(Credit: Canva Pro)The first modern microgrid was built in 2001 on the island of Amory in Maine, and since then, microgrid projects have been implemented globally in both developed and developing countries. While it may seem that microgrids are new, the history of microgrids shows they have been around in some form for years in the US — although they haven’t always been called microgrids. Edison introduced the first one in 1882 at his Pearl Street Station, which combined heat and power to produce electricity and thermal energy.
The concept of microgrids can be traced back to the early days of electrification when small-scale power systems were used to supply electricity to isolated communities and industries. However, the modern definition of microgrids as integrated energy systems that combine distributed energy resources (DERs) and advanced control technologies only emerged in the early 21st century.
The development of microgrids was initially driven by the need to improve the reliability and resilience of the electric grid, especially in remote and underserved areas. Over time, as renewable energy sources such as solar and wind power became more accessible and cost-effective, microgrids evolved to include these sources and provide a more sustainable and environmentally friendly option for energy generation.
In the aftermath of major power outages, such as Hurricane Katrina in 2005 and Superstorm Sandy in 2012, the interest in microgrids increased significantly as a way to provide critical infrastructure and services with reliable and resilient power during emergencies.
Integration of microgrids, Power Purchase Agreements (PPAs), and Combined heat and power (CHP) systems offer several benefits. Microgrids provide more resilient and reliable energy supplies, and the integration of CHP systems increases overall energy efficiency. PPAs provide a secure and predictable source of energy for the buyer, while also providing a stable income for the producer. The combination of these technologies allows for greater control and management of energy consumption, reducing the dependency on the traditional grid. The microgrid market size is anticipated to hit $60,243.8 million at a 12.5% CAGR by 2030.
Power Purchase Agreements are contracts between a power generator and a customer, where the customer agrees to buy a specified amount of electricity at a pre-determined price over a specified period of time. The global microgrid market size was valued at $7.76 billion in 2021. The market is projected to grow from $8.74 billion in 2022 to $23.49 billion by 2029, exhibiting a CAGR of 15.2% during the forecast period.
Microgrids can utilize Power Purchase Agreements as a way to secure financing for their development and operation. For example, a microgrid developer may enter into a PPA with a commercial or industrial customer to sell them electricity generated from the microgrid's renewable energy sources. This agreement provides a predictable source of revenue for the microgrid developer and a reliable source of electricity for the customer, while also reducing the customer's dependence on the centralized power grid.
Energy storage systems play a key role in microgrids by providing a way to store excess energy generated by renewable sources, such as solar or wind power, for use during periods of low energy generation or high energy demand. This helps to improve the overall stability and reliability of the microgrid and enhances its ability to function independently from the main grid if necessary. Microgrids with energy storage can also offer benefits such as reducing dependence on fossil fuels, improving energy efficiency, and providing greater energy security.
Additionally, microgrid owners and operators can also enter into PPAs with utilities or energy providers to sell excess electricity generated by the microgrid back to the grid. This helps to offset the costs of operating the microgrid and enables the microgrid to participate in the wider energy market. As of 2020, there were over 7,000 microgrid projects in operation globally, with the majority located in North America and Europe.
Combined heat and power, also known as cogeneration, is a technology that generates both electricity and useful thermal energy (such as heat or steam) from a single fuel source, typically natural gas. Microgrids are local energy systems that integrate various distributed energy resources (DERs) and control technologies to provide a more resilient, reliable, and sustainable source of power. The global combined heat and power market was valued at USD 26.39 billion in 2021 and is expected to grow at a CAGR of 5.9% by 2030.
CHP systems can be incorporated into microgrid configurations as a means of generating both electricity and thermal energy. By utilizing the waste heat produced during electricity generation, CHP systems can increase the overall energy efficiency of a microgrid, reducing the need for additional energy sources and potentially lowering operating costs.
Additionally, CHP systems can provide a reliable source of backup power during grid outages, ensuring that critical loads, such as hospitals and emergency services, remain powered. This can make CHP a valuable addition to microgrids that are designed to maintain energy security and resilience.
Today, microgrids are being used to provide energy to a wide range of applications, including remote communities, military bases, critical infrastructure, and commercial and industrial facilities. The growth of microgrids is expected to continue as more organizations seek to take control of their energy supply and reduce their carbon footprint.
