SAN FRANCISCO -- Oracle Corp. Chief Executive Officer Larry Ellison plans to build one to power the Hawaiian island he bought last year. EBay Inc. has one to run a data center. The University of California at San Diego and the federal government have invested tens of millions of dollars in the technology.
The systems use computer software and remote measuring devices to control energy sources such as rooftop solar panels and natural gas-fueled power generators. They allow a home or business owner, a college systems engineer or a farmer on a mountainside to generate, distribute and regulate their locally produced power with an ease and sophistication that only utilities had a few years ago.
Not much of a factor a decade ago, microgrids are expected to explode into a $40 billion-a-year global business by 2020, according to Navigant Research, a clean-technology data and consulting company. In the U.S., about 6 gigawatts of electricity -- enough to power as many as 4.8 million homes -- will flow through microgrids by 2020, Navigant said.
“Microgrids are going from evolutionary to revolutionary,” said Jon Creyts, a program director at the Rocky Mountain Institute, a nonprofit energy and environmental think tank. While microgrids control a sliver of generation in relation to the overall grid, they are being built with a speed and projected scale that is cause for utilities to worry, according to Creyts.
In the developing world, they may leapfrog the need for conventional utilities -- the same way mobile phones leapfrogged the need for landlines -- and bring power almost half of the 1.3 billion people on Earth who don’t have it.
While the earliest microgrids controlled simple generator backup systems, they have evolved into sophisticated smart grids. Operators can remain tethered to the larger grid and switch seamlessly between the electricity they generate and utility power, whichever is cheaper. They can even sell surplus electricity back to the utilities through a process known as net metering.
If the main grid goes down, a flip of a switch or automated computer program deploys their mix of green energy, backup generators and storage batteries to keep the lights on.
Microgrids have the potential to radically change the U.S. electricity paradigm as they proliferate and begin to eat into the utility revenue stream. For example, U.C. San Diego saves an estimated $850,000 a month on its electricity bill by self- generating and using its microgrid to fine-tune campus power consumption.
The 3,200 U.S. utilities are already facing what NRG Energy Inc. CEO David Crane calls a “mortal threat” to the industry. Forces including deregulation, green politics and an explosion of rooftop solar and other homemade energy -- known as distributed generation -- mean a reduction in the fossil-fuel electricity utilities sell.
Microgrids may be the mechanism through which this revolution in clean distributed generation will be carried out - - a portal for leaving the traditional power grid.
For utilities, which sell $400 billion worth of electricity a year delivered by 2.7 million miles (4.3 million kilometers) of power lines, the reaction is mixed.
In California, epicenter of the rooftop solar revolution, utility executives have begun to complain to regulators that microgrid operators who remain tied to power lines should shoulder some of the costs of keeping the grid stable, perhaps through connection fees. Sempra Energy and American Electric Power Co. are considering microgrid investments as a way to hedge the threat.
While only about 30 commercial-scale systems like those used by EBay and the U.S. Food and Drug Administration exist now, that number is projected to climb to 300 in just two years, said Steve Pullins, chief strategic officer for Green Energy Corp., a Tennessee-based builder of commercial-scale microgrids.
His company estimates that 24,000 U.S. commercial and industrial sites are ripe for large-scale microgrid conversions. Globally, about 400 additional big microgrid projects are under way. Lockheed Martin Corp. completed in May the U.S. Army’s first domestic microgrid at Fort Bliss in Texas. The military is already using them at sites in other countries to reduce fuel consumption.
“We are seeing requests for proposals going up significantly, 30 to 40 percent higher than last year,” said Paul Orzeske, president of the Honeywell International Inc. unit that designs and builds commercial-scale microgrids. Honeywell built a $71 million microgrid for an FDA research center in Maryland and the agency is in the midst of a $213 million addition that will be online early next year.
On the consumer level, San Francisco-based Gen110, which installs leased microgrid systems with no out-of-pocket costs to homeowners, is attracting utility customers put off by tiered pricing that penalizes them when their use exceeds a certain level.
Gen110, which was acquired in September by franchiser Solar Universe Inc., harvests rooftop solar for its microgrids, then sells power back to its 6,000 customers at rates 10 percent to 30 percent below grid prices. Gen110’s users remain tethered to the grid, from which they draw about 10 percent of their power.