A Steady Ride Up for the Microgrid Market in 2017?

For infrastructure companies in the microgrid market, 2016 at times was like a roller coaster ride.

microgrid marketProspects rose with announcements like AEP’s to invest $52 million to build 8-10 utility microgrids as part of the Columbus, Ohio smart city.

Lows came with regulatory and legislative defeat of utility microgrids in Illinois and Maryland and a slowdown for a PECO Energy proposal in Pennsylvania.

And back up went opportunity with new projects for communities, universities, data centers, the military and others. Additional state support and solicitations encouraged the industry higher.

So what will 2017 bring? More ups and downs for the microgrid market? Or a smooth ascent?

Expect bumpy because that’s what new markets do, said David Chiesa, S&C Electric’s director of business development.

“Microgrids are still an emerging and nascent technology. Go back and look at the other emerging technologies in the market — solar, wind — they’ve all had fits and starts like this,” he said.

Based in Chicago, S&C Electric had a close-up view at one of the big microgrid letdowns of the year. Its local utility, Commonwealth Edison, had proposed spending $250 million for five new microgrids as part of a comprehensive state energy bill. The bill passed but without the microgrids. (ComEd has since decided to seek alternative funding for one signature project, the Bronzeville microgrid.)

Chiesa was disappointed by the legislative defeat, especially for colleagues at the utility who had put a lot of work and thought into the projects.

But after 100 plus years in business, S&C takes the long view, he said.

“We look at it as more of a temporary setback than a death knell. To whom the bell tolls, it tolls for microgrids? That’s not what’s going on here,” he said.

Help me help you
microgrid market

David Chiesa, S&C Electric

Chiesa sees the proliferation of microgrids as inevitable, a logical step following today’s widespread investment by utilities into distribution automation.

Distributed automation is going to create more sectionalized feeders, he said. “And as you get sectionalized feeders, you are also going to have more distributed generation. If you have more distributed generation on sectionalized feeders, what are you one step away from? You are one step away from a microgrid.”

Chiesa added: “Where else can the grid go other than to a series of microgrids because that is a natural offshoot of distributed generation combined with distributed automation.”

What slows things down, at least for utility microgrids, is confusion about how to pay for projects. Chiesa said that regulators lack clarity about the value of microgrids – the worth of energy resiliency and reliability.

How to solve this? The microgrid industry needs to help utilities educate decision-makers, he said.

“It’s the Jerry Maguire quote, ‘Help me help you.’ We have to help them define the value, help them help us get this market going,” Chiesa said.

Still, even with this regulatory uncertainty, players are exhibiting early market confidence, he said. The giveaway? The many demonstration projects underway.

“People pilot the technologies that they think are going to be winners,” he said. “The largest utilities in the world are looking at microgrids and saying this is the future.”

“The largest utilities in the world are looking at microgrids and saying this is the future.”

microgrid market

Clark Wiedetz. Siemens

In this together

When Clark Wiedetz became microgrid director for Siemens Energy Management in April, he was surprised how little customers understood about microgrids.

“Even utilities — I thought the utilities know what microgrids are. Some yes. But there are a lot that don’t know the benefits,” he said.

Like Chiesa, Wiedetz sees the need to educate. That may take the form of webinars, conferences, or participation in industry associations, he said.

“I even started to talk with a few folks I compete with and said, ‘We should ban together and figure out how we can educate markets. It would be good for all of our businesses.’”

Because electric power is regulated at the state level, decisions by public utility commission will influence the speed and direction of microgrid market growth. So the microgrid industry also needs to focus on educating regulatory agencies, he said.

“We’ve got to stay focused on long-term objectives to push for a more consistent regulatory framework across the states,” he said.

Lessons can be learned from the more mature solar industry, he said. Solar faced a particularly rough time over the last year as issues surrounding net metering flared up in several states.

“When I go back to my solar days and think, what didn’t we do early on with solar that might have helped speed things up, I think education. We didn’t focus on it enough early. We did it later, after it got in the way,” he said.

“…ban together and figure out how we can educate markets.”

Faster ride coming for microgrid market

Despite the need for more education, Wiedetz says 2016 was largely a plus for the microgrid market.

He described “nice increased movement” in the microgrid market, particularly in higher education, commercial and industrial, utility, private developer, and federal government projects.

“In talking to the competition, they are seeing the same thing — significant growth in the number of opportunities,” he said. “The opportunities that are now in front of us are good ones, not something two or three years down the road.”

The downside for 2016? Construction and completion of projects fell below forecasts, he said.

Chiesa added that early market adoption is always hard. Capturing the first five percent of the microgrid market may be slow going. After that it should reach a tipping point: “The ride from 5 to 20 is going to be a heck of a lot faster.”

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Elisa Wood About Elisa Wood

Elisa Wood is the chief editor of MicrogridKnowledge.com. She has been writing about energy for more than two decades for top industry publications. Her work also has been picked up by CNN, the New York Times, Reuters, the Wall Street Journal Online and the Washington Post.

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