Will microgrids destroy traditional utilities... or save them?

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By: SGN Staff

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Quick Take: Two electric power experts from the Rocky Mountain Institute have penned a lengthy discussion of the microgrid market. You can see a quick summary below, but if you have the time, jump to the full article for its well-balanced look at the pros and cons.  - By Jesse Berst

 

America's electric power infrastructure is amongst the oldest on the planet. A Galvin Electricity Initiative report found that US outages occur three times as often and 10 times as long as those in places such as Germany and Denmark. Our centralized hub-and-spoke system only adds to the brittleness.

 

Microgrids are emerging as one answer to these challenges. Although they enhance reliability in theory, they also potentially threaten the traditional utility business model.

 

How microgrids create value…

Microgrids aggregate distributed energy resources. They are one way to make a "commoditized" electric power system customizable to the needs of an individual customer.

Microgrids give customers more power. Traditional electric power customers are often at the mercy of the utility's pricing structure. The microgrid puts the power in the hands of the customer and opens up choices.

Microgrids bring private capital. Much of the investment in microgrids will come from customers. As electric utilities face the burden of replacing aging infrastructure and complying with environmental standards, customer investments in microgrids can ease the pressure.

Microgrids improve efficiency. Microgrids use generating equipment located close to the customer. This reduces the transmission and distribution losses.

 

Despite these benefits, the microgrid cost-benefit equation is not yet compelling except for a select group of customers such as universities and military installations.