Customer-Focused Assessment of Electric Power Microgrids

Abstract

The cost-effectiveness of interconnected microgrid systems with combined heat and power is examined for 36 cases involving six microgrid applications in six different U.S. locations. In the baseline analysis, microgrids are found to be good investments in areas with relatively high “spark spreads” (electricity/natural gas price differentials). Customers with a higher value for electric reliability realize greater benefits. Results become more favorable over time if the rate of increase of electricity prices is at least 60% of the rate of increase of natural gas prices—a plausible scenario in states with substantial natural-gas fired capacity. Sensitivity analyses reveal that the choice of microgrid customer mix has a much greater impact on system economics than climate. Economies of scale are shown to be fairly modest for the systems considered here, but microgrids do show clear benefits over traditional single customer distributed generation. If performance goals of current U.S. Department of Energy research programs for IC engines and microturbines are met, rates of return for microgrid investments increase 10–20%.