Introducing Microgrids & Local Energy Communities

Decarbonization of power system and the electrification of everything

The electricity production has traditionally been governed namely by a combination of large centralized power plants, in addition to smaller distributed Combined Heat and Power plants (CHP), both of which were primarily fed by fossil fuels. Environmental concerns, commercial and economic factors, together with national/European initiatives, have been the main levers that spurred the use of Renewable Energy Resources (RES).

The emphasis on climate change policy across European Union (EU) has been to decrease greenhouse gas emissions through reductions and efficiency savings in the power sector. There is a clear focus on promoting low carbon and renewable energy technologies for generation with the new and binding objectives of 50% by 2030.

Towards these evolving changes, the concept of electrification of everything (e.g. electrification of transportation, buildings and even industrial uses) has been arisen, promising a cleaner and overly a more efficient power system [1]. In a highly electric economy with significant shares of RES, novel system challenges emanate that pose existential questions for the operation of them and the extension the electricity market design [2].


Deploying smart grid operation brings up new concepts

The power systems’ design has always been “smart” (i.e. equipped with advanced automation and communication infrastructures), but rather at the transmission level. The distribution level, -where most end-users are typically connected -, however, is currently experiencing an evolution that more “smartness” is being deployed, in order to:

  • Harmonically integrate the distributed generation technologies or even broadly Distributed Energy Resources (DER) (i.e. RES, Battery Storage Systems, Electric Vehicles etc.).
  • Enable local energy demand management, which essentially refers to the active interaction with end-users, driving the demand according to the supply-side. More information on this in [3].
  • Further deploy more advanced control and management functionalities for the grid management; thus, to ensure the enhanced security, quality and reliability of the distribution networks.

To make long story short, distribution grids are being progressively from passive to active networks, in the perception that decision making -concerning their operation and control-, and power flows are bidirectional. Such types of networks provide an open way for the essential integration of DER, RES and the Demand-Response schemes, and raises opportunities towards the deployment of new equipment and services which confront to common protocols and standards. The latter, leads to the evolution of novel systems such as microgrids and local energy communities.


Microgrid concept

The key point that differentiates the microgrids from distribution networks with distributed resources is substantially the implementation of controls for their operation. A micro-grid might be regarded as a smaller piece of the smart grid puzzle.

The microgrid concept could provide a large range of economic, technical and social benefits to different stakeholders; and according to the opted configuration and operation schemes for the microgrid conflicting interests might arise (e.g. network operator, DER owners, energy suppliers, customers). An illustrative explanation of the configuration of microgrids and the versatile impacts on the operation of the grid is given in Figure 1.

From the system’s operator viewpoint, the microgrids can be considered as a concept of aggregation given the coordinated control of both supply-side and demand-side, based on the connected flexible (i.e. controllable) DERs. From end-user’s standpoint, microgrids most importantly lower costs of energy can be offered with increased power quality and reliability of power and energy services accordingly [4].


Fig. 1 - Microgrid operation strategies [4]

Fig. 1 - Microgrid operation strategies [4]

A further grained discrimination of active control management of the controllable resources in the distribution network, following the microgrid concept, can be into:

  • The isolated microgrids, which operate in an islanded mode, fact which means that there is no exchange of energy with the main distribution grid.
  • The embedded microgrids, which can be both operated and controlled under the interconnected mode (i.e. connected to the main distribution network) or the islanded mode.
  • Local energy communities, which typically refer to the cooperation among the consumers (or pro-sumers), in to order to accomplish the satisfaction of their communities (e.g. neighborhood) energy needs using solely local production sources (i.e. DER sources).


Fig. 2 - Future vision of power systems [Modified figure; Courtesy of Efacec]

Fig. 2 - Future vision of power systems [Modified figure; Courtesy of Efacec]

In Figure 2, an overall vision of the future power system equipped with ubiquitous automation and communication, as well as new grid concepts as microgrids and the local energy communities are also present.

More information about the isolated and embedded microgrid concepts can be found in previous INICITE blog article [5].

In the literature, there is a particular effort on identifying multiple kinds of communities for the microgrids such as homogenous energy communities, mixed energy communities and self-sufficient communities [6]. This kind of categorization refers to energy communities which could facilitate the power grid to advance energy management and enable microgrids to trace cooperative peer microgrids that substantially share energy to each other. Other research efforts are focused on identifying communities according to spatial and geolocation data.

Local Energy Communities

Both microgrids and Local Energy Communities (LEC) can have a potential impact on distribution system development, as well as to advantage the end-users and the utilities. According to the European’s Commission Package entitled ‘Clean Energy for All Europeans’, there is a particular concern to pose citizens as the central players into the energy markets future, as part of the decarbonization effort and targets of 2050, [7]. Towards these efforts, the LEC -newly arisen concept- can drive and empower the end-users to consume energy following a more responsible manner, contribute to energy savings and steer the grid to become more flexible.

The European Commission, endeavor to form a supportive legal framework for LEC, that clearly identifies who they are and how the can differ from traditional players. Most notably, the LEC are opposed to solely profit-driven purposes -such as commercial energy companies-. Other issues that are still under discussion and definition concern the network charges and remuneration for self-consumers and energy communities. This issue is rather complex since in current market models consumers are bundled with incentives to engage demand-responses, renewables self-consumption (coupled with storage) and electrical vehicle charging, without rewarding smart and efficient behavior of the them in the long run. Distribution tariffs should promote such attributes by reflective price signals that deliver versatile benefits (i.e. societal, environmental, energy system).

In general, the concept of LEC considers according to the directives that the energy consumers on the power grid will be merely equipped with DERs and they will be have the right to generate, consume, store and sell the renewable energy, by having equal market opportunities and incentives. A clear understanding of the potential opportunities of the LEC, will notably contribute to the accomplishment of EU climate and nation-wide energy objectives.

How far are such concepts?

The technology concerning the appropriate automation and communication systems, is not nowadays a barrier on deploying microgrid concepts. There are already several success stories in particular of embedded and islanded microgrids [8].

To sum up, it is important to be stressed that provided the challenges posed by the rapid renewable build and electrification, market designs, in particular, will need to keep pace on different fronts simultaneously. Additionally, a proper regulatory framework is needed to be designed to allow microgrids and local energy communities; this fact will bring expected benefits to the various stakeholders, but also contribute in maintaining an effective market operation. Following this line, proper market design and legal frameworks can potentially ensure that there is no negative impact on the overall cost base of distribution grid operation, as well as that unfair cross-subsidization is being avoided.

A synergy of these novel concepts for the distribution networks, the propelling of RES integration, the smart grid deployment and demand-side integration schemes have to be coordinated harmonically in order to accomplish the EU targets for the climate change, towards the transition to a green power system and the electrification of everything.


[1]  IEEE Power & Energy magazine, “Electrification of Everything”, Issue July/August 2018

[2] N. Silva, “Tracing the transition from Passive to Active Distribution Networks”, Incite Blog October 2017

[3] K. Kotsalos, “The role of Demand Response”, Incite Blog April 2017

[4] N. Hatziargyriou, “Microgrids: Architectures and Control”, Wiley 2013

[5] J.L. Dominguez-Garcia, “Microgrids, a game changer”, Incite Blog July 2017

[6] Y. Hong et. al., “Discovering Energy Communities for Microgrids on the Power Grid”, SGC 2017

[7] European Federation of renewable energy cooperatives, “Annual Report January to December 2017”, Available online

[8] G. Kraniotakis et. al.,“Pilot Sites: Success Stories and Learnt Lessons”, Wiley 2013

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