The smart grid is complicated. Why not tackle it in bite-sized chunks?

That, simply put, is the idea behind microgrids – islands of renewable power generation, energy storage, building control systems, and a localized electricity distribution grid that can manage it all, whether connected to the grid at large or not.

Imagine a business park or college campus that generates and stores its own electricity from solar panels, fuel cells, waste heat generators and the like – and then lends that power to a utility to meet demand elsewhere.

Or it can keep itself running during a larger-scale blackout, which is a big plus to the military, which is taking to the microgrid concept in a big way.

While still mainly an experiment, microgrids could grow to be a significant, if still small, portion of the smart grid market. That's according to Pike Research, which projects that microgrids will grow to a $2.1 billion market by 2015, with $7.8 billion invested over that time.

That's a tiny slice of an overall smart grid market of $40 billion with about $210 billion invested through 2015, according to Pike Research's projections, said Clint Wheelock, managing director

But one of the ideas behind microgrids is that they allow utilities to build out smart grids in a modular fashion, he noted.

"There are many aspects of this that utilize smart grid technologies," he said, "but in a way it really represents a different vision for the architecture of the grid."

Utilities aren't used to working on the neighborhood scale. They're more into big power plants, big transmission lines and one-way, direct-to-customer distribution systems.

But adding lots of intermittent solar and wind power to the grid makes local power quality control a major issue – one that microgrids could help solve in bite-sized pieces, so to speak.

The Galvin Electricity Initiative is a big fan of the idea, saying it could help bridge not only technical but customer-relations challenges to building out smart grid infrastructure. That's because it could simplify the way a campus, a business park or a neighborhood interacts with the utility, both as a source of self-generated power and an island of grid stability.

Utilities including Duke Energy, San Diego Gas & Electric and Exelon subsidiary Commonwealth Edison are working on microgrid projects (see Integral Analytics: Orchestrating Duke's 'Virtual Power Plant').

Some, such as Fort Collins, Colo.'s FortZED project and the Illinois Institute of Technology's "perfect power prototype" project in Chicago, have already received Department of Energy funding (see DOE Hands Out $47M for Smart Grid Demos).

San Diego Gas & Electric has been experimenting with a microgrid project in Borrego Springs, seeking to coordinate the town's solar power generation with demand response systems and smart meters at customers' homes, said Chris Baker, CIO for the utility. That project was funded with an $7 million Department of Energy grant and $3 million from the California Energy Commission, he said.

Now the utility is seeking a $100 million Department of Energy smart grid grant to build a second microgrid at the University of California at San Diego campus, involving a slew of partners including SAIC, Qualcomm, Intel, IBM, Cisco, General Electric, and Balance Energy, a newly launched arm of defense contractor BAE Systems (see Balance Energy Wants to Build Microgrids, Starting With San Diego).

Defense contractors like Lockheed Martin are also getting involved in microgrid projects, albeit as part of a broader push into smart grid (see Boeing Pushes Into Smart Grid as Defense Biz Gets Tight and  Defense Contractors Pursue the Smart Grid).

Perhaps that's little surprise, given the U.S. military's interest in the concept. After all, it has some obvious reasons to want to keep power on at its bases during a blackout. Military projects include one General Electric is working on at the U.S. Marine Corps base in Twentynine Palms, Calif. (see Green Light post).

But Wheelock noted that remote grid and military applications, while seeming to be the most natural fit for microgrids, represented only a small portion of the market potential. Pike sees North America as the biggest microgrid market, rather than a country like India where many people still lack utility power.

The biggest opportunity, rather, awaits institutions, campuses and other entities that can find a way to bring their solar, wind, geothermal and other clean and renewable power under enough control to sell it back to utilities in a more organized way, Wheelock said. Pike sees the institutional and campus microgrid sector expanding from about 322 megawatts today to about 1.2 gigawatts in 2015, representing $2.76 billion in investment over that time.

Commercial and industrial microgrids are also significant, representing 455 megawatts of power in the United States today, Pike reported. But most of those are using fossil fuel-fired generation to supply on-site power needs, the report noted.

And so-called community microgrids, which link lots of residential customers, probably won't take off until regulatory and business barriers are lifted, the report noted.

Interact with smart grid industry visionaries from North American utilities, innovative hardware and software vendors and leading industry consortiums at The Networked Grid on November 4 in San Francisco.