Microgrids as Fact and Metaphor

In visualizing microgrids as smaller versions of the existing grid, we ignore a whole new dimension of the impending electricity revolution that I wish to call “microgrid as metaphor,” and distinguish it from “microgrid as fact.” Let me elaborate.

Microgrids as Fact 

Microgrids as fact we recognize readily enough. A smaller version of the grid, offering largely the same services, with a variety of generation sources working together in harmony with each other, and meeting customers’ electricity demand as it varies daily and seasonally.

Microgrids that power hospitals, military bases, jails, residential buildings, campuses, villages, islands, and the like are instances of microgrids as fact. They serve the purpose of resilient, reliable service in the event of a blackout of the macrogrid due to storms, fires, natural accidents, cyber-attacks, or physical attacks on the grid.

Figure 1 

But emphasizing resilience and reliability misses the larger topological possibilities for electricity supply. For instance, why should microgrids be visualized as appendages of the existing grid, as fruit handing at the end of a branch of a tree? Why cannot microgrids be visualized as a cluster of grapes of different sizes, and colors? Such a cluster can be the new topology of the electricity infrastructure of the future — a federation of microgrids (see Figure 1 above).       

In fact, a good analogy for the future electricity grid might be the topology of the cellular network consisting of towers radiating radio frequencies. This is typically represented as inter-linked hexagons with a tower at the center of each (see Figure 2 below).

Figure 2

Fractionation: Microgrids as Metaphor

Further, why should we view the evolution of the electricity industry as leading to only smaller versions of what we have today? While microgrids are increasingly viable economically, and a welcome development, the future of electricity need not be the topology of the past writ smaller and cellular.

In fact, fractionation of electricity services is what is happening — the separating or peeling off into smaller business segments, each a standalone business entity, from today’s monolithic whole. This will only accelerate.

Common in the chemical process industry, fractionation (or fractional distillation) involves separating a mixture, such as petroleum feedstock, into its component parts or fractions by heating it to a temperature at which one or more fractions vaporizes; the vapors are then condensed, and thereby separated.

The Ansoff Product-Market matrix (see Figure 3 below) taught in business schools offers another analogy. For a given product, or a technology underlying it, there can be multiple markets, and therefore distinct strategic approaches to addressing them.

What this means for electricity is this: We may have distinct product-markets for traffic signals, street lighting, home energy management, energy efficiency, sprinkler systems, corridor lighting, industrial uses such as railroads, or subways, or aluminum or steel plants, and each represents a distinct business vertical.

Each represents entrepreneurial or new business development opportunities. Who can enter such future electricity fractions? Just about anybody — the barriers to entry have fallen, and economies of scale no longer hold.

Figure 3

The facilities management department of a university, for instance, may manage its campus’ street lighting, or air-conditioning and heating services; many do, and be independent of the grid. Home energy management, a part of “behind the meter services,” e.g., Nest is already a new business. Fractionation presents both opportunities and challenges for electric utilities. In offering such services, an electricity company may not be restricted to any regulated service territory.

Given that both microgrids and fractionated services represent the electricity industry future, we likely underestimate the transformative character of the changes underway. To simply call the phenomenon “distributed generation” (DG) or “microgrids” does not capture the prospects. We mean more than “generation,” more than “distributed,” and more than “microgrids” when describing Electricity 2.0. DG may more appropriately be called LGCM — Local Generation, Consumption, and Management.

While fractionation-based possibilities are not strictly microgrids, they are of a kind. They are a proxy for such services, and therefore, microgrids as metaphor.

Lead image: Transmission via Shutterstock

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Mahesh P. Bhave is Professor, NTPC School of Business (NSB), New Delhi area, He is also Founder, BHAVE Power Systems, San Diego, CA.  He teaches "Corporate Strategy - Energy-centric" and "Business Strategies for Microgrids" for MBA and executive MBA students. He works on projects to replace LPG (liquified petroleum gas) for cooking with solar and battery based solutions. Until December 2016, he was visiting professor, strategy, IIM Kozhikode, India.  Mahesh is an engineer from IIT Delhi with a Ph.D. from Syracuse University’s Maxwell School. He may be reached at  mahesh.bhave@nsb.ac.in . He is the author of  The Microgrid Revolution: Business Strategies for Next Generation Electricity , 2016, Praeger.  

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