A Quick Overview of Microgrids (and How to Monetize Them)
Episode 1 of “How to Monetize a Microgrid?” : the world of microgrids
When you come from academia like me, “Optimising Energy Trading” might be your first answer. But what do you optimise? And is it the only thing? Eventually it drills down to the question of what do people want when they pay for a microgrid or, in other words, how can you make it financially sustainable and profitable.
Over the past 7 years I have had the chance to work on three pilots in very different environments which has made me consider the key drivers that would make a microgrid scale, depending on the setting. In this article I will first try to get some order around the types of microgrids and their key drivers from a business perspective. The following mini-series will dive deeper in each type, with some examples and potential pitfalls as well.
What is a Microgrid?
Microgrids have received a tremendous amount of interest as being the missing building block between the traditional grid and renewable off-grid solutions. They are considered to be the best fit for providing a more distributed, local and greener solution to the traditional grid as well as a more reliable, cost effective solution for places without energy access.
Sounds simple, but it is actually quite complex from a technical, regulatory and business perspective. A lot of confusion comes from the fact that the term microgrid means something different to different people. As of here I will define it as widely as possible: “Any grid connecting a small number of geographically close end-customers who can be prosumer, producer or consumer. “
Types and Drivers
Using this definition we can distinguish two major settings, on-grid and off-grid, with two subcategories each:
- On-grid microgrids with access to national grid and/or wholesale market
- Using existing lines (without control over the grid)
- Using private lines (with control and potentially islanding mode)
2. Off-grid microgrids without any connection
- For remote areas like mountains or islands
- For emerging countries
These vastly different settings lead to vastly different key drivers for building the business models to make microgrids profitable and scalable. Rather than aiming at achieving a variety of outcomes, it is better to pick your fights. Depending on your market, know what the main problem is and how your microgrid can solve it. These key drivers can be summarised as:
- Better energy prices
- Resilience
- Availability
Let’s look at the main driver per type of microgrid:
On-grid microgrids using existing grid lines primarily focus on providing more money for renewable energy suppliers and local consumers by using a multitude of methods. If well designed, we should end up with an infrastructure that optimizes local production and consumption and/or manages demand response.
On-grid microgrids, having their own infrastructure, can control their own lines and therefore can work in “islanding” mode, that is, they can disconnect from the grid and still exchange energy internally. When resilience matters most, managing your own lines becomes essential in order to be able to supply power during utility blackouts.
Finally, off-grid networks have no connection to the grid or the national energy markets, and no energy can be exchanged with the wholesale market. Since there are no external price signals for the kWh price of energy, you have to design your own pricing scheme that aims at maximising the usage of renewable energy and minimises the waste. In other words, how to provide the best availability when energy is limited.
And so to summarise, here is a simplified graph with the microgrid types and their key drivers to monetise a microgrid.
In reality, the situation is a little more complex with a number of hybrids but for more on that follow us as we dive more in-depth on each of them throughout the next articles coming soon!
[desperately authored by Annette, criticised brutally by Vicky. We work together to choose the best content and elevate each other’s work. More on us and our approach here]
*** Update ***
The article-series is complete now! Here are the quick links:
- (Current one) A Quick Overview of Microgrids (and How to Monetize Them) — Episode 1 of “How to Monetize a Microgrid?” : Introduction the world of microgrids
- How to Monetize Microgrids Running on the National Grid? — Episode 2 of ‘How to Monetize a Microgrid?” : on-grid microgrids on existing infrastructure
- Why Pay for Private Infrastructure with an On-Grid Microgrid? — Episode 3 of “How to Monetize a Microgrid?” : on-grid microgrids with private infrastructure
- A Little Primer for Off-Grid Microgrids — Episode 4a of “How to monetize a microgrid?” building a grid from the bottom-up
- Designing an Off-Grid Microgrid 101 — Episode 4b of ‘How to monetize a microgrid?”: building a grid from the bottom up
