Lux: Microgrids Viable Power Option
While customer-owned microgrids are standard today, a new business model, Microgrid-as-a-Service, or MaaS, offers a flexible ownership structure and presents the best opportunity to capitalize on this growing market, according to Microgrids: How Business Model Innovation Will Support New Development Opportunities.
Lux Research utilized 15 different generation sources and cost/revenue inputs to build a bottom-up microgrid financial model giving the internal rate of return and levelized cost of energy as metrics for given sector- and business-model-specific input assumptions.
While all models of microgrid development can potentially be profitable, MaaS – where the installing entity owns and finances the microgrid on behalf of the subscribing customers or power purchasers – provides the most flexible growth opportunities.
As the retail rate of electricity increases, microgrids become a no-brainer investment, according to Lux Research.
Customer-owned microgrids and MaaS yield similar returns – but to different parties (see graph). Based on an industrial base case, with 10 MW of generation from solar and natural gas, as well as energy storage, the returns for the customer-owned microgrid and MaaS are identical. However, the customer-owned model places all financial risk on the customer, while the MaaS model offers an opportunity for utilities and third-party financiers to strategically capture customers while diversifying from traditional power service opportunities, Lux says.
As a region, North America is the world’s leading market for microgrids with a planned, proposed, and deployed capacity of 2,505 MW, according to a report released by Navigant Research in May.
In December, the California Independent System Operator released its Demand Response and Energy Efficiency Roadmap: Maximizing Preferred Resources that aims to encourage distributed energy resources such as microgrids, rooftop solar, electric vehicles and energy storage facilities.
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