Weekly Update

As Smart Grid Takes Off, Microgrid Momentum Builds

It’s a big week for smart grids. Billions in stimulus funds have been awarded to 100 firms to help jump-start development, which by all accounts, will lead to boom times for startups and established players that have something to offer utilities as they revamp their grids. As the smart grid takes off, its development will fuel the growth of another type of grid: the “microgrid.”

Celeste describes it, rather aptly, as “a local area network for energy use.”  Like the Internet, to which the smart grid is often compared, your local area network (or home network for that matter) is a self-contained network that works with your Internet connection, allowing its users to interact with and contribute to online web sites, services and resources.  If your ISP suffers an outage, there’s nothing to prevent you from sharing files among the PCs in your home network, for example.  Sure, you’ll be working (or playing) “offline” until your connection is restored, but your computing devices aren’t rendered useless.

Microgrids promise to extend the same hardiness and robustness to the nation’s grid by embracing distributed energy resources that can include renewable energy to operate in parallel with utility-scale grids or become “islanded” when the need arises (microgrids can operate completely “off the grid” as well).  Instead of plunging campuses, manufacturing plants and neighborhoods into darkness during a brownout, microgrids assert their autonomy and rely on local energy sources (such as solar panels, microturbines and fuel cells) to keep the lights on — regardless of the public utility’s whims.

These autonomous microgrids may seem like a competing vision at first glance, but it’s actually complementary to many of the intelligent energy distribution and load management goals voiced by smart grid proponents.  Microgrids have the potential to impact the smart grid beyond serving as an appendage that can get cut loose in the event of an outage. For instance, excess energy can get fed back into the larger grid, averting outages outright and helping to balance the load. But for that to happen, smart grid technologies — including advanced metering infrastructures that allow for accurate net metering and smarter distribution schemes — need to synch up with microgrids.

To date, microgrids are a tiny drop in the bucket, mostly relegated to keeping some IT, healthcare and industrial installations up and running.  But that’s set to change during the next few years according to a new report from Pike Research. In “Microgrids: Islanded Power Grids and Distributed Generation for Community, Commercial, and Institutional Applications,” Pike analysts forecast that by 2015, microgrid capacity will surpass 3.1 gigawatts from less than one gigawatt in 2010.  In just five years, this will generate $7.8 billion in global investments with the U.S. capturing the lion’s share of $5.8 billion (74 percent). All told, you can expect a $2.1 billion yearly market of microgrid systems.

Who stands to benefit from this growth?  You don’t have to look much further than companies that are already making waves in the smart grid space. In July, GE snagged $2 million in Department of Defense funds (apart from smart grid stimulus outlays) to spearhead a smart microgrid demonstration project at the U.S. Marine Corps base at Twentynine Palms in Southern California. BAE Systems’ Balance Energy is pursuing microgrids with a laundry list of current smart grid players that include Cisco and IBM.

Ultimately, the real winners as microgrids develop will be businesses, customers and, yes, even utilities (provided that they limit their interference). While the concept of “islanded” microgrids may invoke disconnectedness and isolation, stakeholders will find the technology’s potential — and the market opportunities it opens up — positively liberating.

Question of the week

Can there be a smart grid without microgrids?