This post was written by VECKTA’s CEO and Founder, Gareth Evans for his blog Powering Profits. It was not written by AI.
The distributed energy industry is reshaping how we think about power, empowering businesses, communities, and individuals to take more ownership of their energy. But what exactly is “distributed energy” or “onsite energy” and how does it fit into the broader energy landscape? Let’s break it down by exploring the components and definitions of this transformative industry, and why it matters more than ever.
What is Onsite Energy?
Onsite energy is also referred to in the industry as Distributed energy resources (DERs). They are energy efficiency, generation and storage technologies deployed at or near the point of use. Think of solar panels on our rooftops or in our car parks, generators behind our buildings, or battery storage units humming away in our warehouses.
DERs have become more accessible than ever, thanks to a convergence of technological advancements and cost reductions. Over the past decade, innovations in energy technologies like solar panels, battery storage, fuel cells, and microturbines have dramatically improved efficiency and reliability. At the same time, economies of scale from higher production volumes have driven down costs, making these solutions affordable and often cost-optimal. The digitalization of energy management has further accelerated adoption by enabling real-time monitoring, optimization, and integration of DERs, empowering users to maximize performance and savings with minimal complexity.
This progress has been amplified by pain points in traditional large-scale power grid systems. Rising electricity costs, aging infrastructure, and the frequency of outages have highlighted the challenges relating to centralized power. As grid power becomes more expensive and less reliable, DERs offer a compelling alternative: localized, cost-effective, and resilient energy solutions that give companies and communities greater control.
The Strategic Advantage of Distributed Energy Resources
Traditional grid infrastructure, with its reliance on massive power plants and long transmission lines, takes years—often decades—to plan and build. These systems are rigid, expensive, vulnerable and aging. DERs offer faster, cheaper, and more flexible alternatives by leveraging the built environment to deploy localized energy solutions that can be operational in months rather than years.
DERs utilize existing assets like rooftops, parking lots, and underutilized spaces. This dual-purpose approach reduces land use, construction costs, and energy waste. Unlike centralized grids, DERs are modular and scalable, enabling businesses and communities to start small and expand as their energy needs evolve.
The Microgrid: A Self-Reliant Energy System
At the heart of the distributed energy revolution lies the microgrid—a smart, localized energy network that combines multiple DERs to deliver reliable power. A microgrid leverages a control system (a brain) to manage and coordinate operations. Microgrids can range from small systems serving individual buildings to larger setups powering multiple buildings, campuses, or communities. What sets microgrids apart is their ability to operate in two modes:
1. Grid-connected mode: Working in coordination with the utility grid to optimize energy sustainability and costs.
2. Islanded mode: Disconnected from the grid, a microgrid can operate autonomously, ensuring power even during outages.
One of the most common misconceptions about solar (an individual DER) is that it can provide power reliability during outages. While solar panels can indeed generate power during a grid outage when connected to the grid they are designed to shut down during a power outage. This safety feature ensures that electricity isn’t pushed back into the grid, protecting utility workers who may be repairing lines. Without a control system to disconnect from the grid, solar panels alone cannot keep your lights on during an outage.
To achieve true power reliability, a solar system must be paired with intelligent controls and ideally energy storage that allow it to disconnect from the grid and operate independently. This configuration, often part of a microgrid, ensures that power can be safely supplied to your business during an outage without jeopardizing the safety of line workers. Understanding this distinction is crucial for anyone considering solar DERs as part of their energy strategy. Solar alone is a step toward sustainability and cost management, but it’s the integration of complementary technologies that delivers resilience and independence. Microgrids offer businesses, communities, and critical infrastructure energy security optionality.
Onsite Energy vs. DERs vs Microgrids: What’s the Difference?
The term “onsite energy system” is used at VECKTA, and is being increasingly adopted by industry, to encompass DERs and Microgrids. An onsite energy system is designed to meet specific business needs and objectives, designed for energy consumption, local constraints, optimal technology needs/sizes, financial objectives, sustainability and reliability needs as well as market conditions (utility rates, technology/constructing/maintenance prices, incentives, outage risks and more).
Based on the business needs the onsite energy system can be “dumb” DERs to meet specific commercial and sustainability objectives or a “smart” microgrid to meet reliability needs.
Mini, Nano & Picogrids
A mini-grid is a localized energy system that aggregates electrical loads and one or more energy sources, providing electricity—and sometimes heat—either independently or in connection with the main power grid. Mini-grids commonly include renewable and fossil fuel-based generation, energy storage, and load control. They are often deployed as cost-effective solutions for electrifying rural or remote communities, typically serving populations where grid connections are prohibitively expensive or technically challenging. Mini-grids can operate entirely off-grid or interconnect with the main grid while retaining the ability to function autonomously (islanding mode) during disruptions.
Mini-grids and microgrids share many similarities, including their ability to generate, store, and distribute power locally while operating in grid-connected or islanded modes. However, mini-grids are more commonly associated with developing countries, where they bring electricity to unelectrified or poorly serviced areas, such as rural villages. In contrast, microgrids are often used in developed countries to provide ultra-reliable electricity for critical infrastructure like hospitals, data centers, manufacturing facilities, or corporate campuses. While mini-grids typically prioritize basic access and affordability, microgrids focus on ensuring reliability in areas that already have existing connections. Alternatively, they are utilized to support remote company assets, particularly mining and oil and gas, where facilities are often not close to or connected to the main grid.
A nanogrid is a smaller-scale energy system, typically serving a single building or a discrete area within a building. Nanogrids can operate independently or connect to a larger grid, offering localized control over energy usage and enhancing reliability for specific loads.
A picogrid is the most compact form of an energy system, often designed to power individual devices or small clusters of devices. An example is a portable solar panel charging a smartphone. Picogrids are typically standalone systems, providing energy autonomy for personal electronic devices without reliance on larger grid infrastructures.
Why Distributed Energy Matters
The distributed energy industry isn’t just about technology; it’s about reshaping how we think about energy itself. Here’s why it’s crucial:
- Resilience: As grid disruptions from natural disasters, physical and cyber attacks become more common, onsite energy systems like microgrids provide a buffer against outages.
- Cost Savings: By generating and storing power locally, businesses and communities can avoid peak demand prices and time of use rates and in general minimize the amount of energy needed from the grid.
- Sustainability: DERs reduce reliance on fossil fuels and transmission-heavy grids, cutting carbon emissions, and support more socially and ecologically responsible development.
- Control: With distributed energy, the power—literally—is in our hands. Energy control means less downtime, more predictable costs, and the ability to thrive no matter what the utility grid throws our way.
Building the Energy Future
As we move into the 21st century, the energy industry will become less about massive, centralized systems and more about networks of smaller, purpose-built solutions. Onsite energy empowers us to build smarter, cleaner, and more resilient systems. They allow us to scale to meet growing demand, ensure greater reliability, and minimize the strain on existing grid infrastructure. When done right, utilities, businesses, and communities will collaborate to build the right systems for specific needs and objectives, with aligned incentives. In doing so, we will create win-win-win outcomes.
