Our view: stop debating the word microgrid
Texas does not impose a blanket prohibition on every campus microgrid. The relevant questions are what connects to the grid, who consumes and sells the electricity, how generation and load are registered, and which operating modes are proposed. An isolated backup system, a grid-parallel installation, a private use network and a new large load connected behind an existing generator are not interchangeable. A marketing label cannot select the interconnection or retail-service pathway.
Texas context: existing grid-connected generation has a specific constraint
ERCOT’s current large-load page includes a notice route under PURA 39.169 for proposed net-metering arrangements involving a new large load and an applicable standalone generation resource registered as of September 1, 2025. Its resource guidance requires PUCT approval following an ERCOT study before implementing the arrangement. The same page separately describes withdrawal-limited private use network documentation. These routes demonstrate why netting load with generation is not simply an internal property decision, and why one route must not be represented as automatic approval for another.
ERCOT Large Load Integration: net metering, existing resources and private use network documentation
The test that changes the investment case
An owner may model generation as both a bridge to energization and unrestricted capacity during a grid outage. Those are different duties. Our proposed analysis asks what the campus may import or export in each operating mode, what happens if generation trips, whether fuel is actually available, and which tenant can be curtailed. Electrical studies, utility conditions, fuel arrangements, air authorization and tenant service terms have to support the same operating story.
Separate three benefits in the business case
Reducing imports, exporting into an operating grid and supplying an islanded external critical facility are distinct services. Each needs its own technical and contractual basis. Model dispatch against the actual tariff, fuel, storage losses and tenant interruption cost. Do not double-count backup reserves as both guaranteed tenant resilience and freely dispatchable revenue capacity.
The owner’s situation
An illustrative campus has an anchor tenant but the expected utility date has slipped. A generation partner proposes locating the load behind a nearby grid-connected asset. A second option is on-site gas generation with a future utility connection. The owner has received attractive energy pricing but has no agreed interconnection classification, no confirmed outage operating envelope and no allocation of curtailment between tenants. The project is blocked on the structure, not just the equipment purchase.
What we need to establish
Obtain the existing resource registration and interconnection records, proposed point of interconnection, load ramp and electrical one-line. Define grid-parallel, islanded, restart and transition modes with the appointed engineers and operator. Ask counsel and the relevant market participants to determine the applicable retail, registration and approval routes. Add fuel delivery, air-permit operating limits, land corridors and tenant continuity obligations to the comparison. Do not treat standby generator permits as proof of permission for routine generation.
The options we would test
What owners should do
Our proposed execution sequence for this assignment:
Classify the proposed operating model
Have the relevant specialists distinguish the physical network, market registration and customer-service arrangements. Make the remaining legal and utility determinations explicit.
Compare complete routes
For each option, show first usable capacity, development cost, fuel and operating exposure, studies, permits and exit conditions. Include the case where the preferred grid connection is late rather than assuming the bridge ends on schedule.
Structure the partnership around real authority
Allocate site rights, connection works, ownership, dispatch, fuel, metering and maintenance to parties able to perform them. A public utility partnership needs appropriate public authority and process; a private generation agreement is not made into a PPP by its title.
Commission the agreed modes and transition
Coordinate construction interfaces with the appointed teams and require evidence that the permitted operating modes meet the tenant’s accepted requirements. Preserve the permanent corridors and an executable path out of the temporary arrangement.
How we protect the decision
Do not present a MUD, SUD or PUD as a shortcut to electric utility authority. The district or zoning instrument may solve another campus dependency while electricity follows its own route. Tie investment releases to specific determinations, not to a partner’s assurance that everything is behind the meter. Maintain a budget and schedule for the rejected-route case.
What completion looks like
Completion is a legally and technically supportable operating structure, provider and regulatory approvals where required, funded delivery obligations and accepted capacity under defined operating modes. The owner can explain what happens during a plant trip, grid outage, tenant change and transition to the permanent system. Installed megawatts alone do not close the mandate.
What we would track
- Permitted versus assumed import/export capacity
- Approvals on the opening critical path
- Tenant load exposed to a generation trip
- Funded transition cost and remaining temporary obligations
The strongest microgrid proposal is the one that survives a utility review, an operating event and a tenant contract, not just a financial model.