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Will microgrids become increasingly important in the European energy sector?

When presenting this question to product managers, engineers, and business developers in market leading companies in the European energy sector, I discovered a world of potential for many different applications; not only in remote areas where they would normally be implemented but also in grid connected spaces with operational needs to be fulfilled.

I learned how complex microgrids can be, especially if based on intermittent renewable energy sources. But I also discovered how flexible they could be and how they could help the wider energy system that is becoming increasingly challenged both by generation connected at low voltage levels and new demands for electricity for heating and mobility.

Let’s start with the basics. A microgrid is a closed system of interconnected energy loads and distributed energy resources within a defined boundary and with a single point of coupling to the wider grid and can work disconnected from it. The fact that these systems are made to assure resilience and can work off grid make them appear as single loads that can be regulated by the grid operator according to their needs. So, if you think about a new urban area that is developed adjacent to an existing city, having a microgrid design for the new energy system that will supply the area seems to be a win-win situation both for the people that will live or work in it and both for the local DSO that will be able to manage those additional loads as a single one rather than tens or hundreds depending on the size.

However, it is not that simple! In order to work off the grid a microgrid needs to be able to balance all the internal demand and supply. This brings with it a considerable investment in storage, control and monitoring systems which make the microgrid business case difficult especially in a well-connected energy system as it is in Europe, where there is little perceived demand for this functionality. However, things are changing and high penetration of intermittent renewable sources in the wider system challenge especially DSOs, responsible for balancing the network while having little visibility on the medium and lower voltage lines. This has led to the opening of new flexibility services tendered by DSOs intended to avoid grid reinforcements that would result in intervention of the order of millions.

At the same time microgrids are not a novelty anymore and companies like Schneider Electric, Siemens and ABB have made them their specialty creating innovative solutions to overcome the initial capital cost. In some markets, emerging companies like Bloom Energy and Scale microgrid solution have made microgrids a scalable product with modular blocks that can be combined according to the needs reducing installation time and costs. All these factors seem to create the ideal environment for microgrid applications in Europe and interest is growing in the energy sector towards microgrid applications.

The real potential for microgrids remains unclear. One interviewee sees microgrids as a “transition technology” that will help the existing wider grid while it readapts to the new conditions that a distributed energy system demands. The main grid is still the most reliable among all solutions to ensure supply to European citizens and industry. Another expert believes that the only way that microgrid could be economically viable in Europe is by providing ancillary services and therefore such revenue streams should be considered and included in the initial design of the microgrid to create the best economic scenario.

It seems like there is no single answer.  It does, however, feel like there are a few scenarios that are worth exploring.

My opinion is that microgrids could constitute a great support to the transition to a distributed energy system providing local resilience supporting the wider grid. Even though they might not be the right solution in every situation they should be taken in consideration for applications where resilience is a priority such as in datacentres and critical infrastructure. Microgrids may also present an opportunity for energy communities to develop their own energy systems supporting the democratisation and decarbonisation of the wider energy system and providing long term certainty over their energy bills.

One thing is for sure. Energy systems based on private networks can give a great deal of freedom to explore innovative business models and technical solutions.

You can find more about our microgrids research on the Local Energy Systems research service.

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