5 strategies to reduce microgrid costs from the experts

May 18, 2022
Energy experts at Azzo, ComAp Americas, Eaton, Pxise, Rolls Royce Solutions and Schneider Electric offer tips to reduce microgrid costs.

To cut microgrid costs, industry experts offer five strategies: optimize the energy resources to ensure they provide the most benefits, consider cost- and time-saving design tweaks, avoid overengineering, take advantage of standard packages and look into financing that involves no upfront costs.

Patrick Lee, president and CEO of PXiSE Energy Solutions, said that microgrid buyers should focus on properly sizing the distributed energy resources (DERs) for their individual needs and circumstances, which can lower capital costs. For example, rate tariff structures will affect the proper sizing of solar photovoltaics and energy storage. With proper sizing, the microgrid user is more likely to achieve the desired demand charge and energy savings, said Lee, whose company is among the participants at the upcoming Microgrid 2022: Microgrids as Climate Heroes, June 1-2, in Philadelphia, Pennsylvania.
Sequence islanding

In addition to optimizing resources, microgrid designers can focus on strategies that lower costs. For example, Lee said that designers should consider changing the microgrid design from seamless islanding to sequence islanding, which can eliminate some power components and opens the opportunity to use lower cost inverters and batteries. It also means that there may be a few seconds of power outage as the microgrid transitions to islanded operations. But that’s the trade-off.

“Seamless islanding requires additional components and control devices and will require inverters with higher performance in islanding switching; these all drive up project costs,” said Lee.

Bill Becker, hybrid and renewable energy sales manager at ComAp Americas, also had suggestions for making the most of a microgrid’s energy resources. There are two ways to think about reducing microgrid costs, he said. The first is to look strictly at costs; the other is to evaluate the benefit that can be reaped from a given set of microgrid resources — renewables and storage, for example.

“The control system algorithms need to maximize the benefit for a given set of microgrid resources [i.e., renewables, storage, grid constraints]. With optimal control algorithms, fuel consumption and carbon can be minimized, reliability and resilience can be assured, and maximum peak demand limiting and time-of-use energy shifting can reduce energy bills,” Becker said. If these algorithms are not optimized, the microgrid will not yield the savings or revenues that were possible or expected.

“Though this may be hard to measure, it can dwarf the original cost of the controls,” Becker said.

Predictive analysis and grid modeling
Software that provides predictive analysis and grid modeling can also help optimize resources, said Javier Gonzalez, senior manager for PowerGen Sales Americas, Rolls Royce Solutions.

“Intangible advancements have been made through software, the internet of things and artificial intelligence,” said Gonzalez. This allows controllers to “think” and respond to existing conditions, which means that software systems can proactively adjust to a microgrid user’s energy needs, renewable energy output and available fuels. In addition, sensor and data collection and analysis can identify possible errors before they occur and improve uptime, he said. All of this helps reduce costs and maximize benefits.

Microgrid buyers should also avoid overengineering for future scenarios that won’t reap income in the near term, said James DiLiberto, CEO of AZZO.

Often, developers want to design a microgrid to take advantage of all possible revenue streams — resiliency, energy efficiency, decarbonization or a combination of them, he said.

Specifications call for many features that theoretically could be in an energy storage system, for example. The microgrid may not deliver the value streams available in that region today — but theoretically “could” in the future, if utility programs or other incentives become available. These “dormant” features can create a microgrid infrastructure that’s “overqualified” and costs more than anticipated, said DiLiberto.


Another strategy for driving down costs is to take advantage of standardization.

On the technology side, the microgrid industry has experienced several developments that reduce costs. With higher numbers of deployments, common designs have emerged to leverage faster implementations and lower manufacturing costs, said Don Wingate, vice president of utility and microgrid solutions North America operations for Schneider Electric.

And microgrid controls are becoming more configurable and packaged, which cuts engineering expenses, Wingate said.

“Also, some of the distributed energy resources [solar and battery storage] have become more commoditized. Overall costs are decreasing and installation times have accelerated,” he said.

PXiSE’s Lee added that microgrid developers should consider using pre-integrated battery, inverter and control systems to cut system integration costs. Pre-integrated means equipment is specified and already mapped for data communications and programmed for specific functions, so there’s no need for communications among components.

Reduce microgrid costs through EaaS

Also cutting costs are new business models that are becoming more mature, allowing for financing that involves no upfront costs, said Wingate. Under the energy-as-a-service model (EaaS), for example, third parties can design, build, own and operate the microgrid for the customer in exchange for the customer taking the energy at predictable pricing.

“EaaS also offers resiliency and sustainable energy. This is a transfer of risk, no capital expenditure and generally a lower operating cost than traditional energy procurement,” said Wingate.

While EaaS models don’t directly drive down the cost of microgrids, they make installing microgrids more attainable because they shift the investment from heavy upfront capital expenses to ongoing operating expenses through solar power purchase agreements with fixed utility rates, added Greta Foster, product line manager, DER/microgrids, for Eaton.

If microgrid users and developers take advantage of these strategies, microgrids will become less expensive and better able to reap income, provide resilience, lower costs and cut users’ carbon footprint, the experts said.

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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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