Distributed generation located close to demand delivers electricity with minimal losses. This power may therefore have a higher value than power coming from large, central conventional generators through the traditional utility transmission and distribution infrastructure. With the use of renewable energy generation, the dependency on fossil fuels and on their price can be minimized. This step will also lead to a significant reduction of carbon dioxide emissions, which is required in several government programs. If, in addition, distributed generation and consumption in a certain area are integrated into one system, reliability of the power supply may be increased significantly, as shown in figure 1. The importance and quantification of these benefits has been recognized, although these are yet to be incorporated within the technical, commercial, and regulatory framework [11].
However, under today’s grid codes, all distributed generation, whether renewable energy or fossil-fueled, must shut down during times of utility grid power outages [IEEE 1547]. This is precisely when these on-site sources could offer the greatest value to both generation owners and society.
A microgrid is a regionally limited energy system of distributed energy resources, consumers and optionally storage. It optimizes one or many of the following: Power quality and reliability, sustainability and economic benefits and it may continuously run in off-grid- or on-grid mode, as well as in dual mode by changing the grid connection status.