What Is a Microgrid?

Ed Rottmann

Microgrids are gaining popularity in the United States as communities grapple with extreme weather and a national increase in power outages. These localized electricity networks can provide grid reliability and resilience while saving on energy costs.

Nearly 700 microgrids currently operate in the United States, according to the Department of Energy’s Office of Energy Efficiency and Renewable Energy, and that number continues to grow.

Here’s what you need to know about microgrids, microgrid types, how they work and whether installing one could benefit you.

What Is a Microgrid?

Microgrids are local electrical grids that provide affordable power to entire communities.

Microgrid systems can comprise various energy resources, including renewable power generation, backup generators and energy storage systems or batteries.

Rural or remote communities, unincorporated towns, military bases, college campuses and large commercial or industrial campuses can benefit from microgrids.

A microgrid is a group of interconnected loads and distributed energy resources within clearly defined electrical boundaries, according to the Department of Energy. This group acts as a single controllable entity that can connect and disconnect from the grid to operate with it, or as a remote grid operating in “island mode.” 

How Do Microgrids Work?

Microgrids use a mix of resources to power communities, businesses and other small networks. A microgrid system might combine renewable energy resources like solar panels and wind turbines with backup generators and battery energy storage systems. A dedicated energy management system balances each of these power sources to respond to changes in electricity demand and resource availability.

How Do Microgrids Generate Electricity?

Each microgrid component works together to provide a consistent and reliable energy supply to a specific area or facility with significant energy savings.

Renewable energy systems can prioritize wind or solar power to reduce users’ dependency on conventional energy sources and lower energy costs.

Microgrid solar panels harness sunlight and convert it into affordable power, reducing dependency on conventional energy sources. During windy conditions, wind turbines convert kinetic energy into electricity, supplementing the power supply and further reducing reliance on non-renewable energy sources.

But, the sun doesn’t always shine and the wind doesn’t always blow, so a solar microgrid must also use storage systems to preserve excess solar energy for later use. Coupled with backup fossil-fuel generators, these storage batteries can provide greater grid stability.

Types of Microgrids

Microgrids are a decentralized approach to energy generation that promotes greater control over energy distribution and consumption while reducing transmission losses and energy costs. They can operate independently, or in conjunction with a larger grid to enhance energy security and minimize the impact of grid failures.

Here are a few types of microgrids.

Remote Micrgrids

Remote microgrids are self-contained energy systems that operate independently from the main power grid, often in isolated or rural areas. They generate electricity using local energy resources like solar panels, wind turbines and generators, along with energy storage batteries. Sometimes used as community microgrids, these systems can provide reliable electricity to improve energy resilience for users who aren’t connected to the central grid.

Grid-Connected Micogrids

Grid-connected microgrids are integrated with the main power grid to draw electricity from the grid and feed excess energy back into it as well. During grid outages, some grid-connected systems can continue to operate autonomously, providing backup power to critical facilities. These systems operate in one of two ways: 

  • Continuous Microgrids  

Continuous microgrids supply consistent, 24/7 power to their networks. For this reason, continuous microgrid installations are beneficial for campuses, military facilities, government buildings and hospitals. 

  • Conditional Microgrids 

Conditional microgrids supply power based on the availability of renewable resources, local energy demand and price variations. So, they don’t provide continuous power unless there is a grid outage. During a grid outage, conditional systems can power the microgrid network with built-in energy storage or standby generators. 

Grid-connected systems allow users to benefit from additional grid stability and reliability while enjoying a lower cost of electricity. On top of these savings, some utilities compensate microgrid owners for the additional generation capacity.

Interconnected Microgrids

Interconnected microgrids refer to networks of multiple microgrids that are linked together to share resources. Each point where a microgrid exists is called a “node.”

Every node has its own localized power generation resources and distribution infrastructure. Connecting them enables energy exchange. So, when one node generates surplus energy, it can transfer it to another that is experiencing greater demand.

By working together, networks of interconnected microgrids enhance energy reliability, flexibility and resilience while increasing renewable utilization.

Sustainable Microgrids

Sustainable microgrid systems offer a forward-looking solution to energy transition challenges by minimizing reliance on non-renewable resources. These systems prioritize clean energy technologies like solar panels, wind turbines, and battery storage.

Using a sustainable microgrid can reduce carbon emissions and minimize environmental impact and while meeting the energy needs of the connected community, campus or facility.

