Localized on-grid electricity systems that can disconnect from the rest of the grid – called “grid-tied microgrids” – have been gaining momentum in recent years, especially as a tool for resiliency in response to a number of natural disasters around the world. However, these systems are inherently expensive, and their high capital costs often make it difficult to justify adoption. In this report, we analyze the economics of different microgrid configurations, not only for resiliency but also for providing value to the grid. We find that a simple diesel backup generator is the most economical source of resiliency by a long shot, but that using excess capacity within the microgrid to provide grid services can dramatically improve microgrid economics in some markets, though typically not enough to offset their high cost.
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