What You Need to Know About the Future of Microgrids

by Aquion Team Member

stone edge farm microgrid

Our blog has always had a focus on microgrids. We’ve looked at why energy storage and microgrids are a natural fit. We’ve also given you some insights into the big markets for microgrids today.

Now,  we’re going to look at the future of microgrids. Where will new microgrid markets emerge over the next five years? Which markets are going to explode? What challenges do microgrids face? How much growth will we see in microgrid installations?

Here we will attempt to answer these key questions.

Where will microgrid growth emerge and explode over the next 5-10 years?

As mentioned earlier, we’ve already identified the top five current markets for microgrids. The island market, in particular, is poised for explosive growth in the near future. Given the price of conventionally produced electricity and the proliferation of distributed PV, Hawaii is already a microgrid hotbed. To shift away from the high and variable costs of fossil fuel generation, islands will continue turning to microgrids.

Another key growth area is rural electrification, especially in less developed countries. India is a prime example of the need for microgrids. Despite the country’s rapid economic growth, 25% of its citizens still do not have access to electricity--a key link to standards of living.

The cost of extending the grid to rural areas is high. Microgrids present a compelling alternative: eliminate that cost by enabling local electricity generation.

The need for electrification will continue around the globe as more and more nations develop. Microgrids can deliver reliable, continuous access to electricity without expensive infrastructure development.

In aggregated volume, residential grid defection may end up being the biggest trend of all. The rapid drop in PV costs has driven explosive growth in residential solar installations. The next step for these homeowners is energy storage. Residential microgrids will allow homeowners to reduce grid dependency or go off the grid entirely. 

What challenges do microgrids face?

Despite these many opportunities, microgrids still face four main challenges.

Technology Risk

Large-scale energy storage is a new application that often adopts old technology, like lead acid batteries. The industry's  limited experience with battery integration creates uncertainty in both technical performance and cost effectiveness. For example, frequent, deep discharging will ruin lead acid batteries. How do you size and design systems to mitigate this risk?

Microgrids also create technology risk by affecting grid management. Microgrid operators may need to use new site controllers, dispatchers, and algorithms to know what to do and when. Or, in the case of off-grid microgrids, you don’t have the grid to fall back on at all! How do you ensure the same reliability as the grid?

These two prongs of technology risk make widespread adoption of microgrids a challenge. Yet the factors driving microgrid use--high grid costs, grid reliability and resiliency, and others--are not going away. Customers are going to respond by building microgrids. As they do, the challenges will be met.

Economic Risk

With technology uncertainty comes questions about economics. It is one thing to be willing to take the technology risk. Most owners of microgrids cannot afford the costs on their own, requiring outside funding. But who is willing to finance that technology risk? It is always hard to get the market to finance new technology. Fortunately, as more people adopt microgrids all over the world, the payback for these investments is becoming clearer.

Legal and Regulatory Uncertainty

An article in Power Engineering explores the legal and regulatory uncertainty around microgrids. It notes that most jurisdictions have yet to develop a framework for regulating microgrids. Developers then have to figure out the applicable laws and regulations at each installation site. The article points out some key issues that developers should consider, including “whether the state has jurisdiction over the microgrid system, whether the microgrid is a generation or a transmission asset, whether it is self-contained, and whether it returns power to the grid.”

Storage Type Optimization

Finally, how do you pair the right type of storage to your application? Battery chemistries, for example, tend to fall somewhere on a spectrum between power and energy.

A high level look at the power-energy spectrum for the three most popular energy storage chemistries.

Power batteries are best in short-duration applications. For example, lithium ion batteries are useful for frequency regulation, which requires short bursts of power. Energy batteries are optimal for long-duration applications, like shifting solar power.

Every application has different needs on this spectrum. Of course, the duty cycles of most applications vary hour-to-hour and day-to-day. You have to select a chemistry that offers the best fit. An experienced integrator or installer can help.

What sort of growth in microgrids can we expect in the near future?

Predicting microgrid growth is difficult. Despite the growing demand for microgrids, they face multiple challenges. Many market research firms have spent a great deal of time researching the market to develop forecasts.

GTM Research suggests that the U.S. microgrid capacity will almost double from 2014 to 2017. State-level incentives for microgrid development are one driver of this forecast. GTM also notes that while most microgrids today use fossil fuels, PV and storage are becoming more popular.

Transparency Market Research expects that worldwide microgrid capacity will triple from 2013 to 2020. Similar findings by Navigant suggest that microgrid revenue will quadruple from 2013 to 2020.

The future is bright for microgrids.

Like any emerging technology solution, microgrids still evoke questions. Yet there are many strong technical and economic reasons to create microgrids. They are no longer a novel concept without validation in the marketplace. Their value is becoming clearer with each new installation. Microgrids are a real and critical part of electrification. In the future, their role will only grow.


Aquion batteries are ideal for microgrid applications. Learn more by downloading our free Project Spotlight. 

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Topics: Microgrids, Commercial & Industrial

Written by
Aquion Team Member
This post was written by a member of the Aquion team.


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