History of microgrids in the US: From Pearl Street to plug-and-play

July 22, 2019
While it may seem that microgrids are new, they have been around in some form for years, going back to Thomas Edison’s Pearl Street Station. Here’s a brief look at the history of microgrids in the US.

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. The first one was introduced by Thomas Edison in 1882 at his Pearl Street Station, which combined heat and power and produced electricity and thermal energy.

In fact, campuses have been using microgrids for decades and have shown that microgrids are compatible with local utility grids and provide benefits to both the campuses and the larger grids.

Universities were ideal early adapters of microgrids because they have large, easily defined loads. In addition, many campuses have physical plants that provide steam for heating.

As a result, an upgrade to a combined heat and power (CHP) microgrid makes sense in many cases. CHP technology allows them to produce both electricity and steam from a single fuel, which dramatically boosts the efficiency of the system.

Campuses with microgrids include Wesleyan University, Harvard University, Princeton University and the University of California at San Diego. One of the biggest microgrids in the US is at the University of Texas at Austin, which can supply all of the university’s power, heating and cooling needs.

In the late 1990s, Congress was concerned about the reliability of national electricity transmission and asked the US Department of Energy for guidance. The conversation focused on maximizing distributed generation to reduce stress on the grid. A number of research projects were launched over the years, leading to demonstration projects of microgrid technology for utilities, universities, industry, school districts, jails, hospitals, laboratories, military bases and industrial parks.

Pivotal event in history of microgrids: Superstorm Sandy

A series of severe storms from 2011-2012 in the Northeast heightened interest in microgrids, the most destructive being Superstorm Sandy. Microgrid operators, like Princeton University, showcased how microgrid technology kept power on when the central grid failed during Sandy.

Efforts to rebuild the electricity infrastructure prompted people to ask questions about how to better prepare in the future. This helped raise awareness about microgrids and distributed energy.

A handful of states have played a big role in the history of microgrids, among them California, Connecticut, Illinois, Massachusetts, New Jersey and New York.

For example, in 2013, Connecticut became the first state to offer microgrid funding when it announced its Microgrid Pilot Program. Nine microgrid projects were awarded $18 million in funding through the first round.

The program is now in its fourth round of funding, awarding up to $30 million to microgrid projects. Award recipients have included two campuses, Trinity College and Wesleyan University, a family-owned dairy farm and pet shelter, the town of Coventry, and even an apartment complex.

The Ameren Microgrid in Champaign, Illinois, August 2017. Photo courtesy Ameren Illinois

In 2014, New York created the New York Prize, a $40 million competition launched to offer money to those who plan on developing community microgrids. The initiative was created to find microgrids that could be easily replicated and used as models for other communities nationwide.

On the other side of the country, in 2016, the California Energy Commission (CEC) met to begin working on a new microgrid road map, created to encourage microgrid development in California. The road map identifies the top barriers to microgrid commercialization and examines ways to improve commercialization and standardization.

Initially, the CEC cited as barriers the lack of policies and regulations that enable microgrids, plus interconnection rules that impose limitations on microgrids. The CEC has since awarded almost $80 million in grants

 Clustering microgrids

Another big moment in the history of microgrids came when Illinois regulators approved Commonwealth Edison’s microgrid cluster in Chicago in 2018. The $25 million project — the first utility-scale microgrid cluster in the nation — is designed to help teach utilities how to integrate microgrids with renewable energy resources and how to maximize the efficiency and value of two microgrids that interact with one another. The microgrid will directly serve more than 1,000 residential, commercial and small industrial customers on the South Side of Chicago. 

A national security play

Along with these programs that gave microgrids a boost, the US military has been an enthusiastic early adapter of microgrids in an effort to ensure the power stays on in mission-critical operations. The military has for many years relied on small, isolated, self-contained grids in remote locations. More recently, the modern microgrid has altered the way the military and the federal government approach reliability and sustainability.

