The other day I asked whether utilities can survive if more and more businesses start generating their own energy. With Apple installing gigantic solar farms and Walmart getting big into rooftop solar, this is no longer a theoretical concern. Utilities are waking up to the fact that their entire sector is facing potentially disruptive change. 

What's less often understood, however, is that many of these corporate renewable energy schemes — as well as similar schemes in the public sector or private communities — are not just about building new forms of power generation. Many such projects are also getting into distribution too. 

In other words, they are building their own electricity grids. 

For the uninitiated, a microgrid is a contained network of energy generation and storage. Here's how Wikipedia describes it:

A microgrid is a localized grouping of electricity generation, energy storage, and loads that normally operates connected to a traditional centralized grid (macrogrid). This single point of common coupling with the macrogrid can be disconnected. The microgrid can then function autonomously. Generation and loads in a microgrid are usually interconnected at low voltage. From the point of view of the grid operator, a connected microgrid can be controlled as if it were one entity.
University of California San Diego, for example, has built a gigantic microgrid that encompasses its entire campus. They have just one connection to the outside electricity grid where electricity is imported when needed or exported when there's excess capacity. Other than that one connection, all demand and supply is interconnected within the campus' own network of solar arrays, fuel cells, battery storage banks etc. The result, for a power-hungry university like UCSD, is both cost savings and an increased resilience from outside disruptions like powercuts. 

Microgrid - City in the dark after a power outage

An outage that left parts of southern California without power wasn't as disruptive to the UCSC campus. (Photo: Snapshot from video)

Microgrids offer several other key advantages including: 

  • Better matching of supply with demand, optimizing the use of cheaper, or greener, power sources
  • An opportunity to use waste heat from power generation for water or space heating purposes
  • A capacity to prioritize power supply for particular needs during times of disruption, for example crucial medical or scientific research, over non-essential power needs like vending machines or TVs
UCSD is by no means the only entity utilizing microgrids. From the Food and Drug Administration to the U.S. Army to a billionaire CEO's private island in Hawaii, microgrids are proliferating in far-flung places. In an article for Renewable Energy World, Ken Wells and Mark Chediak outline the spread of microgrids. Unsurprisingly, they also document that some utilities are getting decidedly nervous, and they are starting to plot their next move regarding the trend.

The strategies these utilities are exploring, however, are far from uniform: 

For utilities, which sell $400 billion worth of electricity a year delivered by 2.7 million miles (4.3 million kilometers) of power lines, the reaction is mixed. In California, epicenter of the rooftop solar revolution, utility executives have begun to complain to regulators that microgrid operators who remain tied to power lines should shoulder some of the costs of keeping the grid stable, perhaps through connection fees. Sempra Energy and American Electric Power Co. are considering microgrid investments as a way to hedge the threat.
As with my previous article on businesses unplugging from the grid, the problem is not that corporations will defect en masse overnight, but rather that a steady drain of profitable clients will leave fewer customers on the mainstream grid. And those fewer customers will shoulder a larger proportion of the costs of existing, capital intensive infrastructure. That means higher energy prices. And higher energy prices means more people will want to unplug — and so the cycle continues. 

This is not, yet, a brave new world of distributed islands of power. Even the most ardent supporters of distributed power believe a macrogrid will be needed for decades to come. We environmentalists should be careful not to dismiss utility concerns out of hand. True, cries of "unfair competition" are a little hard to stomach from energy giants that have benefited handsomely from substantial public subsidy. But we'll need the grid to evolve if we want microgrids to truly thrive. 

In the meantime, however, pioneers like UCSD will continue to explore the frontiers of new, smarter power. And we'll be following them all the way. 

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