5 Markets Where Microgrids Are a Big Deal

by Aaron Marks

Last year, we discussed what microgrids are. We also argued that they are the next frontier for storage. Market forecasts suggest that the microgrid trend will explode in coming years. Navigant estimated 2014 microgrid capacity at 866 MW and expects it to grow to 4,100 MW by 2020.

So what types of applications are best suited for microgrids? Where will most of this explosive growth take place over the next five years? This blog post will take a look at five markets that are strong fits for microgrids.

1. Residential microgrids can reduce grid costs for homeowners.


This cottage shows how microgrids can be used to generate residential power. Source: Wikimedia Commons 

In the past, homeowners rarely had incentive to take their homes off the grid. The only ones doing it were typically hobbyists and owners of isolated properties forced into these systems due to no grid connection. Today, costs of electricity from the grid plus government incentives make going off the grid much more compelling. It is already cost effective to defect from the grid in some U.S. markets, according to the Rocky Mountain Institute. This report also suggests that many more markets will find it cost effective to go off grid within 10 years.

The residential market is a perfect fit for microgrids. We often see homeowners use one of two systems. First, some homes operate entirely off grid, often using a system that pairs batteries with renewables. It may include a diesel generator to mitigate consecutive days of reduced renewable generation. For example, the generator would help with consecutive days of overcast skies for a microgrid powered by PV. Other homeowners forego the generator and use a grid connection as backup.

Forecasts suggest that residential energy storage will grow by a factor of 10 over the next three years. As the costs of solar panels and batteries continue to fall, expect to see even more growth going forward.

2. Community microgrids mitigate the impact of natural disasters and provide grid resiliency.

Hurricane Sandy created a new wave of interest in grid resilience and backup. The storm caused severe, long-lasting power outages. Approximately 8 million homes lost power. Even more disastrous was the loss of power to critical infrastructure. Losing power at facilities like hospitals and town centers can be crippling--and dangerous. After Sandy-related power failure, staff at the NYU Langone Medical Center had to make "10 to 15 trips down darkened stairwells" to evacuate the facility.

Following Sandy, governments began looking to microgrids to protect against grid failures. Solar plus battery systems provide resilience in these situations. Some states, such as Connecticut, have already launched initiatives to spur microgrid development. New Jersey is implementing a microgrid for its public transit systems. In the face of ever-intensifying storms, many more states and communities will begin considering microgrids.

3. Island microgrids can save money and reduce fossil fuel consumption.

Remote islands can reap unique benefits from microgrids. Currently, islands such as the Caribbean islands, Hawaii, and even some southeast Asian countries are primarily electrified by fossil fuel power plants. The fossil fuels must be shipped to the islands by boat, which drives up power production costs. Diesel is particularly expensive. The carbon dioxide and particulate matter generated by the burning of fossil fuels also harms the environment and presents health hazards to island inhabitants.

Many of these islands see regular, extended sunlight throughout the year. This abundant supply of renewable energy, plus the unusually high cost of fossil fuels, makes tropical islands one of the most ideal locations for microgrids. Many islands are starting to shift away from fossil fuel plants and toward solar with energy storage to reduce their need for expensive and polluting fossil fuels.

4. Commercial microgrids can provide backup emergency power, demand reduction, and peak shaving.

Solar panels at a commercial vineyard. Source: Wikimedia Commons

Grid outages greatly impact commercial properties and can be especially expensive. For example, data centers rely on constant uptime for their server customers. Without electricity, a manufacturing plant’s operations would have to shut down. To protect commercial assets, microgrids can provide a reliable backup to the grid.

Microgrids also allow companies to reduce the amount of electricity they demand from the grid. This is appealing in markets where grid costs, demand charges, or time of use energy costs are high. Parity with the grid, or even cost savings, will draw closer as the cost of energy storage decreases.

One final concern for commercial properties is demand charges. Demand charges are extra fees levied on electricity use during periods of high power demand. Because demand is often high in the middle of the day, demand charges can cost businesses a lot of money. Microgrids with energy storage allow companies to “peak shave,” reducing or eliminating their demand during these times. Instead, companies can generate their own off-peak power, store it in batteries, and use it during peak periods.

Microgrids allow companies to ensure reliable and predictably affordable power. Over the next few years, commercial microgrids should become more commonplace.

5. Military and remote government microgrids ensure secure power for key installations.

Many government installations are in remote locations without grid access. Military bases and outposts may even be in warzones. These facilities need constant, reliable electricity. Microgrids make a lot of sense for these off-grid facilities.

One challenge is that many of these military installations are temporary. In these cases, it would not make financial sense to build a permanent microgrid fixture. Portable microgrid systems are being developed to help solve this problem.

Microgrids can even help save troops’ lives. Convoys often transport fuel to power military facilities. Unfortunately, the trucks that transport the fuel are major targets for enemy attacks, such as by IEDs. Increasing a facility’s self-sufficiency reduces the need for these fuel delivery convoys.

For these applications, microgrids will be instrumental in reducing costs and protecting personnel. Market research projects rapid growth in this area.

The global microgrid market will continue to grow at an astounding rate over the next decade. Many applications will support this growth, but the residential, community, island, commercial, and military and government applications are likely to lead the charge.

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Topics: Solar, Off Grid, Microgrids, Commercial & Industrial, Residential

Written by
Aaron Marks
Aaron was a former marketing manager at Aquion.


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