Microgrids spread across US as Big Tech, utilities sure up power supplies

Independent microgrid power systems are on the rise as demand from large users soars and new technologies offer wider benefits to customers.

Microgrids are being developed across the U.S. as new data centers drive up power demand and companies and communities seek reliable power supplies and protection against extreme weather outages. Microgrid systems combine on-site or behind-the-meter generation, energy storage and electrical load, and can operate either connected to or independent from the main grid.

The DOE has said microgrids are “essential building blocks” of the future grid. The Biden administration pledged $7.6 billion of federal investment for grid resilience and innovation projects but cutbacks by the Trump administration have cast doubt on funding going forward and may increase the importance of state-level support. In June, the Trump administration allocated $8 million in funding and technical assistance to support 14 microgrid projects reaching 35 towns and rural villages.

Meanwhile, states including California, Colorado and Texas are offering grants and incentives to microgrid projects while utilities are implementing new models and providing support.

California utility PG&E has been “leaning heavily” into community microgrids, Jeremy Donnell, senior manager at PG&E, told Reuters Events.

U.S. microgrid capacity could hit 10 GW by the end of 2025, according to the Department of Energy (DOE). There was 4.4 GW of microgrid capacity installed at the end of 2022 across 692 sites, data from the Center for Climate and Energy Solutions (C2ES) show.

California utility PG&E has been “leaning heavily” into community microgrids, Jeremy Donnell, senior manager at PG&E, told Reuters Events.

Cost is a challenge and community projects often rely on public or state funding but demand from cash-rich tech groups is growing as they race to secure on-site generation and energy storage for new data centers. Long waits for grid connection are prompting companies to turn to on-site generation to meet growing demand from cloud and AI operations. Some data center facilities require over 300 MW of power capacity and connection requests are stretching a power network already under strain from clean power deployment.

Microgrids are spreading as utilities and power networks look to strengthen the resilience of power supply amid more frequent weather-related outages while they also meet surging demand for around-the-clock power from data centers and AI, Libby Zemaitis, senior manager for resilience programs at the Center for Climate and Energy Solutions (C2ES), told Reuters Events.

“They really need that grid reliability,” Zemaitis said.

Utility funding

In California, utilities are using microgrids to improve grid resilience and reliability, using funds from a $200 million Microgrid Incentive Program (MIP) established by the state government in 2023 to fund clean energy, community-scale microgrids in disadvantaged or vulnerable areas.

The grants are distributed by California's three major investor-owned utilities, PG&E, Southern California Edison, and San Diego Gas & Electric with each project receiving up to around $15 million to build multi-customer, energy island microgrids

In March, PG&E announced up to $43 million in grants for nine new projects in Northern and Central California.

PG&E has installed microgrids in communities affected by public safety power shutoffs (PSPS) that help to prevent wildfires during high-risk weather. The utility also uses standalone remote grids to replace overhead lines in fire-prone areas, serving small loads more safely and cost-effectively.

PG&E partnered with storage supplier Energy Vault to build the Calistoga Resiliency Center, a hybrid battery and hydrogen storage microgrid that can supply 1,600 customers for up to 48 hours during shutoffs. The contract with PG&E allows the operator to earn additional revenue during normal conditions, which helps limit the cost of the project.

“It doesn’t make sense to spend ratepayers’ money and not to amortize those ratepayers’ money on many, many more use cases,” said Marco Teruzin, Energy Vault’s chief revenue officer

In Texas, where demand for power is soaring, lawmakers have approved a $1.8 billion fund for microgrids at critical sites such as hospitals and water plants.

Texas has been a hotbed of solar and wind deployment and blackouts caused by outages of fossil fuel and clean power generation during the winter storm Uri in 2021 highlighted the vulnerability of power networks to extreme weather events.

Elsewhere, Colorado has a Microgrids for Community Resilience program which supports projects that operate as single, controllable systems, while Georgia’s Gridovation initiative aims to expand access to resilient, cost-effective power.

“Microgrids are just one of the pieces of the puzzle we’re leveraging as part of this investment,” a spokesperson for Georgia Transmission told Reuters Events.

Advancements in technology are increasing the value of microgrids. With the latest technology, microgrids can "add to grid resiliency, support commercial industrial loads, manage regional demand and provide support for grid reliability in rural communities,” the spokesperson said.

Multiple models

Microgrids can be designed for specific on-site needs and critical infrastructure such as airports are increasingly turning to these systems to ensure reliable power supply.

In New York City, development consortium AlphaStruxure is building a microgrid with a 12 MW solar array to power the New Terminal One at JFK airport. The microgrid will distribute electric energy from solar, fuel cells and batteries through a self-contained energy system that can operate independently from the main power grid. Pittsburgh International also operates a microgrid power system.

Five smaller microgrid systems in North Carolina showcase the variety of models emerging across the country. North Carolina hosts 26 electric cooperatives and microgrid projects include Ocracoke Island’s hybrid solar, diesel and battery setup for backup power, and Heron’s Nest, a small sustainable community using rooftop solar and storage. Butler Farms produces electricity from methane captured through hog waste, while Rose Acre Farms powers its egg production for Walmart with solar and battery storage.

Wake Electric cooperative originally developed the Eagle Chase microgrid in Youngsville, North Carolina, to boost community resilience and reliability, but found multiple benefits. The system includes a 300 kW gas generator and a 500 kW battery system and can start almost instantly during outages and earn revenue by selling power when prices spike on the regional electricity network.

Eagle Chase was initially funded through a $25 monthly rider for 31 homes as well as support for battery installation from North Carolina’s generation and transmission cooperative. The microgrid now covers its costs through energy sales, while supporting regional utility Duke Energy during times of grid constraint under a wholesale supply agreement.

“We tackled this project for resiliency and achieved all these other benefits throughout the process of sustainability, demand response, lowering our capacity needs,” said Don Bowman, senior VP of Wake Electric.

Microgrids face many of the same hurdles as large energy projects, including supply chain delays and lengthy permitting procedures, and technological barriers remain significant.

The U.S. grid was not built for two-way power flows, complicating integration for systems that both draw from and supply electricity. Community-led projects can be particularly complex and success often depends on utilities’ willingness to collaborate and state programs that provide grants and regulatory support. A number of states are stepping in to fill the funding gap and provide technical assistance and policy coordination. Eagle Chase for instance required new DC inverters to adapt to long-established AC infrastructure.

“The technical assistance aspect is really important and can’t be undervalued,” said Zemaitis of C2ES.

Big Tech demand

Data center operators and other major power users are fuelling a new wave of microgrid investment as they seek access to reliable power supplies that can be developed swiftly.

“Data centers are the most recent customer ‘du jour,’ if you will, that are really focused on having behind the meter generation, reliability, high power quality,” said PG&E's Donnell said

In one example, Google and partners Intersect Power and TPG Rise Climate are working together to co-locate data centers with clean electricity alongside battery storage.

"When Intersect Power builds new clean energy assets in regions and projects of interest, Google will be able to provide power offtake as an anchor tenant in the co-located industrial park that would support data center development," Google said in a blog post in December 2024.

Another example is Vantage Data Centers, which plans to install over 1 GW of microgrid systems featuring gas-fired capacity across North America.

“There is this tremendous pressure to get power faster, and the grid doesn’t react in days. The grid reacts in years,” said Teruzin of Energy Vault. “This is a moment where generation technology and storage technology will make the difference, for community and also large economic development.”

Cover photo:  Microgrids with energy storage offer reliable power and backup supplies. (Image: REUTERS/Adrees Latif)