The past two decades of telecommunications history can serve to illustrate trends and develop insights that apply to electric grid modernization – the evolution to the Smart Grid.

Private Branch Exchanges (PBXs) disrupted and disintermediated the phone company from commercial and industrial consumers. PBXs duplicated the most relevant functions of the large and remote (and centralized) Central Office switches supplied by the phone company. Today’s telecommunications networks contain vastly more distributed intelligence and autonomy than the network of 25 years ago, and there are many more players delivering innovations in technologies, services, and business models.

What will be the disruptive technology that starts the slow erosion of commercial businesses away from traditional electric utilities? What technology will dramatically reshape today’s power grids and service providers? Microgrids. The Smart Grid Dictionary defines a microgrid as “A small power system that integrates self-contained generation, distribution, sensors, energy storage, and energy management software with a seamless and synchronized connection to a utility power system, and can operate independently as an island from that system.  Generation includes renewable energy sources and the ability to sell back excess capacity to a utility. On-site microgrid management software includes controls for the power generation, utility connect/disconnect, distribution, and energy storage equipment along with building energy management applications for industrial, commercial, or home use. “

Microgrids, like PBXs, reduce the reliance on a regulated supplier to deliver a commodity like electricity.  Industry research firms are optimistic about microgrid market potential, with projections ranging from $6B in 2020 to $17B by 2017.  Commercial microgrid solution providers are acting on the market opportunity.

In developed economies, microgrids provide energy surety for their owners.  Even if the surrounding grid is experiencing an outage, a microgrid theoretically can provide at least a modicum of power to the most important electricity consumers within its confines.  The term theoretically is emphasized here, because current operational and safety standards require that any grid-tied generation has to shut down if the larger grid experiences an outage.  There are standards bodies working to change this without compromising worker safety, which is of paramount concern for everyone.

Conceptually, a microgrid can put into practice the concept of graceful degradation, which has been a hallmark of computing design for a couple of decades.  PBXs of old (now evolved into IP communications servers) were and are designed to be fault-tolerant, but graceful degradation embodies the intentional design of a system to maintain limited functionality even when parts of it are inoperable.

Unless a microgrid has 100% self-generation capacity and energy storage that won’t be depleted, a graceful degradation scheme might determine that like Animal Farm, “All animals are equal, but some animals are more equal than others.”  On a college campus that operates as a microgrid, unoccupied classroom buildings may be less equal than occupied dormitories, unless there is critical research ongoing in a laboratory worth millions of dollars or human hours of time.

In developing countries, microgrids eliminate the traditional electricity supply chain of large, remote and centralized generation, long distance transmission, and low voltage distribution to consumers.  Microgrids hold significant promise to eliminate energy poverty that afflicts over 1 billion humans, according to the International Energy Agency (IEA).  Unless the utility itself is supplying the microgrid in these situations, it’s unlikely that these new consumers will ever have the same sort of buyer/seller relationship that we’re accustomed to in our developed economy and civil structure.

Microgrids will lure the customers with the highest utility bills, who have the most motivation, to seek opportunities to reduce their operating costs and gain more control over their energy security in developed economies.  Will regulators and utilities react in time to ensure that ratepayer bases are not too severely hollowed out, and that overall grid resiliency is realized from the incorporation of microgrids and other distributed energy resources?