What Is a Microgrid?

A backup generator is to a single home as a microgrid is to a multi-building complex, a remote village or even an entire island. 

Written by Brooke Becher
Published on Jun. 20, 2024
What Is a Microgrid?
Image: Shutterstock

A microgrid is a local, self-sufficient energy system that can connect with the main utility grid or operate independently. It works within a specified geographical area, and is powered by renewable and carbon-based energy resources, such as solar panels, wind turbines, natural gas and nuclear fission. Multi-building developments, like college campuses, hospitals, business centers and neighborhoods, as well as critical facilities, like military bases and airports, rely on microgrids to keep the lights on.

Microgrid Definition

A microgrid is a localized energy network that can connect and disconnect from the main grid. It is used to power everything from university campuses to airports and hospitals.

What Is a Microgrid?

Microgrids are small-scale energy networks that operate independently or in tandem with the  main “macro” grid. Working within a fixed geographic footprint, these self-contained systems generate power from on-site energy sources that’s distributed to in-network users, stored for use at a later date or even fed back into the main grid.

Microgrid technology protects large urban areas from power outages and price surges, using smart software controls that automatically switch over. And since modern microgrids make heavy use of renewables, like wind turbines, hydro-power and solar panels, these localized systems provide reliable energy access while cutting carbon emissions and energy costs at reduced demand on the wider electrical network.

“The list of disruptions and impacts to safe, reliable power are seemingly growing each year,” Steve Kiser, senior vice president and global energy sector lead at WSP USA, told Built In. Power outages caused by hurricanes, wildfires and floods can last for days, or weeks even in more severe cases, which prolongs recovery of the area. “Microgrids provide power,” Kiser added, “when it’s needed most.”

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How Are Microgrids Different from Main Grids?

When we reference “the grid,” we’re talking about national, centralized grid systems. There’s three that connect the United States across 5.7 million miles of transmission and distribution lines. Main grids deliver electricity from industrial-scale power plants to consumers over long distances. “But that comes with vulnerabilities,” explained Allan Schurr, chief commercial officer at microgrid firm Enchanted Rock.

Wide-area distribution networks have powered entire countries since the advent of electricity, but they can be inefficient. A single tree fall can onset a cascading power failure across several states if it causes enough damage to a powerline. Electricity also dissipates as it’s transmitted through the network, by as much as 15 percent.

In contrast, microgrids leverage distributed power that’s generated from nearby energy sites. They work within a much smaller footprint, and, while they can be connected to the grid, they can also operate on “island mode” and be totally self-sufficient.

Microgrids “provide standby backup via a self-contained supply of energy to the location they serve, which protects its users from the vulnerabilities of the grid,” Schurr said. “Because microgrids are self-contained with enough generating capacity to sustain operations when the grid is down, they provide significantly more local reliability than the grid can.”

Unlike traditional centralized systems, microgrids also have a multi-directional follow that can move power in more ways than one — from microgrid to consumer, main grid or battery storage and back again.

“The multi or bi-directional flow makes [microgrids] particularly innovative, adaptive and flexible to changes in demand and risks from weather or incidents,” Benjamin Dierker, an executive director at Alliance for Innovation and Infrastructure, told Built In. For example, users can generate power from their rooftop and contribute to the microgrid, rather than only having power move into their home. It would also mean if a powerline goes down because of a storm, “energy can be rerouted more easily across the network to meet customer needs ‘downstream’ of that downed line.”


Why Are Microgrids Important? 

Rising energy costs, power outages and natural disasters all contribute to the growing interest in microgrid technology. But it’s really about playing the long game when investing in these small, self-sufficient systems.

They’re Reliable

Microgrids provide backup power during main grid failures. They enable a continuous energy supply to critical facilities like hospitals, schools and emergency services, adding an extra layer of community resilience and response to extraneous circumstances.

They’re Sustainable

The majority of microgrids are powered by renewable energy. These decentralized systems offer a compatible way to integrate clean, low-carbon energy — solar, hydro, wind and biogas solutions — into existing power generation infrastructure, reducing reliance on the grid and fossil fuels alike. Using a hybrid system, the microgrid network that supports the 36-square mile Marine Corps Air Station in Miramar, which includes over 100 buildings and an entire flight line, generates half of its electricity from renewable sources.

They’re Efficient

By localizing power generation, microgrids reduce the percentage of transmission loss and increase efficiency by simply traveling shorter distances. Renewable energy sources and storage systems also provide a more stable and predictable energy supply that can be balanced based on demand.

They’re Cost Effective

Electricity rates have increased by 20 percent, alongside power outages, which have more than doubled in likelihood over the last decade. To combat this, microgrids practice load-shifting, which autonomously swaps energy transmission back-and-forth from the main grid to a microgrid based on volatile price surges during peak hours. Renewable energy sources also tend to have lower operational costs compared to traditional fossil fuel power plants. A microgrid’s ability to keep operations running smoothly prevents any financial loss a company or facility may incur because of a blackout.

