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Could microgrids change how real estate sources energy? written by Emily Perryman, published in Jllrealviews.com. May 5, 2018

Whether they&rsquore 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 &ndash most notably renewable energy.

 

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

 

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.

 

&ldquoFor a landlord trying to maximize the rental value of their property, a green building ties in well with today&rsquos environmentally conscious world and companies&rsquo corporate social responsibility initiatives,&rdquo explains Szanto. &ldquoWe 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.&rdquo

 

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.

 

&ldquoWhen it comes to microgrids the type of property &ndash be it offices, shops or residential &ndash is irrelevant. What&rsquos important is how much electricity is being consumed,&rdquo says Szanto. &ldquoA typical office doesn&rsquot consume a massive amount of electricity so they couldn&rsquot 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.&rdquo

 

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.

 

&ldquoAt 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,&rdquo 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 &ndash a small energy supplier in New South Wales &ndash 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&rsquos 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&rsquos 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.

 

&ldquoThere are also commercial challenges,&rdquo notes Szanto. &ldquoAlthough microgrids can offer price certainty, a lot of people aren&rsquot 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&rsquore paying too much.

 

&ldquoIn 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.&rdquo

 

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

 

&ldquoMicrogrids 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,&rdquo he concludes.