Combined Heat and Power (CHP) Microgrids

CHP microgrids primarily rely on cogeneration, which uses a single fuel source – like natural gas –  to generate both heat and electricity. These systems capture heat and use it to provide steam and hot water for water, industrial processes and indoor heating and cooling. 

CHP can provide reliable, affordable thermal and electric energy for buildings, campuses and communities that must operate continuously.

Microgrid Examples

Tennessee is home to at least three microgrids that are registered with DOE’s Office of Energy Efficiency and Renewable Energy’s database. 

Vanderbilt University operates an 18.7-MW continuous CHP and solar microgrid for its campus in Nashville, Tennessee. Since November 2014, Vanderbilt University has used a natural gas-fueled, 18.7MW CHP plant to meet 23% of the university’s electricity needs. In 2023, Vanderbilt added a 35-megawatt solar farm to its microgrid. The university has plans to add aother solar farm later to shift more of the campus energy load to renewable power generation. 

In 2018, Erlanger Baroness Hospital in downtown Chattanooga, Tennessee installed an 8-MW continuous CHP system to enhance the hospital’s energy resilience against grid outages and cut energy costs.  microgrid that includes solar panels, battery storage, and CHP units.The Chattanooga Metropolitan Airport also operates a 2.73-MW community microgrid that uses solar power and battery storage to cover the airport’s operations and provide some additional power to a nearby neighborhood to protect it against outages. 

Advantages and Disadvantages of Microgrid Energy Systems

Like anything, installing a microgrid system has its pros and cons.

Advantages of a microgrid system include:

  • Improved Energy Efficiency: By optimizing energy generation and distribution locally, microgrids enhance energy efficiency, reducing wastage and improving overall resource utilization.
  • Enhanced Resilience and Reliability: Microgrids offer increased resilience against power outages, as they can operate autonomously during grid disruptions, ensuring continued power supply to critical facilities.
  • Localized Power Generation: Microgrids promote localized power generation, decreasing the need for long-distance energy transmission and minimizing transmission losses.
  • Reduced Environmental Impact: The integration of renewable energy sources within microgrids contributes to lower greenhouse gas emissions, promoting cleaner and more sustainable energy solutions.
  • Energy Independence: Microgrids provide a degree of energy independence to communities, institutions and facilities, allowing them to generate their own power and reduce reliance on external energy sources.
  • Grid Modernization and Smart Grid Integration: Microgrids contribute to grid modernization by integrating various Smart Grid technologies, promoting a more efficient and flexible energy distribution system.

While microgrid systems have a lot of advantages, they aren’t for everyone.

Designing and Installing a microgrid can involve significant upfront costs, and maintenance costs vary depending on the generation assets your microgrid includes. A microgrid’s design and capacity may also limit your ability to scale the system up or down, compared to traditional grid infrastructure.

Every microgrid needs an advanced control system to balance energy load and flow. You’ll also need sufficient backup power to keep your system resilient against extended outages.

Keep in mind: the advantages and disadvantages vary based on the specific context, goals, and requirements of each microgrid project. We can provide a custom consultation to help you decide if a microgrid is right for you. If it’s not, we can recommend some other potential energy solutions for your unique situation.

How Much Does a Microgrid Cost?

Beyond supplies and labor, several factors may determine microgrid project costs. These include:

  • Physical Size and Capacity: Larger and more powerful systems generally cost more due to increased equipment, labor and infrastructure required.
  • Energy Generation Sources: The type of energy generation sources used within the microgrid directly impacts costs and long-term energy savings. Renewable sources like solar and wind tend to have upfront installation costs but lower operational costs compared to fossil fuel generators.
  • Integration and Control Systems: Integrating different energy sources, storage systems and control mechanisms into a cohesive microgrid system can impact costs.
  • Location: Terrain and climate conditions of the microgrid site can affect installation costs. Remote, challenging terrain may require specialized infrastructure and transportation solutions.
  • Grid Connection: Grid-connected microgrid projects may cost more than isolated microgrid systems, depending on the distance from existing power lines and other factors.
  • Regulatory and Permitting Costs: Permitting and approval costs may vary by municipality.

Keep in mind, the availability of financing options, grants, incentives and tax credits can offset the overall cost of a microgrid project.

If you’re considering a microgrid, email us at [email protected] to schedule a consultation for your custom project!