Energy analyst Peter Asmus, of Navigant Research, offers insight into his work tracking the fast-moving microgrid market.
My life as an industry research analyst is filled with angst. I get paid for predicting the future, but when microgrids are popping up like mushrooms in places unimagined just a few years ago, how does one stand by one’s Excel spreadsheet?
The issue of the validity of market forecasts came to light recently when Microgrid Knowledge highlighted the wildly differing projections about future market growth for microgrids. It is clear that the ways in which one can size up the microgrid market depends not only on definitions, but also on the robustness of data as well as assumptions as to what counts as potential revenue.
Every Microgrid Is Different
Whereas in some industries there is publicly available data about the number of widgets being sold in world markets, the situation is very different when it comes to microgrids. Consider this: a microgrid is not a single technology. It is a collection of diverse resources that can be deployed for a variety of applications in all shapes and sizes. It can be a relatively simple solar PV system with a lead-acid battery serving an isolated community in the tropics or it can be a large-scale system incorporating utility-scale wind turbines in the frigid outskirts of Alaska wilderness.
When it comes to grid-tied systems, quantifying the potential revenue flowing from deployments is equally problematic. A microgrid designed for military base may have very different costs than one designed to serve mixed customer classes in the name of community resiliency.
Growing Pains
Navigant Research has been tracking the microgrid market is 2009. Since then, the market has moved from R&D pilot projects to nascent commercialization. Though companies may have non-disclosure agreements in place and are much more guarded about providing data, our data base continues to grow, now numbering well over 1,000 project entries globally Efforts to update our Microgrid Deployment Tracker, the only global database on microgrids published in the world, remains a challenge, but is vital to our understanding of market dynamics.
When it comes to forecasting the future, Navigant Research’s Tracker data is just a starting point for our forecasts. We know that this data does not paint a complete picture. For example, one company claims to have a portfolio of microgrids that exceeds 1,000 MW in the U.S. alone, but it has failed to disclose project details. Composed largely of backup diesel generators, this company’s microgrids can operate in parallel to the utility grid and can be used to provide ancillary services, including demand response. Some market participants do not consider these systems to be microgrids. Navigant Research does, but these projects are not in our database, so forecasts still need to factor in this missing data into the projections of the future.
I admit we cast a wide net, as evidenced by the type of companies included in our recently published Leaderboard Report on microgrid controls. One can be more discriminating, but then one runs the risk of aligning one’s view of the market to vendors that may have vested interests in promoting either large or small numbers.
Bottom Line
The bottom line: Navigant Research is developing an updated revenue model for microgrids leveraging detailed data we have collected from real-world projects. The truth is that the relative revenue per microgrid project is actually declining due to reductions in cost for solar PV and lithium ion batteries, preferred resources for many microgrids. Look for our new market projections, with varying scenarios, in the near future.
Peter Asmus is principal research analyst with Navigant Research. This blog originally appeared on PeterAsmus.com.
