Macro impact of microgrids

Microgrids may not be a household name, but this decentralized approach to power is already having a big effect around the world by helping communities go green, reducing blackouts, and optimizing energy costs. Leslie Labruto, director of the Marshall Impact Accelerator at the London School of Economics describes the macro impact of microgrids and how this can help take electricity to the next level.

Below is a transcript of this podcast. Some parts have been edited for clarity. 

Michael Hainsworth: The fourth industrial revolution isn't just taking place on the factory floor, at a port of call, or in the metaverse. It's helping replace our aging electrical infrastructure in major cities and light the way in developing nations that previously had expensive power or no power at all. As the director of the Marshall Impact Accelerator at the London School of Economics, Leslie Labruto sees microgrids as a coming together of several technologies at once, including sustainable energy from wind and solar, artificial intelligence, and the Internet of Things powered by 5G.  We began our discussion by talking about where a microgrid deployment makes sense.

Leslie Labruto: Nowadays, microgrid deployments can make sense in many different places. The case study that we looked at as a team was in more remote and rural areas, but increasingly anywhere that needs resiliency in their grid, which can now be urban centers, is eligible for a microgrid as well. Microgrids take centralized grids and make them decentralized. Where we're typically reliant on large-scale power, smaller grids help create a system that could be more easily maintained, more easily monitored, rather than a large-scale system, which we even see in urban centers today. The answer is really anywhere.

MH: That's an interesting point because one of the big things we're talking about in the western world is that we haven't poured enough into maintaining, building and expanding our centralized grid in North America and in Europe. This isn't just for remote areas or developing markets.

LL: It's not, and a great example of this that many people remember was the big blackout and brownout in Texas when they had a freak storm and that was all because they were relying on a centralized grid. If one part of the grid goes down, it has effects on truly millions of people, whereas if we took a decentralized approach, you can more quickly spot the source of the problem and restore power more quickly, thus creating more resiliency in that community.

MH: Geographically speaking, with all your experience in the world of microgrids, who would you say is doing a microgrid the best?

LL: There's a couple different examples that I've had a chance to work on that I've been really impressed by. Two case studies that I wanted to cite today are one, small island developing states and two, microgrids in remote areas of sub-Saharan Africa. On small and developing states, you have a great case study. You have populations of 10-20,000 people who are relying on typically imported diesel powered from one main grid, but you have these communities that can really decentralize themselves and rely on renewable power like solar and wind and use smaller systems that are more resilient to storms and other effects that we're seeing on small and developing states.

I've been really impressed to see their uptakes of solar, wind and geothermal. Given it's a perfect case study, they're importing diesel fuel, which is up to a dollar a kilowatt hour, compared to what we can find with a microgrid, which can be as low as 10 cents a kilowatt hour, kind of what you and I pay in Europe and North America.  

In sub-Saharan Africa you have people who are so far away from a main grid, they're never going to be connected because it doesn't make sense for the utility to spend their time connecting a community of say 10 or 20 or even 100 people to the main grid when they're drawing down on so little power. microgrid is the perfect solution for those communities that just need a small amount of generation to power minimal needs that they're currently drawing down on now. Those have been some great case studies of how we can see solar microgrids powered by batteries as well deployed in remote parts of the world.

MH: That's interesting, particularly the island nation example that you gave of where you've got countries importing the fuel necessary to keep the lights on, but aside from the fuel that you could use or not have to use, you're fueling an economy when you don't have to pay a dollar per megawatt, you're paying 10 cents.

LL: That's right. You're fueling entire economies based on an imported fuel that's not from the country that's volatile in costs as we're seeing. It just increases energy dependence. A microgrid is a first step towards taking that motion towards energy independence, harnessing your own local resources, powered by solar, which are in abundance on island nations. Oftentimes wind and oftentimes geothermal that's all locally produced, kept in-house or in-country, and then powers communities just using energy sources found locally on the island.

MH: What about Europe? What are we seeing on that front?

LL: Even in Europe we're seeing increasing examples. If energy's ever going to be in the headlines, it's what we're seeing now. There's so much energy interdependence in Europe, we're seeing with the war in the Ukraine, the dependence on fuels from Russia. What we're noticing is that this could all be avoided if we developed our own independent energy supplies. The best way to do that in a cost-effective way is think about how we can adopt more renewables, but how we can also roll out Microgrids in communities so they can be independent as well.

MH: With that in mind, maybe we need to talk a little bit about you here because if I understand correctly, you were inspired by a family member to pour your energy into microgrids.

