Golden Decade for Smart Microgrids!

In the context of modern energy systems, traditional power grids function like broad “arteries,” allowing energy to flow in a unidirectional manner. While they provide stability, they are often cumbersome. Extreme weather events or equipment failures can trigger widespread power outages. Additionally, the rapid development of new energy sources, particularly distributed solar and wind energy, has led to traditional grids struggling to accommodate these inputs, making the case for microgrids.

Microgrids are small-scale power distribution systems that integrate distributed energy resources, energy storage, conversion devices, loads, monitoring, and protection systems. They are designed to provide local areas with self-sufficient and reliable power supply, featuring defined physical boundaries and relatively independent operational management systems. In the broader power grid context, microgrids serve as controllable components, capable of supplying electricity to the grid or drawing power as needed.

Four Key Roles of Microgrids

1. Supply Security: Microgrids can provide reliable electricity in specific areas, particularly in remote or underpowered regions, effectively compensating for deficiencies in the main grid. In the event of main grid failures, their islanding capability ensures power supply to critical facilities, reducing outage-related losses.
2. Integration of Renewable Energy: Microgrids can harness local renewable resources like solar and wind energy, enhancing their utilization and promoting the development of clean energy. Smart control systems optimize the generation and absorption processes of renewable energy.
3. Cost Efficiency: By employing intelligent energy management systems, microgrids can monitor and optimize energy usage in real time. This optimization reduces energy consumption and operating costs, leading to a more economical power supply.
4. Emission Reduction: The deployment of microgrids contributes to decreased reliance on fossil fuels and lowers greenhouse gas emissions, advancing the transition to cleaner energy structures. For example, energy obtained through photovoltaic storage systems on-site is entirely clean, yielding significant emission reduction benefits.

Under traditional models, grid scheduling systems manage every entity within the microgrid, including renewable energy sources and users, leading to complex trading and scheduling management. However, smart microgrids participate in trading and scheduling management as new business entities, simplifying processes and enhancing the efficiency of power system scheduling, allowing for more flexible and efficient resource allocation.

It is crucial to note that in certain scenarios where supply reliability is paramount, the design of smart microgrids can meet the technical requirements for island operation. In other situations, such capabilities are adaptable and can be configured based on actual needs.

Policy Empowerment Accelerating Development

As an essential component of the new power system, renewable energy microgrids have received significant attention and support from both national and local governments, leading to a series of policies aimed at promoting their development. Key initiatives include:

• In July 2015, the National Energy Administration issued guidelines to explore microgrid technologies and management systems that adapt to renewable energy development.
• In July 2017, the National Development and Reform Commission and the National Energy Administration proposed a trial approach to promote the healthy development of microgrids.
• In January 2022, the “14th Five-Year Plan for Modern Energy Systems” emphasized the active development of smart microgrids that consume renewable energy.
• In 2023, the National Energy Administration’s Blue Book on the Development of New Power Systems highlighted the importance of enhancing the interaction capabilities of distributed energy, electric vehicles, and microgrids.
• Numerous additional policies have been published, supporting the construction of industrial green microgrids and encouraging innovative business models.

These policies provide a robust framework for the development of microgrids, clarifying their direction and creating a conducive environment for growth.

Expansion of Installed Microgrid Capacity

Although China’s microgrid sector is relatively new, it has rapidly expanded due to the growth of distributed photovoltaics and energy storage solutions. By 2024, the total installed capacity of microgrids is projected to exceed 1284 MWh. The application scenarios have broadened from initial remote power supply to urban distribution grid upgrades and industrial energy management.

Profit Models for Microgrid Energy Storage Projects

Microgrid energy storage projects can create diversified value through various operational strategies based on specific project conditions. Current profit models include:

1. Peak-Shaving Arbitrage: Energy storage systems charge during low-price periods and discharge during high-price periods to capitalize on price differences.
2. Demand Response: Energy storage systems adjust discharge power during peak loads, providing economic compensation for demand response participation.
3. Distributed Energy Consumption: Energy storage works in tandem with distributed renewable energy to smooth out supply fluctuations.
4. Virtual Power Plants: Energy storage can aggregate and optimize resources through virtual power plant platforms, enabling participation in power markets.
5. Distribution Capacity Expansion: Energy storage systems can help increase power capacity when existing infrastructure is insufficient.

Future Outlook

The International Energy Agency (IEA) considers microgrids key to addressing the electricity needs of the 700 million people lacking access worldwide, especially in remote areas. As new energy penetration continues to rise, the microgrid market is poised for significant growth.

With advancements in IoT, big data, and AI, microgrid operations will become increasingly intelligent, improving monitoring, scheduling, and management efficiency. Projections indicate that by 2025, the global microgrid market could reach $39.5 billion, with China’s market penetration expected to hit 18%.

Over the next decade, the focus will be on building intelligent microgrid projects in underserved areas, enhancing renewable energy consumption, and optimizing energy use in industrial settings. The next ten years are expected to mark a transformative period for smart microgrids, transitioning from pilot projects to widespread applications, ultimately contributing to the decentralization and intelligence of energy systems.