MACRO LOOK AT A MICRO WORLD—MICROGRIDS IN FOCUS

Benefits
Microgrids allow for new levels of resilience (in light of emerging threats to global power grids ranging from extreme weather events, earthquakes, and wildfires to terrorist threats) and reliability to reduce distribution outages and provide for higher power quality.

While high utility rates in certain isolated load pockets have incented development, new technologies have lowered capital costs significantly. Microgrids can help organize mixed asset fleets of DER (distributed energy resources) at the distribution network level.

Microgrid deployments include: 1) biomass, 2) CHP (combined heat and power), 3) diesel, 4) battery storage, 5) fuel cells, 6) hydro, 7) solar PV, and 8) wind. Controls for the microgrid can be managed through storage and communication packages internal to the microgrid. Microgrids can increase reliability for site hosts but also provide
flexibility to distribution system operators as components can bid directly into wholesale markets if appropriately configured.

Global/US Footprint & Growth
Based on a mid-2019 report, the microgrid market (both planned and installed) identified 4475 projects totaling close to 27GW (26,965 MW) of capacity worldwide. A companion study projected growth in spending from $8.1 Billion currently to $40 Billion in 2028, sporting a CAGR (compound annual growth rate) of 21.4%. US microgrid capacity was nearly 9GW (8.879 MW) in 2019. Globally, on a customer segment basis, remote microgrids and commercial and industrial (C&I) represent nearly 70% of
installations.

Asia is the largest overall market, North America is the top market for grid-tied capacity, and Latin America is the fastest growing market, notably because of Puerto Rico’s power restoration efforts post-hurricane Maria in 2017. In the US, most microgrid projects are custom configured and largely limited to public facilities like schools, hospitals, and military bases, although chip makers represent a solid exception. Many are dependent on fossil fuels and not renewable energy sources.

Overall Market Assessment
The global market for microgrids continues to grow, but is not yet a smooth ride to widespread viability. Although microgrid technologies have dropped in cost, and controls functionality has improved, regulatory barriers and long project development cycles continue to frustrate efforts to move the market fully into the mainstream. 

Market Segments
Segments are generally divided into six major areas: 1) campus/institutional, 2) commercial & industrial, 3) community, 4) remote, 5) utility distribution, and 6) military.

US Utility View—Thumbs Up, Down, or Sideways?
While an optimist or equipment seller can say the power sector is moving from a centralized system to a distributed system, it can be said, at least for incumbent utilities, that the train hasn’t exactly left the station. A broad view would say utilities essentially have three choices, either to obstruct, facilitate, or engage and implement.

On the plus side, utilities see benefit from microgrids in several ways: 1) supporting distribution operations vulnerable to stability issues stemming from high renewable energy penetration, 2) providing a non-wires alternative to areas of growing electricity demand, and 3) deferring or supporting capital upgrade projects. In addition, there are revenue opportunities if they can fully or partially own microgrids.

On the negative side, utilities view on-site generation, battery storage, and microgrids as disruptive technologies. They see declining revenues from decreased sales, conflicts over where microgrid operators can string lines and connect to the distribution system, and worries about reliability when customers separate themselves from the grid.

In 2019, according to the Edison Electric Institute, 50% of all microgrids had some type of utility involvement compared to 10% several years prior. This defies the perception that utilities are often slow to innovate and resistant to disruptive change. A lingering question remains, ‘should microgrids and distributed energy resources be coordinated by a central entity, akin to the way ISOs/RTOs coordinate the bulk power market?’ Unfortunately, a lack of
market rules and a disjointed regulatory environment are primary factors at play.
In the end, utilities will have to adopt to a changing landscape of fewer entities to pay necessary monies
for utility upgrades and expansions. At last count, utilities are collectively investing $100 billion to
upgrade their networks. It is therefore incumbent upon State regulators to decide how to share those
costs based on the premise that the grid is an essential public resource.