Microgrid Costs: What Accelerates and What Inhibits a Microgrid Project?

Aug. 3, 2021
Tom Poteet, vice president of corporate development at Mesa Solutions, explores how microgrid costs can both drive and inhibit microgrid projects.

Tom Poteet, vice president of corporate development at Mesa Solutions, explores how microgrid costs can both drive and inhibit microgrid projects.

People usually focus first on the questions of what is a microgrid, what does it do, and what does it cost? Here’s a much better first thought: “Yes, we could get a microgrid, but why would we want one?” The answer to that second question varies more than you might think. The reason it varies is because every site and every power consumer is slightly different.

To get to “why,” a potential microgrid champion might have any of a variety of goals in focus:

—We need a power solution that is routinely more reliable than standard utility service.

—Our function is so critical that we require a resilient standby solution just in case our otherwise reliable utility service does go down.

—Utility demand charges are our most important expense to mitigate.

—We want to take advantage of the incentives offered by our deregulated power market.

—We want to utilize renewable resources.

We want all of the above.

Source: AdobeStock, courtesy of Mesa Solutions

So, you’ve looked at the categories above and figured out where you are on the power requirements spectrum. Now you must think about the posture of your organization with regard to these issues:

  • Do we have capital that we want to spend upfront for a new power solution?
  • How much risk are we comfortable with to obtain a potential reward?
  • What length of contract would we agree to?
  • Are we willing to allow our load to be controlled to achieve maximum optimization?
  • Does our interest in renewables transcend economic considerations?

You may be asking yourself, “Why can’t this be simple? Aren’t microgrids supposed to be plug and play by now?” The answer is, well, sort of. Generation sources, energy storage elements and control systems are much more communicative with each other than they were five years ago, but that’s not the same as knowing what mix of resources is just right for your unique requirements. You still need a human to help figure that out. Once you have fairly clear thoughts on the issues above, then you can start evaluating specific cost options. It’s important to work with a knowledgeable partner/provider to get to the right mix.

Here at Mesa Solutions, we field a lot of inquiries about solar, so let’s start with that. Even though the manufacturing costs of solar material and panels continue to decline (supply shortages notwithstanding), the cost of an installed array of ground based panels is still around $2,000 per kilowatt in many parts of the contiguous United States. A good designer can take your specific location and calculate an estimate of the amount of kilowatt hours you can expect on an annual basis from such an array, at which point a cost/benefit discussion can occur. Interestingly, sometimes customers will say something to the effect of “provide the firm power solution I need and then spend $X from my ESG budget for solar panels.” Our team always shows them the economics, which, in addition to the microgrid elements, also depend on the cost of fuel and the cost of utility power at their location.

Natural gas generators can be purchased for around $700 to $1,000 per kilowatt, free on board (FOB) USA. Rental costs vary widely and are a function of the number of annual hours of planned runtime, maintenance requirements, and telemetry and remote control features.

Source: AdobeStock, courtesy of Mesa Solutions

Microgrid controller cost is, among other things, a function of how many elements you need to control. For up to 30 elements, controllers generally cost in the range of $50,000 to $90,000. Costs go up from there and can reach an order of magnitude of $500,000. For many common scenarios, it may be possible to control the microgrid with only the generator controller, so that’s an important question to resolve early.

Battery costs vary depending on current discharge rates, i.e., normal or rapid, and the desired length of discharge coverage time. But a good budgetary number to keep in mind is $300 to $400 per kilowatt for an hour of normal discharge time.

The way that all these costs can be bundled is a conversation all on its own. The most typical arrangement is one that looks like a no-capital-upfront lease agreement that covers the cost of all the installed equipment plus ongoing maintenance and data services. Often, those contracts are referred to as “microgrid as a service.”

If your organization is considering a microgrid — and you have the means — it is a great idea to visit a microgrid site and see one in action. But if you can’t go see a microgrid, at least make sure that you work with partners who understand your requirements and care about gaining your trust.

Tom Poteet is vice president of corporate development at Mesa Solutions, a power solutions company. Mesa specializes in the manufacturing, sales, leasing and operations of natural gas and liquid propane-powered mobile and stationary generator sets and microgrids.

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