Has your business been impacted by Texas power outages? Whether it’s caused by a grid malfunction, brown out or hurricane, owners and administrators of large commercial businesses are tired of being anxious about their power supply. What if you could have a reliable source of power, independent of the grid? That’s what a microgrid is all about.
In this article, we will explore what microgrids are, their costs, benefits and drawbacks. We will also highlight the types of businesses that typically adopt microgrid solutions.
What is a Microgrid?
A microgrid is defined as a “self sufficient energy system that serves a discrete geographic footprint.” In other words, it provides power to a local group of customers, or to a single commercial customer.
A key element of a microgrid is that it can be its own “energy island.” Take power from the grid or generate your own, independent of the grid.
Power for a microgrid is typically from a combination of sources including solar panels, large-scale batteries, and natural gas-fueled or diesel-fueled generators. Your batteries may charge off the grid or via your solar panels or generator. But since the majority of the power is from clean sources (i.e. solar and battery storage) microgrids can also play into your sustainability strategy.
A microgrid typically incorporates a smart control system that monitors the energy markets and business operations. Under normal operations, your company can run off your microgrid or standard power, whichever is financially advantageous. Under emergency conditions, the microgrid can fully support your operations, disconnected from the grid.
One benefit of having this option of grid or no grid is the opportunity to act as a Distributed Energy Resource (DER) with ERCOT (or the grid operator in your area). That allows you to have a stand-alone power system when needed. Or you can sell power back onto the grid during normal operations. Or you could bid your excess energy into the power markets as an ancillary service.
If this is part of your power strategy, just know you must apply to be a DER in ERCOT and you will also need an interconnection agreement with your local power distribution company.
What Type of Businesses Typically Have Microgrids?
A microgrid is not for a small business. Businesses that might consider a microgrid include:
- Data Centers: Data centers require uninterrupted power for operations. A dedicated microgrid maintains power regardless of grid conditions.
- Manufacturing: Manufacturers can benefit from microgrids by optimizing energy use, reducing costs, and increasing production resilience against grid failures.
- Hospitality: Resorts can leverage microgrids to enhance guest experiences.
- Healthcare: Hospitals and medical facility energy operations benefit from the reliability and resilience that microgrids provide, ensuring critical operations continue during power outages. Assisted living facilities and elderly housing are also candidates for microgrids.
- Educational Institutions: Colleges and universities are adopting microgrid solutions to promote sustainability and enhance the reliability of their energy supply. (After all, who wants a bunch of 18-21 year olds with nothing to do?)
- Government: Sewage treatment plans, water pumping stations, prisons and even entire neighborhoods could evaluate a microgrid as part of their resiliency plan.
If you operate a small business, a generator is more practical, whether an automatic standby generator or a portable generator. But if you operate a facility where electricity is critical to your large scale operations, a microgrid is the direction to move in.
How Much Does a Microgrid Cost?
The cost of implementing a microgrid can vary greatly depending on several factors, including size, components, and energy requirements. A system can range from $500,000 to several million dollars.
This upfront expense includes equipment, installation, and any necessary infrastructure upgrades. There are also maintenance, operations, insurance and management costs. Various factors can affect cost, such as geographic location, local incentives, and regulatory issues.
When considering a microgrid for your commercial facility, here are just a few of the groups to reach out to:
- Your local distribution company or utility company to discuss interconnection agreements.
- ERCOT (or the Independent Service Operator that manages your grid) to apply for status as a Distributed Energy Resource.
- Your retail electricity provider, to check your contract agreement bandwidth and any minimum usage requirements.
- Electrical engineers to evaluate your power needs.
- Microgrid installation and management companies like Enchanted Rock, Siemens, PowerSecure to assess options.
In Texas, you may be eligible to apply for microgrid funding. Read up on Senate Bill 7, passed in 2023, which allocates $1.8 billion for microgrids via low interest loans.
Benefits of a Microgrid
Some benefits of a microgrid for your commercial or industrial operations include:
- Energy Independence and Reliability: With a microgrid, you’ll have full control over your energy and operations. That means fewer disruptions during power outages or extreme weather events.
- Cost Savings and Return on Investment: Although initial costs may be high, you could have cost savings through optimized energy use. While many businesses choose fixed rate plans, some large C&I customers prefer block & index plans that let them pay market pricing at certain times. With a microgrid you can generate your own power when prices peak, and even sell power back onto the grid.
- Environmental Impact and Sustainability: By incorporating renewable energy sources like solar panels, microgrids contribute to lower carbon emissions. This eco-friendly approach can enhance your brand image with environmentally conscious customers.
Drawbacks of a Microgrid
Microgrids aren’t for everyone. There are some drawbacks to consider too, including:
- High Initial Costs: The upfront investment can be a barrier for many businesses, particularly smaller operations. While selling power back to the grid as a DER can offset these costs, the initial financing is considerable.
- Complexity of System Management: Managing a microgrid requires specialized knowledge and technology. Business owners may need to invest in training or hire experts to oversee system operations, adding another layer of complexity. (Some companies outsource system management instead).
- Regulatory and Compliance Challenges: Even in a deregulated market like Texas, electricity markets are highly regulated. There are multiple rules, regulations and agreements needed to implement a microgrid. You may need to hire a regulatory expert to navigate this.
