Could microgrids change how real estate sources energy?

Microgrids aren’t just for use in rural communities; increasingly they also have commercial appeal for developers and landlords.

May 25, 2018

Whether they’re supporting developing countries looking to build up their electricity infrastructure or real estate developments looking to offer predictable utility bills, microgrids could have a big impact on the way people and businesses access power in the future.

These localized, small-scale power grids operate independently from the main electrical network and are increasingly being used to boost the amount of power in remote areas or act as a back-up for mission critical buildings like hospitals and data centers. They are able to integrate various sources of decentralized energy – most notably renewable energy.

“There is a trend all over the world for power to be decentralized from the main grid and the biggest driver of this is decarbonization,” says Dominic Szanto, Director – Energy and Infrastructure Advisory at JLL. “Increasingly, microgrids are being considered by real estate developers to not only cut energy bills, but also to boost their green credentials.”

Commercial appeal

In India, power and automation technology company ABB installed a solar power microgrid with battery energy storage at its Vadodora manufacturing campus in Gujarat. And in the U.S., Schneider Electric developed a microgrid at its Boston One Campus, which aims to provide greater power resiliency, reduce costs and use more sustainable energy via solar power.

With access to renewable energy more of a corporate focus, microgrids could become a key selling point for landlords trying to attract commercial tenants in the future.

“For a landlord trying to maximize the rental value of their property, a green building ties in well with today’s environmentally conscious world and companies’ corporate social responsibility initiatives,” explains Szanto. “We could one day see a situation whereby landlords lease electricity supply alongside the building, enabling tenants to get energy at a price that is fixed for five or even 15 years. It could add real value and certainty for tenants.”

For large companies with multiple offices in one continent, the stability and security offered by long term, fixed electricity prices could be a real aid to managing their business better. In the U.S., a California-based healthcare provider with several doctor surgeries commissioned the development of carports with solar panels in its carparks. This not only gives the company a consistent supply of green energy, but also offers price certainty.

“When it comes to microgrids the type of property – be it offices, shops or residential – is irrelevant. What’s important is how much electricity is being consumed,” says Szanto. “A typical office doesn’t consume a massive amount of electricity so they couldn’t really set up an individual power supply agreement. But if they teamed up with other offices in the area, this could create sufficient demand to tender to an electricity generator.”

Community-led power generation

With the rise of solar panels on housing, residential communities stand to benefit through new concepts such as peer-to-peer energy trading.

“At the moment, if you install solar panels on your house any electricity which is not used will be sent to the grid, and if you need more electricity it will sourced from the grid. A peer-to-peer model would enable you to sell power for profit via a blockchain-powered platform,” Szanto explains.

Trials currently in progress could also make communities increasingly self-sufficient. In the Australian outback, where it is often a struggle to get access to renewable and affordable power, Enova Energy – a small energy supplier in New South Wales – has set up a microgrid and rewards local solar users for pushing power back into it. The company is also working with a network and distribution partner, Essential Energy, to explore the possibility of separating from the grid entirely and fully self-sourcing its energy, thereby keeping money within the region.

Likewise in India, microgrids are increasingly being used to bring power to rural communities while growing interest in net positive buildings in cities such as San Francisco could lay the groundwork for future microgrids. One of San Francisco’s most famous landmarks, Alcatraz, already uses one of the largest solar microgrids in the U.S. The solar-diesel hybrid power system keeps the facility functioning independently of the mainland and has cut the island’s fuel consumption by 45 percent since it was first installed in 2012.

Overcoming the obstacles

Yet before microgrids can become mainstream, there are obstacles to overcome. Regulation tends to move slowly, and in most developed countries the electricity system is over 50 years old and not designed with flexibility in mind.

“There are also commercial challenges,” notes Szanto. “Although microgrids can offer price certainty, a lot of people aren’t fans of locking themselves into long-term contracts. Wholesale energy prices are currently low, so in theory it would be a very good time to fix prices, but many individuals actually think they’re paying too much.

“In companies, meanwhile, electricity is low on the list of priorities and with the complex analysis required to justify a price fix, getting engagement is tricky.”

Despite the challenges, Szanto thinks the general shift towards microgrids is likely to continue for the foreseeable future.

“Microgrids are in line with government policy, the technology is there, and they bring long-term benefits to almost everyone. It just requires a leap of faith,” he concludes.

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