The federal government realized that a military base could install solar panels for some portion of its load to help achieve renewable goals while also making the base more resilient and self-sufficient. The Navy was one of the first branches of the military to build microgrids, installing one at the hospital Navy base in San Diego. Since then, the military has installed several others including sophisticated projects at the Marine Corps Air Station in San Diego and the US Marine Corps Recruit Depot Parris Island, South Carolina.

Evolution of microgrid financing

While microgrid awareness and interest was building among the military and others, acquiring the financing to build the microgrids was challenging. Commercial building structures, ownership and leasing arrangements all varied considerably, which made financing specific to the project and therefore difficult.

While it made sense logically to build microgrids, it didn’t yet make sense financially or operationally for many businesses. Financiers were not set up to finance projects that were small and specific to each individual project. This has changed in recent years because of models that de-risk the investment for customers. These are offered under such names as microgrid-as-a-service, reliability-as-a-service and energy-as-a-service.

These approaches convert a long-term capital expenditure to a short-term operational expense, thus keeping a large capital expense off a company’s books. Commercial customers can take on projects with no upfront capital spending. Instead, a third party or financier typically owns the equipment and the customer pays a service fee, much like a monthly utility bill. Agreements vary on a case-by-case basis.

Product differentiation emerges

As microgrid use has expanded, so has its applications. Microgrids at first were viewed as a way to increase reliability, keeping the power on when the central grid failed. Their applications have widened into carbon efficiency. Wider adoption of microgrid technology has also been buoyed by cities, states, corporations and campuses that have set sustainability or carbon-emissions reduction goals. These have helped drive development of clean energy microgrids – those that incorporate renewables. Newer microgrids often use solar panels or wind turbines, and more are beginning to emerge that incorporate electric vehicle charging stations.

The military microgrid on Parris Island. Photo courtesy of Ameresco

Microgrids also are used to keep energy costs in check, as developers become increasingly adept at employing financing innovations and state and federal renewable energy incentives to lower energy costs. Sophisticated microgrids can participate in certain wholesale markets and leverage their assets to reduce costs.

As microgrid applications have expanded, they have entered the phase of product differentiation, which has led to many different types of microgrids, from fractal microgrids to virtual, blockchain, flying, sailing and more. At this time, NRG offers asset-backed demand response microgrids that focus on providing demand response, and S&C Electric provides non-wires alternatives, which allow utilities to avoid investing in traditional poles and wires. And while microgrids continue to be highly customized products, the industry also is working on refining simple plug-and-play microgrids that can be manufactured in a replicable fashion and, in some cases, be installed in a day.

Today microgrids can be found at a broad range of commercial, institutional, industrial, community and government facilities. But residential microgrids remain rare, although some do exist, including one at the ranch of former California Gov. Jerry Brown. And some home developers are beginning to install neighborhood microgrids, but they too remain unusual.

Even though the history of microgrids spans for more than 100 years, it’s been the last six that have brought growth in leaps and bounds. Numerous drivers suggest it’s just the start of a lengthy buildup of microgrids in the US.

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About the Author

Lisa Cohn | Contributing Editor

I focus on the West Coast and Midwest. Email me at [email protected]

I’ve been writing about energy for more than 20 years, and my stories have appeared in EnergyBiz, SNL Financial, Mother Earth News, Natural Home Magazine, Horizon Air Magazine, Oregon Business, Open Spaces, the Portland Tribune, The Oregonian, Renewable Energy World, Windpower Monthly and other publications. I’m also a former stringer for the Platts/McGraw-Hill energy publications. I began my career covering energy and environment for The Cape Cod Times, where Elisa Wood also was a reporter. I’ve received numerous writing awards from national, regional and local organizations, including Pacific Northwest Writers Association, Willamette Writers, Associated Oregon Industries, and the Voice of Youth Advocates. I first became interested in energy as a student at Wesleyan University, Middletown, Connecticut, where I helped design and build a solar house.

Twitter: @LisaECohn

Linkedin: LisaEllenCohn

Facebook: Energy Efficiency Markets

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