LL: I was. My grandmother was born in the great year of 1916, which is just remarkable to think of what she saw in her lifetime. The invention of the transistor, the invention of the television, man going on the moon, all the way to the invention of the internet. When I often would talk to her growing up, she would tell me about her first job, and she worked on a conveyor belt at a light bulb making manufacturing facility in New Jersey. She basically was helping create light bulbs. Her entire life she spent working at this facility and I think about what she would do and every day, day in and day out, she would show up to work to coil tungsten, the little, tiny filaments we'd see in light bulbs, which determine how bright a light bulb can be. There was a time in America when that was novel and new, just having access to a light bulb.

Fast forward to my own career and I was thinking about what to do with my life and I decided to dedicate my life to engineering, and clean energy was the thing I wanted to pour my energy into most, no pun intended. What did I decide to do? I decided to help bring light to places where there were none. Those very same light bulbs that she was manufacturing I was helped take to places like East and West Africa, India, Pakistan, places of the world where almost a billion people still don't have access to basic electricity.

MH: Then let's extend this thought on what's novel and new in the evolution of technology. What's the new technology that makes the microgrid possible?

LL: I think back to nanny's time and a grid was a big deal just having access to power even in the United States as early as the 1930s when we saw rural electrification. Now we've moved on. We don't need to rely on just big grids at just our cable and wires. We now have capabilities for these grids to be so much smarter than they used to be. Understand how customers are actually using power, when they're using power, how much they're using. When is it going to be most cost effective so everyone's not using energy at the same time, but how do we smooth out load curves to make sure that we're not all relying on power right after work, for example, but we can run our dishwashers at night in the middle of the night when demand is maybe lower in a community and cheaper. That's all called smart controls. We've moved from this big clunky grid to these smarter, intelligent, responsive grids that are powered by digital tools.

MH: When we talk about digital tools, what are some of these digital tools because it sounds like there's a role for artificial intelligence, when we talk about understanding, when we're using the electricity for 5G by way of the Internet of Things?

LL: The easiest way to break it down is to just think of supply and demand. We are all demand, we are drawing down power left or right, to power our laptops, our refrigerators, when you turn the lights on at home, when you go to work. It's all demand. Then there's supply. This is the coal being burnt, the solar being produced, anything that's coming in from the grid. Traditionally, those don't speak to one another, it's just supply in and it's there. Now with smart technologies and Internet of Things, as you rightly mentioned, there's a chance for these two to talk to one another for us to really understand how much demand is being needed at a given time in what locations and how much is there of a supply.

We can start doing a better job matching these through things like artificial intelligence, things like smart technologies where they can say, "Do I really need this right now? Do I need to run the laundry right when I get home, can I delay this to a point where the grid could tell me there's actually excess supply and not much demand? Maybe that's a better time to run my dishwasher or my washing machine or power something at home." These are kind of the examples of smart controls and artificial intelligence that we're seeing this emergence of. The more they can talk to one another, the more efficient our system becomes and the cheaper it becomes for consumers.

MH: What about on the supply side of that equation? What kind of technology are we dealing with there?

LL: The steam engine was invented and there was a long time when we thought we could just combust fossil fuels and that was the main way of producing power. Now we're seeing such a diversity of supply that I think the world is starting to embrace as cost curves come down. Now, things that we've heard about before, renewables, solar, wind, geothermal, these are essentially free resources that are being generated just by the earth's natural movements. Now, of course, harnessing them takes power and takes money and we're seeing those costs reduce. The holy grail of course is battery storage. People often lament, "Well, what if the sun's not shining? What if the wind's not blowing?" The answer there is how do we store power when it is coming in, into a battery, and then release it when, say, the sun isn't shining or the wind's not blowing?

There's also an exciting subset of renewable energy called base load power. For those that might be overwhelmed by that term, base load power means it's always on. That's why people love fossil fuels. You can always burn the coal; you can always pour diesel into a generator really can always be there. Base load solutions like nuclear, geothermal, hydro, these can always be running. The steam from the earth doesn't stop when you're producing nuclear energy. It's not that you stop and start, it's just always on and that's something utilities love because it's always predictable, you know how much you're going to get. When it's renewably powered, then we find that there's no carbon emissions, which increasingly countries are trying to set more and more goals around.

MH: This seems to be one of those building blocks as part of industry 4.0 and communication service providers are steeped in the fourth industrial revolution. They're helping fuel that. What role do they play in the build out and management of a microgrid?

LL: What smart tools, and you're right, this kind of fourth revolution that we're calling it is playing a role in doing is, we could rely on just supply and demand, but there's this intermediate world called smart controls that we could be harnessing to better smooth out and match that load supply and demand. It's just an opportunity for it to become way more efficient, so we're not wasting power, we're not wasting money, and there's a chance for it all to kind of come together in a way that's much smoother and more efficient, so we don't fall behind on energy efficiency and just wastage. So many times, in the winter or the summer we'll see air conditioners running in the middle of the day when nobody's home. That's a great example of smart technologies to say, "Hey, everybody left the house, why is the AC still on?"

