Discussion about the ‘circular economy’ tends to focus on raw materials, waste and recycling. Less talked about is energy. But that’s starting to change. And it turns out that microgrids and the circular economy are a natural fit.

The circular economy refers to using resources in a less linear way.  Typically, we make a product, use it and discard it. But a circular economy seeks out and extracts the lifetime value of the product and its materials.

Sounds like good-old-fashioned recycling from the 1970s, right?  True, but that’s only a part of it, as explained by Ed Pinero, of Veolia North America (VNA), during a recent interview.

“The circular economy is more unique and contemporary. It has a much stronger economic and market component to it,” said Pinero, who serves as VNA’s senior vice president for sustainability.

The circular economy remakes used auto parts. It extracts the economic value of rare earth metals from discarded cell phones. It leads to the creation of sharing services like Uber.

How do microgrids and the circular economy fit together?

It turns out that the microgrid – and its frequent companions, combined heat and power and district energy – were operating under circular economy thinking before the term even came into vogue.

“Microgrids, CHP and district energy — they represent classic examples of what the energy picture would look like in a circular economy,” Pinero said.

For example, CHP’s re-use of waste heat offers an obvious circular economy practice. CHP plants extract the heat created in power production and re-use it to heat and cool buildings or in industrial processes. Conventional power plants just discard the heat into the air or water.

But there are three other characteristics that together match microgrids, CHP and district energy to circular economy thinking, according to Pinero.

They are resilient due to their self-contained nature, making them easier to protect and maintain from storms and other dangers.
They have fewer moving parts and less complexity, which makes them reliable, and able to avert economic loss from power outages.
And last, they are sustainable and efficient in their ability to incorporate renewable energy and avert the electricity losses that occur when power must travel long distances over wires. (Microgrids and CHP are located near those they serve.)

Gaining value out of the same product in more than one way is a hallmark of the circular economy too. Consider the way grid-connected microgrids serve their host buildings, but at the same time strengthen the central grid by reducing peak load or providing ancillary services.

Circular economic thinking balances environmental friendliness, quality of life and economics. But unfortunately, when it comes to microgrids, CHP and district, the economics are askew. We continue to rely on pricing models suited to a centralized grid. Microgrids offer services that save society money – like keeping the lights on during a storm – that have yet to be monetized.  Economic models need to adapt, Pinero said.

Western Europe embraced the circular economy concept more quickly than North America. But Pinero said he has seen interest growing in North America as well, accelerated by U.S. climate change policy. The result is a “new blast of interest” in microgrids, CHP and district energy, according to Pinero.

McKinsey & Company estimates that moving to a more circular economy could result in $1 trillion in savings on materials alone by 2025. Framing microgrids in terms of the circular economy could open up a whole new discussion about their economic and environmental value.

Do you see the circular economy offering a new framework to promote micogrids? Tell us what you think by posting below or on our LinkedIn group, Microgrid Knowledge.