What Is a Microgrid? How Islanding Works (2026)

A microgrid is a local energy system (generation such as solar or generators, battery storage, controls and the buildings it serves) that can disconnect from the main grid and keep running on its own, which engineers call islanding. They are being built for hospitals, military bases, campuses, islands and disaster-prone communities because they keep power on when the wider grid fails; a home with solar, a battery and an automatic transfer switch is a very small version of the same idea.

What is a microgrid and how does it work?

A microgrid is a local energy system that can operate connected to the main grid or disconnected from it, what engineers call "islanding." The ability to island is the defining characteristic. Without it, you have distributed generation (solar panels, backup generators), but not a microgrid.

Four components make up a functional microgrid: generation (solar panels, a diesel generator, a gas turbine, or some combination), energy storage (batteries), intelligent controls, an energy management system (EMS), and the loads being served (buildings, equipment, an entire campus). The EMS is the brain: it monitors supply and demand in real time, decides when to charge or discharge storage, when to use grid power versus local generation, and when to initiate or exit island mode.

When the main grid fails, a microgrid's EMS detects the failure within milliseconds, opens the interconnection switch to electrically separate from the larger grid, and continues operating on local resources. When the main grid is restored and stable, the EMS resynchronizes with it and reconnects. Done properly, the transition is seamless, occupants may not notice a grid outage has occurred at all.

Why are microgrids being built?

Three distinct pressures are driving microgrid deployment, and they operate independently:

Grid resilience. Climate change is making the main grid less reliable. Wildfire risk in California has led utilities to cut power proactively to prevent ignitions; at their height in October 2019, PG&E's shutoffs left nearly 1 million customers without power (Los Angeles Times). Hurricanes in the Gulf Coast and Southeast have left communities without power for weeks. Ice storms across the South have exposed the vulnerability of distribution infrastructure. For critical facilities, hospitals, emergency services, military bases, water treatment plants, extended grid outages are operationally catastrophic. A microgrid that can keep the lights on for 72 hours, a week, or longer is increasingly standard infrastructure for these users.

Remote and island locations. Communities not connected to a main grid, or connected via long, expensive transmission lines, have always needed local generation. The difference now is that battery storage and solar have made it economically viable to replace or supplement diesel generators with cleaner, cheaper alternatives. Island communities like Kauai, Hawaii have become showcases for what modern microgrids can achieve at community scale.

EV fleet charging and industrial reliability. Large commercial EV fleets charging simultaneously create demand spikes that can overwhelm local distribution infrastructure. Microgrids with on-site storage buffer those spikes. Manufacturers with precision processes can't tolerate even brief power interruptions; microgrids provide the reliability that public utility service can't always guarantee.

What is an example of a community microgrid?

Kauai, the fourth-largest of Hawaii's main islands, is one of the most-cited examples of a renewable-heavy island grid operating at community scale. Kauai Island Utility Cooperative (KIUC) serves the whole island, which has no connection to any other grid.

KIUC reported getting 52.8% of its electricity from renewable sources in 2025 (solar, hydro and biomass), with a goal of 100% by 2033 (KIUC), a share that depends on substantial battery storage. KIUC buys power from several large solar-plus-storage facilities, including a 13 MW solar array paired with a 13 MW / 52 MWh Tesla Powerpack installation that opened in 2017 (Tesla case study).

The island still burns imported fuel for nearly half of its power, but Kauai's model demonstrates that remote island grids, which have no neighboring interconnections to lean on, can reach high renewable penetration with the right storage and controls.

Why do military bases use microgrids?

The US Department of Defense operates microgrids at many domestic installations because grid-connected military bases are considered a national security vulnerability. If the commercial grid fails during a crisis, through cyberattack, extreme weather, or infrastructure failure, bases connected to that grid could lose power at exactly the moment they need it most.

Military energy resilience policy, such as the Army's goal that critical missions be able to sustain themselves for 14 days, pushes installations toward on-site generation and storage. Meeting that standard requires substantial on-site generation and storage. Marine Corps Air Station Miramar, about 14 miles north of San Diego, runs a microgrid built around landfill gas, natural gas and diesel generators, to which a state-funded project added a 1.5 MW, 3.3 MWh battery; a base-wide blackstart exercise tested its ability to support islanding (California Energy Commission).

Military microgrid procurement has also driven technology development that eventually reaches commercial markets. Controls systems, battery management software, and microgrid integration standards developed for DoD applications have found their way into commercial and industrial deployments.

How much does a microgrid cost?

Costs vary enormously with size, generation mix, storage duration and how long the site must run islanded. A 2018 study by the National Renewable Energy Laboratory (renamed the National Laboratory of the Rockies in December 2025) found that microgrids in the continental US cost an average of $2 million to $5 million per megawatt once generation, storage, switchgear, controls and engineering are included (DOE). Small commercial systems sit at the low end; hospital, campus and community systems run far higher.

Costs per kilowatt have been falling as battery prices decline and control systems become more standardized. Grants and incentives, such as FEMA hazard mitigation funding, Department of Energy programs and state resilience programs, can offset part of the cost for qualifying facilities.

Is a home solar and battery system a microgrid?

The term microgrid is sometimes applied to residential solar-plus-battery systems, which creates confusion. A home with solar panels, a battery, and an automatic transfer switch that can island during grid outages does meet the technical definition of a microgrid, it has generation, storage, controls, and islanding capability.

In practice, what most homeowners have is a simpler system: solar panels that export to the grid when it's available, a battery that provides backup during outages, and an automatic transfer switch that disconnects from the grid when grid power fails. The controls are less sophisticated than true industrial microgrids, the duration of autonomous operation is typically limited to one to two days, and there's no real-time dispatch optimization for grid services beyond basic arbitrage.

That's not a criticism: it's a functional, useful system. But homeowners evaluating home battery storage should understand they're buying backup power with some grid interaction capability, not a fully autonomous energy system. True energy independence for a home, enough solar and storage to operate indefinitely off-grid, requires substantially more equipment and capital than a typical residential solar-plus-battery installation. For most households, the economics of full independence don't pencil out; the goal is resilience against outages, not permanent disconnection from the grid.

The convergence of solar, batteries, and smarter controls is gradually bringing microgrid-like capability to residential users. The virtual power plant model aggregates home systems to provide grid services without the physical complexity of islanding, a different path to some of the same goals. On the smallest scale, a portable power station can keep a fridge, router and medical devices running through an outage; see our best solar generators for home backup.

Related reading: How the electric grid works · Hybrid renewable energy systems · How to go off-grid