Feb 12, 2024 | John Atkinson

Microgrids: From “Too Expensive” to a Cost-Saving Must-Have

Between fast-rising demand, growing generation supply constraints, and the steadily-increasing frequency of extreme weather events like wildfires, severe storms, and heat waves, the US electricity grid is facing unprecedented challenges – and so are the businesses that depend on it. Over the past decade, average electricity rates have increased by over 20% while power outages experienced by customers increased by over 50%. 

Continuing to rely on grid power that keeps getting more expensive and more unreliable is an untenable proposition for many companies, and particularly for facilities where prolonged outages or power quality issues can spoil inventory, ruin sensitive manufacturing processes, or create health and safety hazards. Some are investing in expensive and polluting diesel-fueled backup generators to provide resilience, while others are installing solar panels and batteries to combat steadily-rising electricity rates. 

Microgrids can offer the best of both worlds, adding an integrated layer of clean on-site generation, battery storage, and controls to serve the twin purposes of reducing everyday electricity costs while also ensuring critical operations stay online in the event of a grid outage. However, there is a perception among many businesses that microgrids are too complex and expensive to be an affordable solution.  

Scale Microgrids is changing that perception by showing our customers that microgrids aren’t just “affordable” – they can actually save up to 30% or more on energy expenses from day one, with a microgrid service agreement that eliminates up-front capital costs as well as operational complexity and risk. In fact, our currently-contracted projects are expected to help our customers save nearly $420 million on their utility bills, avoid over 14,000 hours of power outages, and reduce CO2 emissions by 2.5 million tonnes for customers that range from grocery stores to large manufacturing facilities. Here’s how. 

Delivering ROI Beyond Resilience

Traditionally, energy and facilities managers have understood resilience as an added expense for their business. On-site diesel or natural gas-fueled generators entail costs for installation, maintenance, and refueling, but they keep the lights on when the grid goes down. Some companies have a precise, often hard-earned understanding of the value of this resilience to their bottom line, but many companies simply assume that backup power is an unavoidable cost of doing business. 

Microgrids offer similar or even superior resilience benefits compared to a backup generator, but with a dramatically superior overall value proposition. In contrast to backup generators, which only provide value during an outage, microgrids can deliver significant economic benefits every single day through a variety of value streams. 

  • Solar savings: Most microgrids include on-site solar panels, which deliver zero-emission electricity at a lower cost than the grid and thus save money whenever the sun is shining. Solar power prices are also effectively locked in for the 20+ year life of the asset, which means that their per-kilowatt-hour cost savings will increase every time utility rates go up. This is a sharp contrast to diesel generators, which are more expensive than utility-delivered power and have to contend with often-volatile fuel prices. 

  • Load shifting: Microgrids equipped with battery storage enable businesses to shift their energy use to take advantage of (TOU) rate arbitrage opportunities, charging batteries during cheaper off-peak hours and drawing on that stored electricity during expensive on-peak hours. These savings from load shifting are magnified in microgrids that include both solar and batteries, as optimized control systems can ensure that businesses maximize their use of cheap stored solar power when grid electricity prices are highest.  

  • Reducing demand charges: Demand charges are based on the highest level of energy consumed in a given hour during a monthly billing period. This is often the fastest-growing portion of many businesses’ utility bills, sometimes accounting for as much as half of their electricity costs, and it is a particular concern for companies with on-site charging facilities for electric vehicles (which can significantly increase peak demand). Microgrid controls can optimize battery use to reduce the amount of power that a facility needs to draw from the grid at any given time, flattening their load and reducing demand charges.

  • Demand response and VPPs: On hot summer days when demand is high, utility demand response programs offer payments to businesses that relieve stress on the grid by cutting their power usage. Microgrids make it easier to participate in demand response events, allowing companies to tap their own on-site power to reduce grid use without reducing their productivity. Emerging applications called “virtual power plants” or VPPs may offer further revenue opportunities, allowing microgrids to provide additional grid services in coordination with other customer-sited distributed energy resources. 

  • Avoiding utility service upgrades: In addition to these everyday savings on operational expenses, the on-site capacity of a microgrid can also help avoid the capital costs and indeterminate delays associated with having their utility upgrade their electrical service. For companies looking to build new facilities, expand their operations, or add EV chargers for fleets, this can save millions of dollars and years of waiting. 

These value streams can add up to a significant ROI even before the value of resilience is considered.  For example, a cold storage facility microgrid developed by Scale for a customer in California is projected to achieve more than $43 million in lifetime savings. These projected savings often increase over time as electricity rates spike – for example, a microgrid we built for a New Jersey vertical farm customer saved from year one and is on pace to generate savings of 128% compared to its original expected value. 

As evidenced by this lengthy list, the cost benefits of microgrids are diverse and complex, and they may 

vary significantly with site characteristics, load profiles, and utility jurisdiction. The beauty of a microgrid is that its sophisticated control systems can automate operations to deliver maximum ROI alongside maximum resilience – and the advantage of working with Scale is that we have experience delivering these optimized services for a wide variety of customers. 

Scalable success with Scale

At Scale, we aim to literally live up to our company’s name, scaling microgrids from a bespoke, expensive resilience solution only suitable for high-need customers to a cost-saving and accessible must-have for everyone. If your business is concerned about rising electricity costs, reliability risks, or both, Scale can provide a fully-financed microgrid solution that combines the savings of solar and batteries with the resilience of a backup generator. 

And if you’re a project developer, fleet management company, charge point operator, or energy advisory firm, Scale can help you reach new markets by meeting your needs for expertise across the entire microgrid adoption lifecycle, including project design, delivery, operations, and financing. 

Interested in partnering with us? Let’s grow together.