The case for microgrids is well known: resilience, lower energy costs, sustainability. But a new report suggests a more far-reaching value, hinted at in the past but never fully quantified until now.
And it may change how we think about the investment case for microgrids.
When commercial buildings install rooftop solar and batteries for their own financial benefit, they allow recovery of something the grid needs — and isn’t paying for: headroom.
That’s the findings from a report released today by the Schneider Electric Research Institute: Grid Relief from Smart Buildings.
Most interesting, the grid gains this headroom, or new capacity, at zero marginal cost to the grid operators.
Not by design. A byproduct
Microgrids take stress off the grid by actively reshaping when and how a building draws power. When rooftop solar generates electricity on site, it reduces the building’s need to import power from the grid in real time.
A battery then takes that a step further, storing excess solar or low-cost off-peak electricity and discharging it during periods of high demand. The result is a flatter, lower load profile: peak demand drops, creating power headroom, while energy use shifts away from congested hours, creating energy headroom.
Importantly, these systems are typically optimized to minimize the building’s energy costs — not to help the grid — but in doing so, they free up capacity on existing infrastructure that can be used to serve additional load without new investment.
So the achievement is inadvertent, not intentionally created by the microgrid owner who has installed the system to improve the building, not the grid.
“The headroom on the grid is a byproduct of the system that’s being deployed,” said Vincent Petit, the institute’s senior vice president of climate and energy transition research, in an interview.
That means the grid doesn’t have to pay for the relief it receives. Private capital, responding to the right price signals, finances the whole thing.
A cheaper way to solve the peak problem
The report cites recent research from Duke University covering 22 U.S. states that found the grid operates at roughly 50% utilization. “It’s designed for the peak, and the flow of electricity is not the same across the day,” Petit said.
Layer in today’s demand growth, and the problem gets worse. The report notes that US aggregated winter peak load is forecast to grow by more than 21% over the next decade. Some forecasts suggest peak loads could rise by 128 GW as early as 2029.
The go-to response has been to call for more infrastructure: more wires, more transformers, more generation capacity. That’s not wrong, the report says, but it misses a resource that’s already out there, already paid for, already sitting on rooftops and inside buildings across the country.
The new value proposition
The research modeled 65 use cases across five commercial building archetypes — hospitals, large offices, secondary schools, small hotels, and strip malls — in 13 geographies, including three US. regions. Each building was modeled with rooftop solar and a stationary battery, sized and optimized not for grid benefit but for the building investor’s bottom line.
Microgrids enabled recovery of power headroom — the available capacity below a site’s grid power limit — in over half of all cases, reaching up to 60% of the site’s grid limit in the best scenarios. Energy headroom recovery, which measures how much the overall load curve can be flattened, reached up to 35% of site capacity.
“We get a range between 20%, 40%, depending on the type of building, depending on the region, and up to 60% in the best of cases,” Petit said. Getting to that top end requires both a large deployable system and favorable tariff structures, he noted.
The financial picture for building investors is also strong. Nearly all 65 use cases proved profitable. Over half showed payback periods between five and ten years. A quarter came in below five years.
“In the cases which are the most interesting, because the tariffs are the most favorable, you get paybacks well below five years,” Petit said. “So you get those paybacks below five years, the people who are making the investment are making money, and on top of that, you create headroom on the grid.”
That’s the new angle here. Microgrids have always been sold on what they do for the building: backup power, demand charge reduction, and sustainability. The institute’s research puts hard numbers on what they simultaneously do for the grid operator — and that benefit doesn’t cost the operator a dime.
“It’s zero marginal cost because the building dweller is doing it in order to optimize its energy,” Petit said.
The real lever: tariffs
So what determines whether all this potential actually gets realized? Petit points to one primary influence: the electricity tariff structure.
Regions where tariffs include a power component — demand charges in the US and Canada, subscribed power penalties in France and Spain — showed strong headroom recovery across the board. In France, a secondary school achieved 58% power headroom recovery. In Canada, hospitals and small hotels came in at the mid-thirties. Denmark and Norway, where tariff structures lack these components, showed little to no recovery.
The report identifies three regulatory levers: dynamic tariffs with demand charges or power subscriptions; access to flexibility markets through aggregators; and connectivity standards so building assets can respond automatically to grid signals.
When asked which one matters most right now, Petit didn’t hesitate. “Tariffs are the key.”
The weather plays some role, but the bigger difference is whether price signals are rewarding the right behavior.
Buildings with microgrids as grid resources
“By showing that making our buildings smarter, leveraging the distributed energy resource capability that we have on the rooftops of our buildings, we can actually save a lot of money overall — for everyone.”
For the microgrid industry, this research lands at a tricky moment in the US, where shifts in federal incentives have created market uncertainty. But Petit sees it as strengthening the underlying investment case regardless.
“We don’t need to work only harder, we can also work smarter,” he said. “By showing that making our buildings smarter, leveraging the distributed energy resource capability that we have on the rooftops of our buildings, we can actually save a lot of money overall — for everyone.”
The report is ultimately asking grid operators and regulators to see buildings differently — not as loads to be managed, but as resources to be tapped.
The foreword, written by Mike Hemsley of the Energy Transition Commission, makes the policy point: grid relief, financed entirely by private investment and responding to the right price signals, is the kind of outcome that smart market design should produce.
Petit says some utilities are getting it. “They’re seeing a huge economic potential for them,” he said. “And they don’t want to be left on the side of this transition, which will happen no matter what.”
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