Microgrids and the future of reliable energy
- November 1, 2023: Vol. 10, Number 10

Microgrids and the future of reliable energy

by Benjamin Cole

The soaring temperatures of summer 2023 plagued the American Midwest, testing electrical utilities from Michigan to the Lone Star State.

“Can Texas Stave Off its Next Grid Emergency?” inquired Energy and Environment News in September. This query was prompted after the Texas electrical grid infamously collapsed in the winter of 2021. But the rest of the nation was not spared close calls either. In July, PJM Interconnection, the largest U.S. electric grid operator with a whopping 65 million customers, issued an “energy emergency alert level 1” as residents in 13 states, including Illinois, New Jersey and Pennsylvania, went indoors and switched on air conditioners. The sprawling regional transmission organization skirted summer without rolling blackouts, but barely.

Of course, for hospitals, first responders, data centers, city infrastructure, military installations and other critical operations, power interruptions are not feasible. Onsite electricity through diesel generators is an option for many critical users, but another more comprehensive approach — and possible revenue-generating model — is winning favor too: microgrids.

Nationally and globally, microgrids are popping up in mission-critical applications, or to serve rural communities, especially in less-developed nations.


A microgrid is a constellation of energy users and producers connected to a common system, usually a defined geographically area, such as a remote town, college campus, data center, warehouse district or airport. A microgrid can draw from, or feed into, a traditional larger utility grid as warranted, although rural microgrids tend to be standalone.

There are some advantages of a micro-grid, as compared with lone buildings with rooftop solar panels and banks of batteries or diesel generators. In a microgrid, there can be several energy producers, providing diversity of power sources. The range of consumers, even within the small grid, can smooth out the consumption curve.


In the near future, more data centers — those vital electric-impulse beehives that store data and enable the ever-growing internet and cloud — will be embedded within microgrids, replete with battery backup, and possibly even feeding power into larger grids as needed, predicted the Swedish-Swiss energy and technology giant ABB Group in a 2023 report.

The world-class data centers, run by behemoths such as Apple, Amazon Web Services or the Yotta NM1 facility in Mumbai, each consume as much electricity as small cities. Obviously, going dark is not an option for such data centers, relied upon continuously by billions of consumers and enterprises globally.

Most data centers are backed up by battery power for the short term (usually less than 15 minutes) and diesel generators for longer interruptions. But in the United States and globally, traditional grids are migrating to renewable power sources, which can lead to less reliable power and thinner margins for error. Consider the mishaps in Texas in 2021 and 2023.

For data centers, this pending grid sketchiness could spell trouble, or opportunity, posits ABB Group. Cheaper batteries are one reason.

“The balanced compromise of battery performance and the drop in lithium-ion technology cost are making battery energy storage easily accessible for data center operators,” asserts ABB Group.

The second step for the gigantic data centers is not to merely be prepared with the batteries (charged by the traditional grid) and to then await power interruptions, but to develop a microgrid into which electricity is fed by wind and solar power generators that keep the batteries charged. Then, when batteries are topped off, microgrid power can be fed back into the larger traditional utility grid to earn income, advises ABB Group.

“The future of energy in data centers is becoming a mix of sources coupled with battery energy storage comprised within a microgrid. Data center microgrids provide an electrical architecture to allow data centers to operate as consumer or prosumer [producer],” says ABB Group.

Some huge data centers are already married to solar battery power plants, such as the Switch Tahoe Reno data center in Nevada, situated in the same industrial park as Tesla’s gigafactory. The Switch data center is considered one of the largest in the world and is 100 percent powered by an onsite solar power and battery facility.

Data centers and microgrids may, in fact, become inevitably linked in something similar to shotgun marriages.

“A worldwide shortage of available power is inhibiting growth of the global data center market. Sourcing enough power is a top priority of data center operators across North America, Europe, Latin America and Asia Pacific,” reported real estate giant CBRE, in a July report titled Global Data Center Trends 2023.

But the demand for data center capacity keeps growing and will likely get yet another kick by artificial intelligence (AI) needs, reports CBRE. “The rapid growth of artificial intelligence — along with other modern technologies, such as streaming, gaming and self-driving cars — is expected to drive continued strong data center demand.”

One of the wonders of the internet era, there are more than 5,000 data centers in the United States, and more than 8,000 worldwide, and that number is expanding daily.

Globally, data center capacity is rising in double digits annually, by most industry estimates. The capacity of “hyperscale” data centers, such as those operated by Google, Amazon, Microsoft and IBM is growing at a 20 percent annual compounded rate, reported real estate-services giant JLL in a recent report.

But plopping down a power-hungry data center does not always sit well with local or regional authorities and can overwhelm the local grid. Consequently, “sustainability and energy efficiency are top priorities for data center users, operators and investors,” notes JLL.

That, in turn, likely spells a larger role for microgrids in the expanding data center universe.


Of course, microgrids are finding more applications than in just the booming data center sector. In 2022, the capacity of microgrid installations in the United States alone passed the milestone 10 gigawatts, up 47 percent in five years, Wood Mackenzie recently reported. By way of comparison, that is roughly enough to power 3 million homes. Moreover, “more than 175 solar and solar-plus-storage microgrid projects have been in active development and were scheduled to come online,” says Wood MacKenzie.

