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The movement toward a cleaner, more efficient electrical grid is underway.

And while digital electricity meters seem to be at the forefront, a radically new concept of energy distribution is quietly taking shape: small, locally-generated power systems otherwise known as microgrids. Microgrids are basically self-contained electrical ecosystems. Power is produced, transmitted, consumed, monitored, and managed all on a local scale. In many cases, they can be integrated into larger, central grids, but their defining characteristic is that they can operate independently if disconnected from the whole. This is what makes microgrids so well-suited to university campuses, corporate research parks, military bases and other insular environments that want to run on their own energy from start to finish. But the concept underpinning this strategy won t be so limited: These grids will be coming to your neighborhoods, office buildings, and beyond over the next several years. Several trends are fueling this momentum. First and foremost, a lot of states are running out of money for pricey energy transmission projects. (Money is always the primary catalyst when it comes to change in the monolithic utility industry.) California certainly has had to tighten its belt in this respect. Spending billions of dollars stringing bulky, unsightly and expensive aluminum-steel cables across thousands of miles doesn t sound convenient for anyone. In an increasingly wireless era, transmission lines seem almost humorously antiquated. In addition to them being costly and a pain to install, they account for huge losses in energy every year. In fact, some analysts say as much as 10 percent of the energy produced is lost just in getting it to its destination. Neither utilities, their customers, or governments can afford this anymore. By drastically shortening the difference between where energy generated and where it is being used, microgrids eliminate the need for heavy-duty transmission infrastructure, and thus reduce the amount of energy simply being lost along the way. Another major boost for microgrids: the transition to renewable sources of power like solar arrays and wind farms. These efforts get a lot of good press that ignores some of the bigger challenges involved, namely how hard it is to get the energy produced by panels and turbines to customers that can and want to use it. Some of the most expensive transmission projects ongoing in the U.S. today are focused on delivering solar or wind energy (which are usually based in remote areas like the desert or the plains states) to utilities and their customers. That said, these renewable sources have made distributed power much more practical. It s hard to imagine generating energy for standalone neighborhood or communities using natural gas or coal. Fossil fuel-based electricity requires complex plants and refineries that cost billions of dollars and serve millions of buildings. But rooftop solar panels and small clusters of wind turbines can successfully generate enough energy to keep the lights on in just a handful, a few hundred or a few thousand homes. Renewables may not be able to meet the needs of entire cities today. But they can reliably serve people who live off the grid, or who want to declare independence from major utilities. With government incentives on the rise, and solar equipment costs dropping, the idea of even individual homes creating and consuming their own power isn t so outlandish. Rooftop solar is the obvious choice here, with companies like SunPower, First Solar, SunRun, SolarCity and more all cropping up to capitalize

on what could be a very big market. But it s the microgrids that make distributed power work.

which actually hook the panels into homes

The third trend contributing to the rise of microgrids: growing distrust of utility companies. Last year, residents of Bakersfield, Calif. filed a class action suit against Pacific Gas & Electric, claiming that the new, digital smart meters it had just installed were inaccurate and causing rate hikes. After closer inspection by a third party, PG&E actually apologized for what it acknowledged to be a mistake. Since then, utilities have been taking a beating from the public and media for poor communication and execution when it comes to the smart grid. PG&E also just lost its Proposition 16 bid to block the formation of local, municipal utilities and it may even find itself banned from rolling out smart meters in San Francisco. Microgrids supply an appealing response to these problems. Because they can operate separately and independently, they provide one option for escaping utility rule while still responsibly monitoring how much energy is used and where it goes. Depending on the size of some of the cities and municipalities looking to start their own utilities now that they can in PG&E s coverage area, microgrids could see a big spike in popularity. In fact, they seem to be a win-win for both utilities and people who don t want to be beholden to them anymore. Because microgrids are so easily integrated into broader grid systems, they allow surplus energy generated by rooftop solar arrays and the like to be fed back into the same grid used by utilities. That way, utilities get a bit of help handling peak demand, and the people generating the energy will probably soon be compensated for the energy they ve chipped in. Microgrids provide a channel for consumers to profit from going green and ditching their utility two coveted goals. So why aren t they taking off even faster? You d think that more people would be all over the idea of micropower, considering its myriad benefits. But there are two hurdles standing in its way. First, utilities are fighting tooth and nail against the development of microgrids. Notoriously slowmoving when it comes to any kind of change especially if it will be expensive these companies are scrambling to maintain control of the power supply chain, and its end consumers. To be sure, they are battling some steep odds. Not only have utilities fallen in public favor, their whole relationship with people has changed. Utility subscribers used to be called ratepayers for a reason. They couldn t choose between energy vendors, and they had to pay whatever rate was asked of them. But increasingly, ratepayers are becoming customers customers that do have choices and need to be courted with additional offerings. In Texas, utilities are deregulated, allowing residents to go with another utility if they aren t pleased with their current vendor, and the same thing is in the works elsewhere. Utilities aren t taking this transition lying down. Many of the big companies, like PG&E, Consolidated Edison, Oncor, Florida Power & Light and Duke Energy have millions of dollars at their disposal to lobby the government and crack down on threats. PG&E may have lost its Prop 16 fight, but it did have $46 million to spend on the campaign just one indication of how much utilities are willing to spend to maintain the status quo. The second major reason microgrid hasn t become a household buzzword is that renewable energy sources are still too expensive for most people. Yes, many startups and programs have emerged to

finance the purchase of rooftop panels lowering upfront costs from $25,000 to $2,500 in some cases SolarCity and SunRun among them, but they re still more expensive to run than simply signing up for PG&E s natural gas-fueled service. It s fair to say that microgrids depend on renewables gaining traction, since the two complement each other. So that means that local power has hit a bottleneck, waiting first for distributed solar and wind technologies to get to a point where they can be cost competitive with mainstream sources of energy. And this wait may last a few years yet. Ironically, microgrids might also be the best and perhaps only way to jump these two hurdles. They seem to solve a lot of problems on both sides of the equation. For utilities, microgrids have a chance to not only help them handle peaking demand (which could lead to billions of dollars in brownouts and blackouts, particularly when electric cars come online later this year), but also to help them hit stringent targets for renewable energy generation. PG&E, for one, is accountable for deriving 20 percent of its retail energy from renewables by the end of this year. On a larger scale, the state of California has a goal to generate 33 percent of its energy from renewables by 2020. Microgrids are a practical way for them to get there. Especially if utilities start reliably compensating residents for the electricity they contribute back to the grid, buying and installing rooftop panels could become much more attractive to (and affordable for) average people allowing customers to benefit too. These forces are gaining too much strength to deny, making microgrids an inevitability. Whether it will take a year or a decade for them to catch on is a different matter. Corporate involvement could be the deciding factor. Already, companies like IBM, Cisco Systems, Intel and General Electric are circling the market (estimated at $2.1 billion by a Pike Research report last year), looking for the best place to get their feet in the door. If these giants can back the right plays, making every segment of the emerging microgrid industry more affordable, then utilities may ease up on the lobbying. It s time they start accepting that the central power-plant model is already dead, and that a future of distributed energy ecosystems awaits.