Jeff Winmill, an associate in Van Ness Feldman's Electric Practice, sheds light on complex state regulations that affect the use of microgrids.

The term “microgrid” refers to a small-scale, low-voltage electrical distribution system that connects several loads to nearby distributed energy resources (DERs) and can operate as part of the main energy grid or in an intentional island mode. Among other things, microgrids provide users with a high degree of electric reliability, as was demonstrated by Princeton University, which was able to maintain electric power despite the blackouts caused by Hurricane Sandy. And yet microgrids—by and large—are restricted to only niche markets, including universities, military bases, and business parks.

Adverse or ambiguous state laws are among the reasons microgrids are not more widely utilized. Some states, for example, may define a microgrid as a “public utility,” thereby triggering substantial regulation by state public utility commissions. Other states and municipalities may grant exclusive franchise rights to electric distribution companies, thereby making independently owned microgrids illegal within those franchise areas. Moreover, existing utilities may perceive microgrids as a threat to their business model and may seek to block microgrid development. Utilities themselves may be reluctant to develop microgrids due to a lack of incentives or expertise...

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