The generators providing electricity to a 13-state grid stretching from New Jersey to Illinois, including Ohio, will get a record $269.92 per megawatt-day from utilities to provide capacity over a 12-month period, which is over nine times the $28.92 price from last year’s auction. Currently, fossil fuels account for more than 80% of global energy production and approximately 80% of the population lives in countries that are net-importers of fossil fuels, which means about 6 billion people are dependent on other countries for their energy supply. As a result, companies should look to utilize renewable energy sources to establish energy independence.
What is a Microgrid?
A microgrid is a group of interconnected loads and distributed energy resources that acts as a single controllable entity with respect to a larger power grid. A microgrid can operate as part of a larger grid or it can disconnect and operate independently as a stable source of energy, providing reliability and resilience to grid disturbances. An advanced microgrid enables local power generation assets such as traditional generators, renewable resources, and storage to keep the local grid running when the larger grid experiences interruptions. In addition, microgrids allow local assets to work together to save costs, extend duration of energy supplies, and produce revenue via market participation.
Benefits of Renewable Energy Sources and Microgrids
Microgrids are often fueled by renewable resources and therefore provide flexibility and efficiency that doesn’t exist in grid-connected environments, among other benefits. Beyond extensive growth in the renewable energy industry in the US, renewable energy solutions are manufactured across the globe, offering a hedge against import dependency and mitigating the effects of unpredictable price swings in fossil fuels.
One major benefit to making the switch from fossil fuels to renewable energy is the economic impact. According to the United Nations, renewable energy prices have decreased drastically since 2010, and state that solar power decreased 85%, onshore wind energy fell 56%, and offshore wind energy dropped 48%. The downward cost trend continues as the efficiency of renewable technologies improve (e.g., in solar module efficiency has increased by approximately 40% during the same timeframe). Other adjunct technologies, such as grid-connected energy storage, have also grown in both adoption and efficiency (e.g., lithium-ion batteries, a dominant technology in grid-connected storage, dropped by approximately 90% from 2010 to 2022, decreasing from $1,100 per kilowatt-hour (kWh) to around $137/kW). Additionally, the U.N. estimates that every dollar of investment into renewables creates three times more jobs than in the fossil fuel industry.
Microgrids can improve local management of power supply and demand, which can help defer costly investments by utilities in new power generation. When sited strategically within the electricity system, microgrids help reduce or manage electricity demand and alleviate grid congestion, thereby reducing prices and peak power requirements. Therefore, the microgrids support system reliability and improve system efficiency. Finally, the microgrids can continue to provide uninterrupted power to individual buildings or cities even if the larger power grid suffers an outage, providing an added layer of protection to extreme weather or cyber-attacks.
Path Forward
Cuyahoga County, Ohio has been working to move communities away from coal-fired power generation and toward a clean energy microgrid system. In December 2023, City Council approved a contract with Compass Energy Platform to operate a new microgrid called the Cuyahoga Green Energy. The County received a $129 million grant from the U.S. Department of Energy to install solar power and battery storage on landfill and brownfield sites. Construction on the project is expected to start next year and be operational by 2026 and 2027.
Due to the rising cost of fossil fuels and the substantial benefits from renewable energy, companies should consider investing in alternative energy sources. Companies investing into renewable energy will have the opportunity to use their own microgrid as an energy source. Additionally, moving to a microgrid will allow companies to work with the state or local government on overcoming financial hurdles as more cities look to move away from fossil fuels.
Businesses across the country can leverage the Federal Solar Investment Tax Credit, which allows businesses to claim a deduction on their federal corporate income tax up to 30% of their solar system’s total cost if they install a renewable energy system in their building within the year of usage. Local incentives can also significantly improve the economics of renewable installations. For instance, through its Energy Loan Fund, the Ohio Department of Development is assisting qualifying businesses by providing low-interest financing to install efficiency measures that reduce energy by at least 15%. Ohio schools, nonprofit education service centers, and hospitals can also receive grant funding to install similar measures to improve energy efficiency. Finally, Ohio’s Qualified Energy Project Tax Exemption provides qualifying renewable energy project owners and lessees with an exemption from the public utility tangible personal property tax.
