Microgrid Case Studies Highlight Regional Resource Mixes, Value Propositions, and Costs

Coauthored by Adam Forni and Laura Vogel

A recently published report by the California Energy Commission profiled 26 microgrid case studies. The case studies include several demonstration projects sponsored by governments, public utilities, and universities, but the majority feature private industry projects for commercial hosts. The portfolio was focused on California and North America, but also included projects in India, China, Singapore, Japan, Mozambique, and Denmark. 

A key aspect of the analysis was to look at the distributed energy resources (DER) deployed in each region’s microgrids. Solar PV was a clear focus in California compared to the rest of the world. While Guidehouse Insights purposefully targeted case studies that included renewable energy, results still demonstrate that North America and global case studies more often include fossil fuel generation (diesel and combined heat and power) to achieve resilience and reliability benefits through the ability to completely island from the grid. One factor contributing to this result is a focus primarily on projects not dependent on government subsidies. Projects that relied on at least 50% nongovernmental funding were the focus of this analysis.

The Multidimensional Value Propositions of Microgrids

The case studies also explored what value propositions are driving commercially viable microgrids. Despite the diversity of use cases and microgrid applications, there are common value propositions driving microgrid adoption in California, nationally, and globally. Ten value propositions were provided to project developers and owners, who then ranked the importance of each value proposition. Results are shown in the figure below.

Value Proposition Rankings, by Region

(Source: Guidehouse, Inc., Inc.)

Microgrid Drivers

The drivers for microgrids in California, as shown by the value proposition rankings, appear to align with state policy goals for renewable energy and carbon reduction. The rankings also show the value placed on resiliency and microgrid economics, particularly for electricity bill savings and demand charge abatement. This is a driver microgrids share with energy storage systems for commercial customers in California, where electricity rates and demand charges are quite high. In comparison, most of the microgrids profiled from North America are in states with relatively low electricity costs. The North America projects score higher on reliability and resiliency, likely due to the impact of extreme weather events on the East Coast.

Global microgrids reported value propositions more like California than the rest of North America, signaling a strong interest in renewable energy integration and carbon reduction (despite reliance on legacy fossil fuel generation). The relatively high scores for the provision of ancillary services and energy and capacity services, speak to a recent trend of exploring ways for microgrids to offer services to the larger grid in general.

What Does a Microgrid Cost?

The cost of a microgrid varies greatly depending upon size, the DER resource mix, legacy assets being incorporated into the microgrid, and number and types of vendors involved. The best measure of the cost of microgrids is the cost per unit capacity ($/MW). Acknowledging the limited dataset available from these case studies (only 26 microgrid projects overall), North America is the most expensive microgrid market, followed closely by California, which is identified as a separate market. As key enabling technologies such as solar PV and energy storage experience additional price decreases, microgrid costs are expected to continue to decline over time. This trend is already apparent. The average cost of all the case study microgrids is just over $3 million/MW, down significantly from data provided in the past by vendors showing average costs exceeding $4 million/MW.

Value Proposition Rankings, by Region

(Source: Guidehouse, Inc., Inc.)

Download the complete CEC report here.