Calculating Costs: Is a Microgrid Cost-Effective for Your Facility?

June 22, 2020
Jack Griffin, vice president and general manager/Boston of SourceOne, a Veolia company, explains what businesses need to consider in calculating microgrid value.

Jack Griffin, vice president and general manager/Boston of SourceOne, a Veolia company, explains what to consider in calculating microgrid value. This interview with Elisa Wood, editor-in-chief of Microgrid Knowledge, is the fourth and final article in our series, “Are Microgrids Expensive?”

Jack Griffin, Veolia

Are microgrids expensive?

Jack Griffin: Yes, they are expensive. But any energy system is expensive. Wind turbines are expensive. Solar panels are expensive. When people say that they are expensive, they’re making a qualitative judgment. What I find is that when we dissect the components, and do the comparison of what your options are, then it becomes a different conversation.

What key factors should facilities consider in determining if a microgrid is cost-effective?

JG: Facilities have what I call a durability requirement. They cannot suffer an outage for ‘X’ length of time. They must ask themselves the question: “How long can my power be out?” If the answer is any length of time over four hours, then a microgrid is probably not the best solution. 

So if you can live with an outage that’s four hours you probably don’t need a microgrid. But if your durability requirement is under four hours, an outage is going to cost you money, and you probably want to look at a microgrid?

JG: Correct. What’s the opportunity cost? If I am a manufacturer of glasses and I’m not going to be able to make 1,000 glasses in those four hours, and the probability of an outage is 10%, the calculation of what that impact is on my operation is the premium value of having redundancy of supply.

What else might you need to consider to calculating microgrid value? 

JG: You need to consider the probability of an outage occurring in the future. You can do that by looking back on your operations. When have you had the situation happen to you before? What were the impacts? How did you address it? 

Manufacturers in Puerto Rico offer a perfect example of facilities that face a high probability of an outage and would benefit from microgrids. Earlier this year Puerto Rico had a 5.8 magnitude earthquake one day and 6.5 the next. Power went out for the whole island — which means all the manufacturers sparked up all of their diesel generators. 

But I had a client who would do this even when a blip, a momentary outage occurred. They would run the diesels until the end of shift, regardless of whether or not power was restored on the grid, so that they wouldn’t have any mishaps in manufacturing. It was a minimum six hours every time there was a problem. And in a one-year period, they had over 100 incidences — over 100 shifts where they ran their diesels 24/7.

It must be expensive to secure diesel that frequently on an island.

JG: Yes, it is. If they use a microgrid instead, they are not reliant on one fuel source for generation but have multiple sources.

Are there other costs you need to consider when deciding if a microgrid is cost-effective for your facility?

Yes, operational costs, which includes operations and maintenance as well as fuel. So if I’m burning natural gas in a CHP plant, that’s going to give me a number for operational cost for fuel. But I may be offsetting that because I’m making electricity in heating. I’m offsetting what the electrical costs would be. There’s a trade-off in my O&M budget for fuel between electricity and natural gas. 

When I add wind or solar PV, my fuel cost for those kilowatt hours is zero. I have my maintenance requirements of cleaning the glass, making sure the controls package is in place, and I have to do my high voltage inspections every year. But my fuel cost on those items is zero.

Is there a scenario where a microgrid be the best solution for the customer who does not lose money in a four-hour outage?

JG: Yes, if I also want to integrate renewables so that I minimize my impact on society. The microgrid enables the ability to integrate wind, solar, battery, geothermal energy supplies. And if I’ve got a combination of an electrical microgrid and a low intensity thermal district energy system, then I’m able to mix and match my most opportune energy sources to meet my real-time energy requirements for either heating or cooling.

Final advice? 

JG: You have to take the approach that you’re trying to solve a problem. What are your energy requirements? What’s your reliability, sustainability, and capacity requirements thermally and electrically? The right engineer, the right person with the background in economics, cost and construction, combines those ingredients and provides you what is the optimum solution to meet your requirements. It sounds like a sales pitch, but that’s really what we do.

Read the other articles in our series, Are Microgrid Expensive?

Read earlier articles in this series:

Are Microgrids Expensive by Elisa Wood, Microgrid Knowledge

What is the Cost of a Microgrid? Think Function by Michael Boswell, Concord Engineering

What Does a Microgrid Cost? It Depends on the Problem it Solves by Will Agate, Ameresco

About the Author

Elisa Wood | Editor-in-Chief

Elisa Wood is the editor and founder of She is co-founder and former editor of Microgrid Knowledge.

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