“Power outages can last for days or weeks in severe cases, further slowing the recovery from such events,” Kiser said. “For consumers who cannot afford extended outages, the benefits of microgrids can be invaluable.”

They Deliver Power to Remote Areas

All microgrids come with the ability to operate independently from the main grid. While this protects urban areas from macrogrid vulnerabilities, microgrids are essential in delivering electricity to remote or disaster-prone areas. Take for example SunMoksha’s nanogrid, which helps Kudagaon’s 300 island residents get through the monsoon season, or the Kigbe solar-powered minigrid, which decontaminates a bore hole that provides clean drinking water to an off-grid community of more than 2,000 members. Schneider Electric’s 8.7 kilowatt microgrid directly contributed to an increase in birth rates at Matongo’s Women’s Clinic in Kenya after delivering reliable electricity for the first time.

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How Do Microgrids Work?

The purpose of a microgrid is to safely separate energy from the main grid for use on-demand. To do this, one or more energy sites must be installed to serve a specific area. These systems typically feature a combination of different kinds of energy that range from renewables, like wind turbines or photovoltaic solar panels, to fossil fuels and nuclear fission.

The energy produced from these sources are either used in real time or reserved in battery storage. But to actually separate itself from the main grid, a microgrid’s intelligent control system uses a big switch, sometimes called an automatic transfer switch, that autonomously manages the distribution of power within the microgrid’s network and, when connected, coordinates its supply needs with the main electrical grid.

”In response to an unplanned outage or when the grid is stressed, a microgrid functions just like a generator or a battery,” Schurr said. A microgrid’s power supply kicks in instantaneously, and the system runs as long as needed — at least until the power supply from the central utility grid stabilizes and returns to service. When this happens, the switch is closed back in so the generating capacity can synchronize with the grid before it returns to its pre-outage state.

”Once the generation has synchronized and the grid is again supplying power to the site, the microgrid goes back into standby mode,” Schurr said. “Advanced microgrid controls automate this process, helping to ensure reliable and continuous power.”


Types of Microgrids

There are two categories of microgrids: off-grid and grid-connected systems.

1. Off-Grid

An off-grid microgrid is a self-sufficient energy system that operates independently of the main electrical grid. It can be found supporting isolated communities on islands or in remote locations, where significant electricity is needed, but access to the main grid is either impractical, impossible or extremely limited. Off-grid systems entirely rely on local energy generation and storage. Traditional models use diesel or heavy fuel oil, while new-age tech have developed alternative hybrid systems that integrate renewable sources, like solar panels or wind turbines, that are connected to batteries or generators.

2. Grid-Connected

A grid-connected microgrid operates both independently and in conjunction with the main grid. This allows it to leverage local energy generation with mainline power as needed. For an added layer of resilience, multi-building facilities and institutions that run critical systems — like military bases, airports or hospitals — primarily employ grid-connected systems to maintain reliable, efficient electrical service in the event of a power outage. It can also be used to reduce cost, offering supplemental energy access that may even rotate in locally sourced renewable energy.

“The wind doesn’t always blow and sometimes the sun doesn’t shine,” Schurr said. “It’s during these times that dual-purpose microgrids can temporarily make up the difference, balancing out the grid until the renewables are able to supply enough power to meet the demand."

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The Future of Microgrids

Currently, there are 692 microgrids installed across the states, holding a total capacity of about 4.4 gigawatts. And while that means these decentralized systems provide less than 0.3 percent of the nation’s electricity, that’s still an 11 percent increase in the past four years, according to the Center for Climate and Energy Solutions.

Access to clean, reliable energy at lower cost is not only on trend for big business and eco-conscious government initiatives. It’s also captured the interest of homeowners, with residential solutions being the fastest growing sector of the microgrid market.

As our cars and cities become electrified, our relationship to energy consumption is also changing. The widespread adoption of low-carbon tech is enabling new concepts, like energy modeling, where consumers can assign specific types of energy per use case for optimal performance, as well as novel business models, as demonstrated by energy-as-a-service startups.

That being said, microgrids are by no means replacing the main grid any time soon.

“More microgrids in the future will reduce strain and demand on the central grid — which will have to stick around to meet larger demand needs,” Dierker said. “With more distributed power … microgrids serve as a lower cost supplement, working with the main grid to improve the overall resilience of our energy system.”

Frequently Asked Questions

Yes, microgrids are legal in the United States — but the regulatory framework varies by state.

Yes, microgrids are currently in use. As of 2023, there were 692 microgrids installed across the states, with a total capacity of about 4.4 gigawatts.

A traditional, centralized grid distributes electricity over large areas from industrial power plants, whereas a microgrid is a localized network that can operate independently or alongside the main grid thanks to nearby energy sites and battery storage.

The two types of microgrids are off-grid and grid-connected microgrid systems.

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