A microgrid is an electricity grid where multiple homes and premisis are linked together by wires, with their own electricity generation sources (e.g. solar panels or wind turbines) and energy storage (e.g. batteries), as well as electricity consuming appliances.  A microgrid may be an “island” or it may be connected to the main grid (macro grid).  It is different from just being a section of the macrogrid however, because it has everything it needs to function independently, ie as an island, when it is cut off from the macrogrid. Microgrids are also purpose built depending on the energy consumption needs at the site.  A site can be a home, a hospital, a school, an apartment building, a farm, or an entire village.

In areas where there is already an electricity grid (macrogrid)

• It can be easier and less costly for the macrogrid to connect a microgrid than to connect each home and organisation individually to the macrogrid.  This is because the microgrid can internally balance some of the demand and supply, resulting in a lower “maximum import capacity” (MIC) overall than if you summed up the MICs which would be needed by each individual home or premisis.  This can lead to lower electricity connection costs for new developments such as housing estates, apartment blocks, business parks etc.
• Resilience - when the macro electricity grid has black outs or problems, the microgrid can continue to run autonomously.  This is unlike the situation many householders and premises face at the moment, whereby even if they have their own solar panels, they can’t use them during a power cut for safety reasons, as they are connected directly to the main grid.

In some areas, there is no macro electricity grid at all, for example in areas of the global south where national electricity grids have not reached yet, or in very remote locations.  The choice in these situations is a) no electricity, b) each home or premisis having its own off-grid system with its own generation and storage, or c) a microgrid.  The microgrid has advantages over multiple off-grid systems, as it “pools” the electricity generation and storage in the area, which is more efficient both in terms of hardware and in terms of ongoing electricity losses when charging and discharging batteries/storage.

Alternating Current (AC) can travel long distances, whereas Direct Current (DC) can’t efficiently travel far.  So national electrical grids have been built as AC.  However solar panels generate DC, and batteries store DC.  Because of the way the electricity systems evolved, most appliances have been designed to plug into AC, however DC appliances are also available (some DC appliances emerged so they could be plugged into car batteries, which are DC).  A microgrid, because it covers small distances, can be based on DC or AC.  If the microgrid is DC based, either appliances must also be DC, or AC appliances must plug in via an inverter.  Many microgrids in the global south are DC, with the households and premises using mostly DC appliances such as DC lights and DC fridges, as well as charging phones and laptops using DC directly, with DC-DC converters to alter the DC voltage if needed.  DC microgrids typically operate at 12V/24V/48V/60V.  However microgrids such as those run by Independent Distribution System Operators (IDNOs) in the UK are normally AC.  AC microgrids may run at similar voltages to the low voltage sections of macrogrids, ie more than 100 V.

Software to balance and control: The fundamental components of a microgrid are the generation assets (e.g. solar panels and wind turbines), energy storage (e.g. batteries), loads (i.e. electrical appliances which are using electricity) and the wires which link them up together.  There are also safety hardware such as fuses.  You may also have inverters converting between AC and DC.   However, it is not simply a question of linking them all up together and everything works.  Electrical grids only work if demand and supply are balanced at all times.  So you need software to balance demand and supply by charging/discharging batteries and switching other components on and off at the right times.  Safety is a core consideration.  To do this the software must also be able to facilitate communication between different parts of the system, facilitate decision making by the different parts of the system, and often collect data from meters and other devices, and manage that data.  

Software to facilitate billing of households/premises: Microgrids normally (although not necessarily) have a system whereby each household or premises pays in line with the amount of electricity they use.   To facilitate this, meters are needed for each household or premises, and software to manage this meter data.  In pay-as-you-go systems, features are also needed to link with payment systems and cut off electricity supply to a household or premises which has run out of credit.

Software to interact with the macrogrid:  If the microgrid is connected to a macrogrid, software will also be needed to “trade” with the macrogrid so that optimal decisions are made about energy storage vs importing/exporting to the macrogrid, in line with time-of-use prices and backup needs.  This can be done with more sophistication if it includes forecasting - both of the microgrid and of the macrogrid market conditions.