Beyond Resilience - The Hidden Benefits of Microgrids

A short term power outage has never presented so much risk to American businesses and government. As technology winds its tendrils into nearly every operation of society, it has brought ever greater reliance on a constant supply of energy. The interconnected nature of modern society means that a power failure at a single data center or substation can affect a web of services, from emergency services to healthcare. Given this, it’s no wonder that the primary driver for microgrid adoption has been resilience. What is surprising is the extent to which other, non-resilience microgrid benefits are often the factors that push these projects over the line for customers. Cost savings, sustainability, and economic development are playing an increasingly important role in driving the value proposition for microgrids across sectors and industries.

Energy Resilience

Before we explore the lesser known values that a microgrid can bring, let’s start at the place most customers do – with a discussion of resilience. Microgrids can operate in “island mode,” making use of on-site generation to remain powered during an outage. Without a microgrid, even a building with solar on the roof will go dark when the utility grid is down. The ability to “island” is becoming ever more critical. Our dependency upon a steady supply of energy is compounded by the vulnerabilities of the system that delivers it. Severe storms are becoming more frequent, and more damaging. Weather related power outages have been on the rise in recent history. Much of the infrastructure making up the energy system in the United States is decades old, with some pieces dating back 100 years or more. The general age of the infrastructure that undergirds the energy system in the United States does not just make it more vulnerable to failing on its own. It also makes it more susceptible to sabotage, with EIA data indicating that grid infrastructure is subject to a physical or cyber attack every four days, on average.[i]

Microgrids bring energy generation on-site, adjacent to the end user. If the campus or facility where the microgrid is installed is secured, so too is microgrid infrastructure. The operation of a facility covered by a microgrid is no longer dependent on far flung utility infrastructure, including the tens or even hundreds of miles of transmission lines that deliver energy from centralized power plants. The best microgrid designs will replace any included overhead distribution lines with power lines installed underground, further securing the microgrid from storm damage and sabotage.

The challenge of assigning a concrete dollar value to all of these resilience benefits has proven a vexing one for the microgrid industry, but many customers have been willing to invest to ensure that their mission will continue uninterrupted, regardless of the risks the utility grid may face. But what if no investment were necessary? In certain cases, that is the happy question that microgrid customers get to ask when a microgrid project is poised to actually save them money.

Source: Evan Mills, Lawrence Berkley National Laboratory, from

Energy Information Administration data

Energy Cost Savings and Stabilization

Energy costs are significant budget driver for many facility types that are common microgrid customers, including college campuses, municipalities, and hospitals. A typical 50-bed hospital in the U.S. annually spends $680,000—or roughly $13,611 per bed—on electricity and natural gas.[ii] It is this budget pressure that drives many facility managers to focus on maximizing the energy efficiency of their facilities. Some are now discovering that a microgrid has the potential not just to decrease demand, but to actually bring the cost of energy down.

Often, instead of being owned by the host institution or the utility, microgrids are owned by a third party that sells power to the institution through a power purchase agreement (PPA). If the conditions are right and the microgrid is designed correctly, the PPA price can be set below the current all-in cost of electricity paid by the customer, while still maintaining a return for the third-party owner. This competitive advantage is accomplished through efficencies related to generating energy on-site, the use of renewables, and efficient generation technology such as combined-heat-and-power plants.

Of course, the difference between the PPA price and the current cost of energy only represents the savings in year one. Energy prices from the utility will rise over time, and the PPA will grow too, but a set rate. This PPA escalation can be deliberately set to grow slower than the projected growth in the overall retail energy market, increasing energy savings for the customer over time. On top of these savings, microgrid customers are protected from fluctuations in energy prices, and can engage in long term budget planning with confidence knowing exactly what their energy costs will look like into the future.

Sustainability

Microgrids change the value proposition for distributed renewable energy. Instead of simply reducing the “carbon footprint” of their host, on-site solar or wind that is part of a microgrid can actually power their host facility when the utility grid is down. By developing a microgrid, an institution can design a comprehensive portfolio of renewable resources that is intended not just to generate credit with the utility, but to meet the specific loads of the included facilities.

Further, the microgrid controller presents the capability to optimize the performance and efficiency of generation resources in a way that would not be possible with stand-alone rooftop solar. Depending on the variation of loads, the energy market, the weather, and other factors, the microgrid can actively manage distributed resources to ensure that the it’s host institution is powered in the most cost effective and sustainable manner possible.

Microgrids offer an attractive option for institutions looking to install renewables to meet emissions or general sustainability goals. Without a microgrid, solar on the roof of your building does just as much good as solar in a field 100 miles away. With a microgrid, renewables can be put to work for the institution that actually hosts them, providing resilience and cost savings.

Community Development

Due in part to public incentive programs like the New York Prize program and similar programs Massachusetts and Connecticut, there is increasing interest in community scale microgrids that are designed to lend resilience to essential public services, protect residents, and help meet municipal and state level sustainability goals. The proliferation of community microgrids has revealed another sought-after benefit of microgrid development: economic and community development.

A microgrid that is strategically deployed in an area in need of economic development can have several beneficial effects for the community. First, it can protect vulnerable residents from the worst effects of extended power outages from severe weather or other emergencies. The inclusion of low income housing, homeless shelters, and other facilities that can act as emergency shelters can help ensure the safety of residents who might otherwise be left without heating, cooling, and electricity. Other facilities in the microgrid such as grocery stores and pharmacies can provide additional services that become critical to residents in extended outages.

A microgrid can also help to encourage economic growth. Business parks or commercial districts that can offer the hardened resilience of a microgrid can better attract tenants for whom periodic power outages are unacceptable, such as those engaged in high tech manufacturing or sensitive research. The lower emissions profile of most microgrids can be a further enticement for companies trying to meet sustainability goals related to facilities and operations.

Finally, a microgrid can help to beautify urban areas by replacing a tangle of overhead lines with hidden underground lines. The principle reason to install these lines underground is to protect them from damage, but the ancillary aesthetic benefit on a commercial main street can be striking.

When people think of microgrids, they think of resilience, and rightly so. No other technological solution does more to ensure an uninterrupted supply of energy for end-users, and to protect the continuity of their mission. However, as microgrids are deployed in different contexts and for customers with different requirements and values, new “hidden” benefits are being discovered. Cost savings, sustainability, and community development are likely to become regular parts of the microgrid value proposition. What will be next?

[i] Reilly, Steve. “Bracing for a Big Power Grid Attack.” USA Today. March, 24, 2105. http://www.usatoday.com/story/news/2015/03/24/power-grid-physical-and-cyber-attacks-concern-security-experts/24892471/

[ii] ESource, Inc. “Managing Energy Costs in Hospitals.” 2013. http://bea.touchstoneenergy.com/sites/beabea/files/PDF/Sector/Hospitals.pdf

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