Oversizing grid-connected microgrids as a business model—An optimisation assessment approach

Solar photovoltaic-based (PV) microgrids have received increasing attention to lower electricity costs, improve service reliability, and preserve the environment. The literature has mainly addressed their design and operation from the self-supply at a minimum cost perspective, overlooking alternative business models. This paper assesses the possibility of oversizing solar PV grid-connected microgrids to profit from self-supply and export sales to the power grid. To this end, an optimisation model is developed that evaluates if oversizing is a worthwhile business strategy to follow and a better one than the self-supply perspective. The model, which includes legal, technical, and demand constraints, is applied to nine urban communities in Colombia living under diverse socio-economic and climatic conditions. The results suggest that oversizing is the optimal business strategy for small microgrid systems – up to 100 kW of capacity according to the Colombian regulation –, but not for large microgrid systems, those above 100 kW. The model shows larger margins and shorter capital recovery times in small microgrids planned under the oversizing business model than those designed under the self-supply approach for all the analysed communities. The paper demonstrates the advantages of considering oversizing and self-supply when planning solar PV grid-connected microgrids. In the Colombian case, oversizing brings more significant economic and strategic benefits than self-supply for small microgrids. However, the opposite applies to large microgrid systems; self-supply brings larger benefits than oversizing. Thus, the paper contributes to the literature by providing an empirical study on microgrid-centred alternative business models.