Myth 1: Microgrids Cannot Be Used as a Capacity Resource to Support Utility Capacity Needs

5-quakertown_communiity_microgrid_powersecurePart 1 of Demystifying Microgrids:
The Truth About Microgrids and Distributed Energy Series

PowerSecure is exploring myths and misunderstandings about modern microgrids. To start this series, we are exploring the myth that microgrids cannot be used as a capacity resource to support utilities. This may have been true in years past, but technological advancements and energy options have changed how microgrids can support grid stability, peak demand reduction and renewable energy integration. Microgrids are no longer isolated systems but dynamic tools capable of addressing increasing capacity challenges.

How Did this Myth Start? 

The myth that microgrids cannot be used as a capacity resource stems from outdated perceptions of their capabilities and the types of energy resources used to power them. Early distributed energy systems were viewed as niche solutions for remote areas or backup power during outages rather than tools for large-scale utility support. Concerns about reliability, scalability, and integration with centralized grids contributed to skepticism.

High upfront costs and limited economic incentives further fueled negative perceptions. Legacy grid systems were designed for centralized generation, making integration with distributed resources seem complex and unfeasible, but we will explore that myth later. Before AI and advancements in grid technologies, microgrids struggled to respond dynamically to peak demand and grid fluctuations, reinforcing doubts about their scaling potential.

New Technology Makes Microgrids a Viable Option for Capacity Support

Advancements in technology, microgrid controls, and energy management systems have transformed microgrids into essential components of the broader energy ecosystem.

Microgrids have become well-suited to support utilities’ capacity needs. Modern microgrids can now integrate easily with centralized grids, deliver reliable power during peak periods, and support renewable energy adoption. Their scalability, cost-returns, and ability to enhance resilience make microgrids a vital tool for utilities seeking to modernize infrastructure and meet growing capacity needs. As companies continue to embrace these innovations, microgrids are proving to be transformative in building a more sustainable and decentralized energy future.

How Microgrids Enhance Capacity

Generation and battery storage systems can be placed at substations or near commercial and industrial loads to reduce system loading during capacity shortfalls. Distributed energy resources (DERs) can be in front of the meter as a supply-side resource or behind-the-meter on the customer side. These resources can offload demand from the grid during emergencies or grid constraints, making a resiliency solution even more beneficial.

Modern microgrids, particularly advanced or hybrid systems, integrate multiple DERs such as solar panels, Tier 4 Final diesel or EPA-certified natural gas generators, and energy storage solutions like batteries. When effectively integrated with the utility grid, these microgrids can:

  • Support Peak Demand Reduction: By supplying additional power during high demand, microgrids alleviate stress on the central grid and reduce the need for utilities to activate expensive peaking plants.
  • Facilitate Load Balancing: Microgrids can manage energy flows intelligently, ensuring that demand and supply remain balanced even during fluctuating conditions.
  • Contribute to Capacity Relief: During grid constraints, microgrids can operate as virtual power plants, providing capacity support without requiring new infrastructure. 

The Role of Technology in Grid Integration

Advanced control systems and real-time monitoring capabilities enable microgrids to adapt to grid needs dynamically. Innovative grid technologies, such as advanced sensors, real-time monitoring systems, and automated controls, allow microgrids to communicate with the main grid and dynamically manage energy flow. Improved energy storage solutions enable microgrids to provide stable, high-quality power, even during fluctuations in generation or consumption. These innovations have transformed microgrids into reliable capacity resources, helping utilities modernize infrastructure and meet evolving energy demands. For example:

  • Demand Response Participation: Modern microgrids can participate in utility demand response programs, reducing consumption during peak periods or feeding excess power back to the grid.
  • Renewable Energy Integration: By pairing renewable resources with energy storage, microgrids help smooth the intermittency of solar and wind power, enhancing their reliability and contribution to grid stability.
  • Economic Optimization: Microgrids with sophisticated energy management systems enable customers to avoid peak pricing by strategically drawing from stored energy or on-site generation.

By reducing dependence on expensive peak power purchases, minimizing service interruptions, and enabling participation in demand response programs, microgrids create opportunities for cost recovery and profitability. These financial advantages make microgrids an attractive investment for utilities and organizations looking to build sustainable and efficient energy systems.

As capacity continues to be an issue, adopting microgrids will be a key strategy for maintaining reliability and efficiency while supporting long-term growth.

Redefining Microgrid Perception

The stereotype that microgrids are synonymous with basic backup generators does a disservice to their transformative potential. Modern microgrids go beyond resilience—they are integral to load management, cost optimization, and the transition to a cleaner, more flexible energy future.

As the energy landscape evolves, microgrids’ ability to act as capacity resources will continue to grow, benefiting utilities, customers, and the environment alike.

Further Reading

Curious about how microgrids support capacity needs? Learn more from our case studies on how microgrids support capacity, improve security, and lead smarter communities for the future. 

American Municipal Power: Behind the Meter Peaking Project ↗

APC’s SMART Neighborhood ↗

Marine Corps Air Station & Arizona Public Service Microgrid ↗


Next in our series, we examine the question, are microgrids too complex? Coming soon... 

Ready to learn more?