A microgrid, for example based on photovoltaic systems, wind turbines, or generators, supplies a defined area and is generally not connected to a higher-level utility grid. It operates completely autonomously. In contrast, an interconnected grid consists of multiple coupled and synchronously operated subnetworks. These grids are primarily used in remote areas, such as islands or isolated settlements, but they can also be intentionally deployed for industrial or agricultural operations to ensure reliable self-supply.

In every power grid, generation and consumption must remain balanced at all times. Load fluctuations are caused by changing energy demand as well as by fluctuating generation from wind and photovoltaic systems. In interconnected grids, controllable power plants provide balancing services, while in microgrids this role is typically performed by diesel generators. However, their controllability is limited, as they cannot absorb energy and only respond with a delay.

Battery energy storage systems solve this problem by responding significantly faster, absorbing excess energy, and enabling stable operation with a high share of renewable energy sources — up to fully renewable power supply. As a result, diesel generators can be operated less frequently and within their optimal load range.