Communities interested in cleaner energy, as well as greater control over their electric supply and reliability, are increasingly turning to microgrids — miniature power systems that serve an individual facility or area with electricity, either on its own or in concert with a larger power grid. Typically, a microgrid consists of energy generation and energy storage that can power a building or community and can be disconnected from the energy grid.

In addition to offering cleaner energy and greater control over electricity, microgrids can help communities:

  • Keep the lights on when the larger grid fails;
  • Gain control of energy costs;
  • Better compete for new industries and jobs;
  • Improve air quality;
  • Improve public health;
  • Reduce energy poverty in disadvantaged neighborhoods; and
  • Move toward environmental justice goals.

Community microgrids are increasingly popular, particularly in Rust Belt cities such as Buffalo, New York; Cleveland, Ohio; and Pittsburgh, Pennsylvania that were once famous for noxious pollution, but have lost manufacturing jobs over the past decades. One explanation may be that diverse, innovation-driven economies have replaced heavy manufacturing. Community-based microgrids coupled with climate objectives present the opportunity to entice green energy innovators to become part of the revitalization of once-forgotten neighborhoods.

Microgrids and New York State Laws and Policy

In New York, microgrids align with several of the State’s important laws and policy initiatives relating to the environment, energy and development. For example, microgrids advance New York State’s Smart Growth Public Infrastructure Policy Act, which was enacted in 2010 to minimize sprawl development and promote funding for infrastructure projects with sustainable land use projects. In many cases, microgrid projects can dovetail with Shovel Ready Certified sites, which have been preapproved for development as meeting all major state permitting issues, thereby reducing the time, expense, unpredictability and other risks to land developers.

Microgrids also serve the purpose of advancing the principles of the Climate Leadership and Community Protection Act, (“Climate Act” or CLCPA) signed into law in New York in 2019. Among other objectives, the Climate Act seeks to address inequities of climate change by establishing tangible requirements and goals to attain carbon neutrality while expanding benefits and community ownership to disadvantaged communities. The Climate Act also requires that the New York State Department of Environmental Conservation, in coordination with other State agencies, including the New York Power Authority and the New York State Energy Research and Development Authority, prepare a report on the barriers faced by disadvantaged communities in accessing and owning energy systems relating to climate change mitigation and adaptation.

New York’s Regional Economic Development Councils (REDCs) also have a role to play in the increasing creation of microgrids throughout New York State. Specifically, the REDCs can identify sites that currently lack electric infrastructure and/or electric capacity, which both prevents economic expansion and limits the opportunity for community-wide decarbonization.

Considered to be one of the top eight U.S. states in microgrid policy activity, New York State supports microgrid development through its innovative NY Prize program, which offers millions of dollars in a competitive microgrid grant program.

Microgrid Economics

Microgrids bring supply and demand closer together, and thereby minimize the cost of economic investment in a large grid system. Ownership in such systems can be by the community, the microgrid developer or a local economic development agency. Economic incentives are provided in several ways.

For example, in 2017, the New York State Public Service Commission (PSC) established the Value of Distributed Energy Resources (VDER or “Value Stack”), a new mechanism to compensate generators of energy created by distributed energy resources (DER). The Value Stack is part of Reforming the Energy Vision, a State policy strategy to revitalize energy distribution markets, and help achieve the State’s objective of meeting 50% of its electricity needs from renewable energy sources by 2030.

The Value Stack compensates projects with bill credits based on when and where they provide electricity to the grid. This is determined by a DER’s:

  • Energy Value (LBMP);
  • Capacity Value (ICAP);
  • Environmental Value (E);
  • Demand Reduction Value (DRV); and
  • Locational System Relief Value (LSRV).

Additionally, certain Community Distributed Generation projects may be able to obtain credits that recognize the benefits that DERs provide to the grid and society, including avoided carbon emissions, cost savings to customers and utilities, and other savings from avoiding expensive capital investments.

Support for microgrids is strong among community groups, developers, economic development agencies, microgrid vendors and those that support co-locating supply with demand. Many of these groups seek to develop clean energy unencumbered by what they view as the costs, vested interests and bias of legacy models of large grids. Additionally, these constituencies understand that microgrids position communities to attract green energy companies, and that building local economic development can help achieve climate goals.

For traditional utilities, microgrids are sometimes seen as a threat to their energy monopolies. And yet a real opportunity exists for utilities to participate in microgrid solutions. By developing their own microgrids, utilities can increase revenue even while sustaining shocks to their electrical grid. Additionally, utilities could provide seamless redundancy and resilience to their operations, while continuously powering services that are critical to health and safety. And not least, utilities are uniquely and well positioned to operationalize and monetize the value of microgrids to all ratepayers instead of a select few, thereby creating a distributed energy grid to all connected users.