The massive upheavals that have buffeted the electrical distribution sector are making a simple idea – the microgrid – more potent and valuable than ever.
The establishment of islands of electrical generation, which are connected or independent of the main grid – or which, at various times, can switch – is being used more frequently because it has more use cases and a wider variety of sponsors, according a study by GTM Research.
Microgrids’ usual standbys include isolated rural and island communities. It is retaining those users and gaining traction with universities, the military, public institutions and the commercial and industrial sectors, according to Omar Saadeh, a Senior Analyst at GTM and one of the report’s authors.
“U.S. Microgrids 2016: Market Drivers, Analysis and Forecasts,” which was released last month, found strong overall numbers. The firm sees growth of 115.8 percent between 2016 and 2020. That equates to a compound annual growth rate (CAGR) of 21.2 percent. There will be 380 megawatts (MW) of new capacity deployed this year. Eleven percent of that will be solar. The ramp up of annual deployments will reach 819 MW in 2020. Of that, 23 percent will be solar. By 2020, the overall market will reach 4.3 Gigawatts (GW) and the annual increase in installed microgrid capacity will be 115.8 percent.
Microgrids have multiple use cases. Perhaps the most common is use by critical organizations such as hospitals and the military to ensure that the lights don’t go out if there is a general grid failure. Businesses use microgrids to take the edge of peak pricing. A third use case is to ensure the quality of the electricity of the increasingly common solar installations and other forms of renewable energy. And, of course, organizations can build a rationale to use a microgrid by combining these use cases.
The growth of grids also can be seen in the context of the parallel growth in renewables. Energy storage, the ability to send energy generated at end user sites to the grid and other innovations often have a microgrid element.
The military is the single biggest driver. The Obama Administration has pushed the military to reduce energy use and lean more on renewables. That plays well to microgrid’s strengths. GTM found that the armed forces deployed a tad more than half – 52 percent – of the microgrid capacity deployed this year. Overall, it has 42 percent of the overall capacity deployed and, by 2020, will be the end user of 32 percent annual capacity deployments.
The other important evolution, according to GTM, is that financial backing is growing more diverse. Today, projects often have multiple backers. “It’s a stacked value proposition,” Saadeh said. “There is almost never one driver that pushes a microgrid program forward. There are more stakeholders in project development and ownership. That is very evident in the military and large commercial sectors. These are large projects developed with utilities and third parties where the cost among all stakeholders and also future benefits and revenue streams are shared.”
One of the most important trends is the participation of the unregulated arms of utilities in the creation of microgrids. Andrew Mulherkar, the Grid Edge Analyst at GTM, pointed to unregulated arms of utilities such as Edison International, Duke Energy and ConEdison as players who can take the skill sets developed by their regulated cousins to bear on the microgrid market. “Those businesses are going further into distributed energy than ever before,” he said. “Edison Energy is a perfect example that. It is broadly aimed at commercial and industrial customers and the largest users in North America. They bring a portfolio from energy efficiency to energy procurement services and from basic to advanced that microgrid services.”