The residents of that house, we can see where they are, they're coming home in 20 minutes, let's kick that system on so when they get home, it's as if the air was never off all day, but it was. There're these examples that we can see of just smart technologies. We all know where we are at all times and our phones are constantly monitoring our geolocation. Sometimes people could say, "Well, that's creepy," but other times we could say, "Well, if we can control it for good, then we have an opportunity to actually create a more efficient system from a power supply perspective."

MH: Oh, I've got personal experience of that. The moment the wheels are up on the plane, when I leave the city on a business trip, my house knows I'm no longer in my city and it automatically lowers everything in the house, makes sure that the power drain is minimal. Then soon as I land back in the city and my phone reconnects to the network, the house goes, "Oh, I guess I better turn the air conditioning back on or heat the house again," so those are some interesting end user aspects to that sort of smart technology as well.  

LL: Oh sorry, and Michael, how nice is it when you get your bill at the end of each month to know that you optimized what you were using energy for, and you aren't just sinking cash when you went to go pay your bill? It's such a nice feeling and that's what smart controls can really do is make happier, healthier, and more economically viable homes.

MH: How micro is a microgrid?

LL: Well, microgrids can be very tiny. Even a household can consider themselves a microgrid all the way up to say about 5,000 households. That's the metric I like to use. Obviously, some people would say it can go a little bit bigger, it can flex a little larger and some people would say even a bit smaller. That's just a good way to think about it. I could probably talk about it in terms of kilowatts and megawatts, but I think using the household dimensions probably even easier than using those kinds of numbers, which sometimes don't mean much to many people.

MH: Okay, so when we talk about that going up to 5,000 households all the way down, what's the carbon footprint of a microgrid?

LL: Well, that depends. It depends a lot on what that microgrid is being powered by. Now microgrids are not inherently powered by solar, wind or renewables. A microgrid can be powered by fossil fuels. It really depends on what your input is to power that grid. Again, in sub-Saharan Africa, there's places where fossil fuels are going to be the least cost solution to powering a microgrid. Longer term, that again goes back to the energy interdependence issue. We are seeing a move towards microgrids being powered by renewables and thus having a lower carbon footprint.

MH: You brought up the cost component. I can imagine when we talk about the key challenges in deploying a microgrid, cost would be one of them, but what are some others?

LL: Cost is one of them and another is just regulatory. Imagine you are the CEO of utility, what you need to do is provide reliable power and generate revenue for your business. Then in comes this microgrid company that wants to kind of take away some of your supply, some of your revenue. You see there's an inherit tension there where utility CEO might say, "Hey, hold on, I'm not sure I want microgrids popping up in my area," but if you have progressive regulatory policy, you can see that they could actually coexist and still generate revenue and you're actually increasing competition for consumers to say, "Hey, wait a second, maybe I don't want to get power from the traditional big utility. I do want renewables power in my home, or I do want to a more reliable system and maybe I'll actually be willing to pay a premium so that if there's a big storm, I'll actually know that I have reliable power because the grid that I'm drawing power from is smaller and more localized."

Increasing competition's not a bad thing, but inherently, there are some tensions that emerge regulatory or politically when we see these wanting to increase. Now don't get me wrong, utilities aren't always the bad guy. They understand this and they do want to see an increase in competition because at the end of the day, utilities are stretched. It's stressful to have to always be the one providing all the power. If they have smaller actors coming in to buttress and reinforce some of their supply, oftentimes they welcome it and they're part of a system that also has clean energy goals, and sometimes they want smaller providers to come in and say, "We'll do the renewable stuff, so you can keep doing what you're doing, and we can see a nice healthy mix."

MH: Yeah, I don't know of any other industry that asks its consumers to use less of its product, not more.

LL: Isn't that funny? It's so true.

MH: If cost and I suppose willingness and the regulatory component comes into play as a challenge to deploying a microgrid, soon as you hear regulation and politician, I can imagine we have to add time to a list of the key challenges.

LL: I mean, I've been working in this sector for a decade plus, and you think things would move so quickly. I love to use the example of island nations. Here you have sometimes populations of 5,000 people. You think surely if any one thing can move quickly, it's in a population of 5,000 people. You're not dealing with 340 million people like you are in the United States. Sometimes it's very tiny, but even then, the number of stakeholders you need to bring together, the minister of finance, the minister of energy, the CO of the utility, the new developers coming in, the land studies that need to be done. This is a great example, when I was looking at helping develop a solar project in St. Lucia, the most viable plot of land was very near the airport. There was a nice open patch of land where solar, everybody agreed, this made a ton of sense.

