• Kevin O'Hara

The Evolution of Sustainable Microgrids

A microgrid is an integrated energy system consisting of distributed energy resources with multiple electrical loads operating as a single, autonomous grid either in parallel to or independent (“islanded”) from the existing utility power grid. Its generation, storage, and usage are all contained within a discrete geographic footprint while its energy is managed by a system of control independent from the main grid.


Some key benefits of microgrids include the following:

  • Autonomy - Microgrids allow generation, storage and loads to seamlessly operate in an autonomous fashion, balancing out electrical voltage and frequency issues through advancements in control. The ability of these systems to island, or separate, itself from the grid and operate independently has become increasingly attractive as the U.S. experiences more outages caused by storms, wildfires and other dangerous conditions.

  • Stability - Advanced control allows the entire network to operate in a stable manner, whether connected to the main grid or not.

  • Reliability - Placing generation near the consumer enhances electric reliability since there is less chance for electricity flow to be disrupted along the path. The microgrid’s ability to island from the grid during a power outage is one of its hallmark features and allows it to essentially operate autonomously in deploying internal generation sources to serve its host.

  • Flexibility - System expansion does not need to follow any precise path since lead times are relatively short and systems build out incrementally. They also tend to be technology neutral, meaning the system is able to tap the best generation sources from a diverse mix of renewable and fossil fuel options without limitation due to technology.

  • Scalability - Microgrids allow for small generation, storage, and load devices in a parallel and modular manner to scale up power production and/or consumption levels as needed.

  • Efficiency - Energy goals can be optimized around both economic and environmental factors.


Microgrids have a long history originating with Thomas Edison’s first power plant constructed in 1882, known as the Manhattan Pearl Street Station. It essentially acted as a microgrid since the centralized grid was not yet established. By 1886, Edison’s firm had installed 58 direct current (DC) microgrids. However, further development of microgrids waned for decades due to a host of reasons including early adoption of an alternating current (AC) electric grid, the prohibitive cost of grid infrastructure, and the overall monopoly structural model that emerged in the electric power industry. Yet recent technological and legislative changes have led to a resurgence of microgrids.


The Arab oil embargo of the early 1970s and resulting spike in gasoline prices and other impacts led Congress to pass the Public Utility Regulatory Policies Act (PURPA) in 1978. A minor provision that didn’t get much initial attention had major impacts on the electric power industry. It said that a non-utility generator that could sell excess steam on the market was also entitled to sell its electric output to the monopoly utility at the avoided cost of new generation. Avoided cost is the price the utility would have paid to produce the same power itself or purchase it from a non-utility generator.


This resulted in a major industry paradigm shift leading to a proliferation of combined heat and power (CHP) development. Non-utility generators, known as NUGs, sprang up to make money by selling power to utilities that had previously refused to buy from outside generators. This new class of merchant generators, using PURPA authority, undermined the conventional notion of how electricity could be made and sold.


While PURPA gave CHP a great boost, particularly for large projects, it was often tied to industrial customers such as oil refineries and chemical plants. Until the turn of the century, microgrids relied almost exclusively on fossil fuels to generate power. Increases in natural gas prices applied the brakes on big projects; however, smaller, more innovative projects using new financing methods such as a shared savings contract survived and formed the basis of modern microgrids. While it took another 20 years for solar panels and battery storage costs to fall far enough to make truly sustainable microgrids an economic reality, a recent surge in microgrid interest and installations have shown that they’ve reached an inflection point and could very well be the future of clean energy.


According to the research firm Wood Mackenzie, the cost of solar generation has plummeted 90% in the past decade. In parallel, storage technologies have evolved in both efficiency and costs. Until recently, batteries have been considered a weak link in sustainable grid applications - usually for their limited lifespan and cost. But bolstered by renewed investment, particularly in the auto sector, battery technologies are becoming an integral element of sustainable grid development. Lithium batteries are leading the charge based on recent declines in pricing, but there will likely remain a diversity in technologies. Combining these developments with advancements in software and controls, future microgrids will undoubtedly be dominated by renewable energy sources.

Visual diagram of microgrid and conventional utility power grid
Visual diagram of a microgrid and conventional utility power grid

The diagram above offers a simplified representation of how a microgrid powered by renewable energy can operate alongside the utility power grid. The blue bubble represents the microgrid and the corresponding blue arrows represent the flow of energy through the microgrid. The yellow arrows represent the flow of energy through the utility grid. Consumers that are part of the microgrid and also connected to the conventional grid can get their energy directly from renewables, battery storage, or from the utility. In the event of a utility power outage, the microgrid can continue producing power for their immediate consumers and potentially provide power to the utility grid as well, while consumers connected only to the utility grid will not receive power.


In parallel to the improvements in sustainable energy technology, the effects of a warming climate and associated natural disasters have power consumers of all classes seeking more sustainable energy options. The greatest impact of early sustainable microgrids may extend beyond reliability and resiliency to offer a glimpse of a radically different way for energy consumers to think about how power is produced and used. Microgrids can create a concrete, practical connection between the supply of energy and direct efforts to control energy demand. It allows consumers to see the versatility of microgrids and their applications.


Despite the attractiveness of sustainable microgrids, several real barriers remain in place. Legal and regulatory regimes have not evolved to incorporate microgrids yet and challenging issues must be navigated by developers and consumers. Laws and regulations are not clear and significant uncertainty remains on many fronts, especially financing. Since these systems are generally 25+ year assets, there must be clear economic payback models supported by legal foundation to ensure valuable, long-term financing, which in some cases is difficult to establish.


There are few, if any, negative effects of implementing sustainable microgrids. They are better positioned to meet the needs of the future. Localization of generators, solar cells, and other related energy generation equipment allows for the efficient and effective management of energy. Consumers increasingly want choice in how their energy is produced. They want to be able to exercise more control and be able to customize it to their unique needs. As related technology continues to evolve, there is little doubt that energy production will continue to shift closer to the point of consumption, and sustainable microgrids will be the answer for many.