A microgrid model gaining acceptance is the solar-and-battery set up, but with diesel generators as the fail-safe emergency backup, adds Wood MacKenzie.

JLL advises: “A fossil fuel generator, often sized to cover the entire [microgrid] site, acts as backup for the solar and storage to ensure uninterrupted service” during unusual periods of limited sunlight.

Globally, as might be expected given sketchy power systems across much of the planet, microgrids are a much bigger energy model than in the United States. For nations such as India, with yet still large rural populations difficult to serve by traditional grid, the microgrid could become the default option. Tata Power, the subcontinent’s largest electrical utility, in April announced it has already constructed 220 solar-powered microgrids in the states of Uttar Pradesh and Bihar, and the “goal is to roll out 10,000 microgrids [nationwide] in the near future.”

Indeed, thanks to decreasing costs of solar panels and batteries, microgrids may become a dominant form of electrical supply in much of the rural developing world, according to a recent report from the International Energy Agency.

“The International Energy Agency forecasts that 60 percent of future electrification needed to reach the goal of energy for all by 2030 will be enabled through microgrids and other small standalone systems,” writes the International Smart Grid Action Network in a recent report.

A possible parallel: Many rural regions of the developed world never installed landline telephone service, as that technology was leapfrogged by cellphone towers and the ubiquitous smartphone in the 2000s.

Rural electrification may also go the way of landlines, as microgrids, made possible by better and cheaper solar panels and batteries, supplant traditional grids.


The invasion of Ukraine is the latest example of a nation’s infrastructure being targeted in war, and the most recent warning that military installations globally must be hardened against loss of power.

Interestingly, the 2021 National Defense Authorization Act specifically called on the U.S. Department of Defense to “promote installing microgrids to ensure the energy security and energy resilience of critical missions.”

Why microgrids? For example, in the Middle East alone the U.S. military maintains a footprint of roughly 40,000 to 60,000 personnel deployed across 18 major bases, all dependent on host-nation grid power or diesel generators — and the diesel is supplied by local markets, and vulnerable to interdiction.

The idea of failed nation-states, war, terrorism or collapsed fuel markets is hardly foreign in the Middle East, meaning that U.S. bases are vulnerable to unacceptable power cutoffs. But the microgrid offers a solution, especially in the sunny Middle East.

“A standard medium-size U.S. base similar to those in the Middle East has a peak critical load of 10 megawatts. Installing a 40- to 60-acre solar panel field … with a battery storage system could provide 100 percent of the base’s overall electricity demand,” Nathan Olsen, a lieutenant colonel in the U.S. Air Force, specified in a recent study for the Washington Institute for Near East Policy.

The U.S. Army plans to install a microgrid in every major installation worldwide by 2035, and to pursue enough renewable energy generation and battery storage capacity to make the Army self-sustaining in all its installations by 2040.

Indeed, accidents, severe weather, cyberattacks and acts of war all threaten power outages at U.S. military bases worldwide, adds a recent report by the Atlantic Council. “Although backup diesel generators can ensure that some critical operations continue, microgrids are more reliable because they can draw power from multiple generators and are able to assign power to different buildings … unlike generators that are generally only connected to one building,” says the Atlantic Council.

The hardening of U.S. military installations globally will include a large dose of microgrids, if current Pentagon plans are brought to fruition.


There is no refuting that solar power costs have been radically reduced in recent decades. From 2010 to 2020 alone, there was a 64 percent to 82 percent reduction in the cost of solar power installations, reports the National Renewable Energy Laboratory. Yet microgrid advocates should be aware of limitations ahead,  argued the Washington, D.C.-based Brookings Institution in a 2019 report.

“Capital requirements [for microgrids] are high and revenues per customer tend to be low, so most private projects require low-cost capital with loan durations of 10 to 15 years,” notes Brookings. “Government policy does not always favor microgrids; for one thing, the same conditions that make communities attractive for microgrid expansion also make them attractive for the centralized grid, and government planners are typically not obliged to plan around private off-grid developers.”

Moreover, since 2019, interest rates have risen, thus raising the capital cost side of the microgrid equation.

In addition, private developers of microgrids “risk stranding assets when centralized grids encroach,” continues Brookings. “Nor is public ownership a panacea; community owned and public microgrids often have similar issues concerning maintenance and long-run sustainability.”

Even with best technologies, a tough nut to crack is that power from microgrids is generally more costly than grid power. For example, electricity from utility-scale solar power ran near 7 cents per kilowatt-hour in 2019, while onshore wind power could be even less, recently reported the International Renewable Energy Agency.

On a per kilowatt-hour basis, microgrid power usually costs many multiples of grid power, even 10 times as much in some configurations.

Certain customers turning to microgrids, such as data centers and military installations, have other overriding considerations above simple costs, including mission-critical obligations.

And throughout the developing world, rural areas situated too far from grid power will likely turn to microgrids, as is the case in India.

But grid extensions and traditional utility electricity remain formidable competition to widespread microgrid adoption in much of the developed world.

Nevertheless, worth watching in the years ahead is whether further reductions of solar and wind power and battery costs, or an unanticipated breakthrough in technology, tips the scale in more applications to microgrids and away from traditional grid powers.


Benjamin Cole ( is a freelance writer based in Thailand.

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