Quickly into the project, about three months in, someone said, "Wait a second, when airplanes are landing, are they going to see a glare from the solar panels thus affecting their ability to land?" What did they have to do? They had to spend six months on a glint and glare study just to make sure pilots from every angle when they were landing wouldn't be affected by the glare from the solar panel. That took six months to do. To your point, yes, regulation and policy, it's there often time to keep us safe and to make sure that things are done in a way that's responsible and viable. When you're putting anything in the ground, asbestos doesn't get picked up. It does take time, but I will say after the first project gets done, the second, the 15th, the 16th, you do see efficiencies and suddenly people start to get more comfortable and that's what really creates a revolution.

MH: What are the first steps to gaining traction on a microgrid?

LL: Start small and bring together the right people. Move fast and break things. Doesn't exactly work in the energy sector.

MH: No.

LL: You really want to make sure that people feel informed and feel understood and heard. What does the community want? What is the utility worried about? What is the finance budget that they're able to apply towards maybe reducing the cost of this? The sooner we can bring those actors together to voice their concerns and figure out what is the common ground, what is the common vision that we want to see? Then you can start making progress, but as small as you can go even on a local level, even in your community. I mean, go to a town hall meeting, and have this conversation. It starts with one person and then starting to engage the right people, you can see change in a community.

MH: You touched on the money component to this. How do you gain financing for a microgrid?

LL: Energy, I love talking about energy finance because it seems like a big black box, but energy is quite easy to price. It's predictable. It's not rocket science. I'd say all the things out there that we've learned how to price energy we've done a pretty good job at. The key here is making sure we're attracting the right kind of financing. In the news you may have seen this startup solar company went bust. It's like, well were we using the right kind of money to back that company. Venture capital dollars in Silicon Valley who are looking at software companies going to power solar. It doesn't make sense. You're not going to see the returns on the same time scale. Oftentimes, we're just looking at the wrong type of capital to power the right solution. How do we look at the right type of investors who are looking at a similar return profiles for what an energy system can provide?

Therefore, we see infrastructure money; investors have longer term horizons and maybe expect less returns, but it's a solid bet. How do we get more infrastructure investment and how do we even look at subsidy capital where it doesn't make sense? I mentioned in Sub-Saharan Africa you have communities of 100 people that are just trying to power light bulbs looking at mini-grids. Now these mini-grids could cost a million dollars and the payback for a small community just powering light bulbs sometimes it said the payback was 51 years. You'd say, "What investor is going to look at that?" The answer is probably not many, but that's where we have development capital. That's where we have grant capital and subsidy capital to play a role to say, this is the just thing to do.

This, if we want to see economic development in this country, this is where philanthropic, grant capital, subsidy capital from governments is meant for to make sure that everyone's on an equal playing field, and those people can then start using other forms of power and economically developing to become a part of society and the 21st century. This is where we need to make sure there's a wide spectrum of capital out there. How are we using the right type of capital to back the right solution?

MH: Where are we in seeing decentralized power as a movement?

LL: Every year, I make sure that I brush up to speed on where we stand on the state of energy supply. Every year, I'm encouraged to see more and more, not less and less. Increasingly, with these incredible advancements we're seeing in technology, the costs keep coming down, batteries become cheaper, batteries become more efficient. Every time that I check these stats and hit the refresh button, there's more and more renewable power out there. Now we do see some global trends that sometimes make us think, are we taking a step backwards? Sometimes the answer is yes.

We never could have predicted a war that would cause energy prices in Europe to be volatile. We never could have predicted that when a recession hits and we just need to be maybe increasing our amount of fossil fuel development in a country, is that the best long-term solution? I think the answer is no, but you have these kinds of political pressures that sometimes see these blips on the radar. 2022 is going to be a year where there's a blip. We're going to see all sorts of trends kind of looking a bit wonky, but in the long term, when we take a 10-year, 20-year view, we're seeing things go in the right direction.

MH: Sounds like you're optimistic.

LL: I am optimistic because they say this thing about wizards and profits. Prophets say we just need to use less power, and wizards say technology's going to save the day and it's a silver bullet. You know what? I think I'm in the wizard and the prophet camp. I think that we're seeing smart technologies come up in ways that, you just mentioned going to the airport leaving and your house turns off. That's brilliant. That never would've existed. Think back to nanny's time to think about something as smart as that. In some ways, I studied technology, I'm an engineer, and the cost gains I've seen in technology, we're only seeing things get better. At the end of the day, I am an optimist. I think we are going to see the kind of smarter grid solutions becoming more and more prolific where we can become prophets and wizards, seeing greater technology gains that inspire me every day.

<< Go to previous episode