National climate targets will require major transformations across all sectors of the energy system. At the same time, we need significant numbers of new homes to meet our housing needs.

The UK housing market is expected to grow to around 300,000 homes annually by 2030. To deliver this level of growth whilst simultaneously meeting our net zero targets, we will need to apply a wide range of technology and business model innovations. 

Even for today’s homes with gas heating, building large numbers of affordable homes already represents a significant challenge. Capacity constraints on the electricity distribution network may cause delays and increase costs and investment risk for developers seeking to obtain connections to the grid. And, as we decarbonise heat and mobility through electrification, we impose additional burdens on both the distribution network and the overall energy system. 

Microgrids offer a potential solution to this technical problem and new homes present an opportunity to get it right from the outset, avoiding many of the technical constraints of upgrading existing homes. Microgrids also present opportunities to capture both societal and environmental benefits.

What is a microgrid?

In simple terms, a microgrid is an energy system in which locally generated electricity is used to meet local energy demands. Technically, it must be able to balance supply and demand perfectly in real time and operate in so-called island mode, that is, disconnected from the grid. 

In practice, the majority of microgrids, although capable of disconnecting and operating independently, actually operate in grid-parallel mode in order to make use of the wider system to capture additional value from supplying energy or energy services (such as flexibility). 

However, a key feature is that they are able to minimise any impact on the grid, particularly when it is stressed and can in principle require a lower nominal capacity than a conventional development. 

If we apply this microgrid concept to a new housing development, the local (renewable) generation can be matched to the needs of the households. The rooftop solar on individual homes plus communal assets such as a wind turbine could, combined with energy storage, supply the bulk of the households' needs. This would minimise the impact of the development on the distribution network and should reduce the cost of connection.

It could also facilitate the transaction of energy amongst households within the microgrid in the context of an energy community. ‘Energy communities’ are seen as an integral part of the energy transition and are supported in EU legislation with three key objectives:

• Flexibility – households with generation and storage assets represent a highly distributed source of flexibility.
• Funding – given the scale of investment required to transform the energy system and the level of public debt post-COVID, any new source of funding is welcome. 
• Engagement – engagement with the energy system can overcome objections to renewable energy projects.

Although energy communities can be either physical or virtual, here we are considering physical energy communities; that is, communities in which members are all connected directly to the same bounded and possibly privately owned network. 

The rooftop solar on individual homes plus communal assets such as a wind turbine could, combined with energy storage, supply the bulk of the households’ needs.

There are those who argue that private networks expose customers to monopolistic business models and remove the potential for competition. Others argue that the current competitive market framework has failed and that other, more innovative models might deliver lower costs and better performance for consumers.

Microgrids are theoretically quite simple and deliver benefits to the households, the network operator and the housing developer. 

• Households benefit from lower energy costs with long-term price stability based on their own or shared communal generation. In principle they also enjoy a higher level of resilience from the microgrid which continues to operate even in the event of grid failure.
• Network operators benefit from a connection which not only does not have a negative impact on their network, but which can provide services to support it when required. 
• Finally, the housing developer can meet the increasingly onerous performance requirements for low carbon housing without becoming involved in costly and complex technology solutions.

However, although all are potential beneficiaries of a microgrid, none of these parties has the necessary competence to deliver them. And that is where the concept of ‘Microgrid as a Service’ (MaaS) comes in.

What do we mean by MaaS?

MaaS is sometimes used interchangeably with ‘Energy as a Service’ (EaaS) in that customers contract with a solution provider to supply energy, usually electricity, for a fixed payment based on the amount of energy delivered. However, in EaaS business models, the client takes no ownership of any assets and simply pays for the energy.

On the other hand, MaaS, whilst also offering energy supply, involves the delivery of an infrastructure solution of a microgrid comprising generation and storage as well as the distribution network. There are many variants of this offering. 

In some cases, the microgrid is delivered to the housing developer, who then passes the assets to a third party which operates the microgrid on behalf of the householders. In other cases, the householders become shared owners of the microgrid and may pay some kind of service fee to the third party but receive the energy at a preferential cost.

A number of innovative companies such as Cepro and SNRG in the UK are building on this approach to create more value from capturing additional revenue streams from, for example, establishing an energy community in which both heat and electricity production become permanent features of the package. One such example recently completed by SNRG at Corby in the UK, is illustrated in the Box below.

However, it is not just in the UK that such schemes are being developed. In the Netherlands, for example, Spectral has led the development of several projects including a fascinating floating home scheme at its Schoonschip development in Amsterdam.

The MaaS proposition

There are three main areas of service provision and value within the overall MaaS proposition; some service providers include all these components, whilst others only select services in partnership with complementary service providers.

Recruitment and establishment of an energy community

Historically, energy communities have been the preserve of early adopters and those with professional skill sets. There is a need for service providers to support those communities lacking such skills. Some companies (such as Enogrid in France) provide this service alone, using their proprietary platforms to recruit potential community members.

Design and build of a microgrid infrastructure

The design of energy systems within the home must comply with building regulations and other low carbon targets, whilst the microgrid must comply with relevant electrical standards and grid codes. 

The supply and installation of systems within each home, including rooftop solar, batteries, electric vehicle (EV) charging and heat pumps together with the supply and installation of microgrid assets including generation, storage, controls and cabling also require high levels of competence which are unlikely to reside within a single organisation.

Although not as technically challenging as many believe, both the design and the building of a microgrid are specialist activities beyond the competence of any of the participants, at least at anything like a viable cost. Again, some companies outsource certain specialist components.

Operation and maintenance of the energy community

On completion of the development there will be an ongoing need for commercial functions such as metering, billing and customer support, as well as operational optimisation including energy trading and sale of flexibility and other services. There will also be a requirement, as with any physical assets, to support engineering functions such as asset maintenance.

Yet again, these services are often provided by partners. The key, however, is that one MaaS company can act as a single responsible party, providing confidence and removing complexity.

The microgrid energy community

In the case of a newbuild housing development, the energy community is likely to comprise all the homeowners. On purchasing their new home, they also purchase a share in the energy community which owns the microgrid assets. In the event that the generation assets comprise renewable energy technologies, the majority of the cost of the delivered energy is the very low marginal cost of generation. As with most renewable generation assets, the majority of the lowest cost of energy (LCOE) is in the upfront capital cost. 

In this way, households who invest in an energy community effectively purchase a lifetime’s energy together with their new home. Even if the renewable assets are not sufficient to meet the entirety of the community’s consumption, they will at least be purchasing a very much reduced long-term, stable energy contract.

The future for MaaS

The opportunities for MaaS in supporting energy communities and thus providing affordable, sustainable energy to households are considerable. 

Although the current MaaS market is in its infancy, it is expected to grow strongly in the next few years, supported by EU legislation and the increasing electrification of heat, mobility and our everyday energy demands.

*Jeremy Harrison is a Principal Analyst with Delta-EE, where he is responsible for its Local Energy Systems research.