A microgrid is a self-contained, small electricity grid. A microgrid can serve anything from individual homes to towns and cities. Unlike traditional, centralized power distribution systems, microgrids house all their elements near the load. To generate power, microgrids often use renewable energy sources, such as wind and solar. Microgrids also often supplement renewables with diesel to offset renewable intermittency.
In general, microgrids exist in three distinct applications:
First, countries with limited access to electricity may use microgrids. In particular, microgrids make sense where a lot of power comes from diesel generation. India is a great example of a country employing microgrids.
Microgrids also have value in areas with no access to the grid. These areas include mines in Australia, remote villages, or government outposts.
Finally, some facilities like military bases or hospitals must be able to disconnect from the grid. The need to ensure reliable electricity during grid outages drives this demand. In these cases, microgrids make sense as a backup mechanism.
Centralized vs. Distributed Power Generation
Microgrids are just one application of distributed energy distribution. In this kind of distribution, decentralized electricity is generated and delivered near to where it’s needed. Some microgrids are completely independent. Others can connect to bigger, centralized electricity grids that exist in many developed countries.
The grid is a complex network of power generation, transmission, and distribution components. Unlike distributed generation, the grid delivers electricity over long distances. Centralized power stations often use coal, diesel, and nuclear sources for fuel. Some use solar panels and wind turbines to generate power from renewable sources. Transmission lines carry high-voltage power to areas with demand. Then, distribution lines carry low-voltage power to customers, including residences and commercial properties.
An example of a typical electrical grid. Source: Wikipedia
In contrast, distributed energy resources (DER) exist close to the load that they serve. This offers more modularity and flexibility. As a result, distributed generation is emerging as an effective alternative to the grid. Energy storage will play a critical role as this trend continues.
The 3 Key Value Drivers for Energy Storage
Energy storage saves energy for future use. Energy storage methods include electrochemical (batteries), pumped hydro, and thermal, among others. On the grid, people use storage “in front of the meter” (the utility’s side) or “behind the meter” (the customer’s side). Depending on the application, storage can provide value in three key ways.
First, energy storage can provide power that is cheaper than other alternatives. Off-grid and microgrid applications often incorporate diesel generators that generate power and maintain system stability. The system relies on the diesel genset for power when solar power is inadequate or unavailable. Batteries can also supply power under these conditions, lowering energy costs by offsetting the use of diesel. The improved flexibility of battery power also helps maintain system stability. (Be sure to check out our blog post for a deeper dive into this topic!)
Second, energy storage can create extra revenue streams. This is typically seen in grid-connected storage systems. In these cases, grid owners or operators bid megawatts and megawatt-hours into open markets. This power and energy balances the supply and demand of electricity on the grid in real time. These applications include frequency regulation, spinning reserves, non-spinning reserves, capacity, and resource adequacy.
Finally, a regulatory body may mandate that energy storage connect to other resources. In some areas of the world, governments mandate that energy storage connect to solar or wind power plants. The power produced by these plants is intermittent, since the amount of sunlight or wind varies. By storing this solar or wind energy, it is available when the renewable source is not. In these situations, energy storage does not create extra value. Instead, it enables the value that the renewable power plant will generate.
The Value of Energy Storage in Microgrids
Energy storage can add value to microgrids in quite a few ways. In areas that rely on a lot of diesel generation, energy storage can deliver a lower cost of electricity. Beyond that, energy storage acts as a real-time balance to supply and demand within the microgrid. Also, storage can offset diesel by maintaining frequency and stability. Finally, storage can maximize the use of renewables by load shifting over multiple hours.
Energy storage offers strong value for microgrids and other distributed applications. The value of distributed storage is clear, even though the applications are smaller and not concentrated in single areas. Moreover, demand is growing rapidly and should continue growing for the foreseeable future. Aquion is currently focusing on developing the best product for these applications.