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A distributed energy resource is a localized source or store of electrical energy connected near the consuming part of an electric power system, commonly through electric power distribution. Examples include a nearby electrical generator, an array of solar cells, and an electric battery with its power-conversion equipment. Energy storage can either absorb or deliver power; calling it a resource does not make it a net source of energy over a complete charge-discharge cycle.^[ref]

For an original boundary calculation, a site consumes $50\mathrm{kW}$, its solar cells supply $30\mathrm{kW}$ at the stated output boundary, and an electric battery supplies $10\mathrm{kW}$. Neglecting site losses, the imported power isIf the same electric battery instead charges at $10\mathrm{kW}$, its signed supply is $-10\mathrm{kW}$ and import becomes $30\mathrm{kW}$. If solar output rises to $70\mathrm{kW}$ while storage is idle, the algebra gives $-20\mathrm{kW}$ import: an export, provided the connection and controls permit that operating point.

The location matters physically. Local generation can reduce upstream electric current when it offsets downstream consumption, but sufficiently large export can reverse the electric current. In a simplified resistive two-terminal branch, $V_s-V_r=RI$ for signed electric current from supply to site; negative $I$ makes the receiving-site electric potential difference higher. This is an illustrative direct current relation, not a complete alternating current feeder calculation.

A group of distributed energy resources becomes a microgrid only with an appropriate boundary and coordinated operation. Installed generating capacity alone does not establish that disconnected operation can regulate the local supply. A useful test records import or export together with each resource's signed power, so an apparent reduction in imported energy is not confused with a change in the consuming electrical loads.

Islanded microgrid operation supplies a bounded set of interconnected electrical loads from its local distributed energy resources while the external electric power system connection is open. The microgrid's own equipment must then maintain a usable supply and balance demand. The DOE overview explicitly distinguishes this disconnected mode from grid-connected operation and assigns coordination and connection management to the controller.^[ref]

For an original steady active power balance, local generation supplies $25\mathrm{kW}$ and storage can supply at most $20\mathrm{kW}$. Connected electrical loads request $50\mathrm{kW}$ and network losses are stipulated as $2\mathrm{kW}$. The shortfall isAt least $7\mathrm{kW}$ of the requested demand must be removed, or more usable supply obtained, for this simplified operating point. A full electric battery does not remove the $20\mathrm{kW}$ output limit. Electrical load shedding can balance the remaining demand, but it changes which service is delivered.

Passing the active power calculation is necessary but insufficient. An alternating current island must also sustain appropriate electric potential differences and frequency, accommodate reactive power, and respond to load changes. A power inverter can connect storage to the AC network, but the control capabilities and operating limits of the actual equipment determine whether it can establish or support that supply. The presence of a converter by itself proves none of those capabilities.

A proposed test records the external switch state, individual source power, storage state, load connections, electric potential differences and frequency through the transition into island operation. A load step then tests the local response described by electric power balance during a demand step. Surviving the transition and sustaining the island for a required duration are separate observations; power-rating limit versus energy autonomy in a microgrid explains why both are needed. Reconnection is another controlled operating transition, rather than simply assuming that two energized AC systems already agree in phase.

A microgrid is a bounded group of interconnected electrical loads and distributed energy resources that can be controlled as one entity. Its defining boundary and coordinated operation matter: a collection of nearby generators is not sufficient by itself. A microgrid may exchange power with an external electric power system, while islanded microgrid operation supplies its connected electrical loads without that external connection. The DOE overview identifies generation, storage, and the controller as interacting equipment, rather than treating storage capacity alone as a guarantee of service.^[ref]

For a worked operating point, suppose a microgrid must supply $100\mathrm{kW}$ of electrical load plus $5\mathrm{kW}$ of losses. Its solar supply delivers $40\mathrm{kW}$ and an electrical generator supplies $30\mathrm{kW}$. Storage must deliverIf the storage system can continuously deliver $40\mathrm{kW}$ and has $70\mathrm{kWh}$ of usable output energy, it can support this unchanged operating point for $70/35=2\mathrm{h}$. Here usable output energy already accounts for the chosen discharge convention; no further conversion loss is silently subtracted.

Now let a cloud reduce the solar supply to $10\mathrm{kW}$. The storage demand becomes $65\mathrm{kW}$, above its $40\mathrm{kW}$ rating even with a full store. The controller must obtain more generation or reduce electrical load. This power-rating limit versus energy autonomy in a microgrid explains why an energy budget and an instantaneous power constraint must both be checked. A test of islanded microgrid operation therefore records the external connection state, generation and storage power, and the response of the connected electrical loads, rather than merely checking that a battery is present.