Energy project developers are just beginning to see the advantages of bypassing the old and “messy” electricity infrastructure in favor of clean, smart microgrids in developing countries.
That was one of Haresh Patel’s observations about the information gleaned from developers for its latest Mercatus Global Advanced Energy Insights Report.
“Our report comes out twice a year,” said Patel, CEO of Mercatus. “This reflects the fourth quarter and latter half of 2015 and the first part of 2016. This was the first time microgrids are being loaded into investment opportunities. It’s a new trend.”
The company creates its report to provide energy producers with insight into conditions and trends that are emerging in the advanced energy power generation market. The report is based on information about energy projects in various stages of development managed in the Mercatus Energy Investment Management (EIM) platform in 2015.
“Our data from our customers — major power producers that use our platform to evaluate all projects — allows us to predict three years in advance their future business,” Patel said.
Developers in emerging markets want to bundle assets in a mini grid, he said. “They say ‘Let’s take a small town and give them their own grid.’ They don’t have distribution lines. That’s where we see early signs of investing in microgrids. They are seeing populations in the developing world bypass what we have and leapfrog the electricity infrastructure.”
That’s what many developing countries have done with phones, leapfrogging over landlines and straight to cell phones, he added.
“Developers in emerging markets are seeing opportunities to put in clean, smart microgrids and bypass the messy system we have created so far,” he added. Much of the focus is on solar, he added.
He said it’s unclear how big this trend will become.
The report also found that renewable energy projects in emerging markets are yielding 28 percent higher returns than in North America and Europe.
In fact, investment in advanced energy in emerging markets matched that of developed countries for the first time in 2015, according to the company.
The report identified three large markets—Japan, China and India, Patel said.
Different issues are driving the growth of renewables in each country. In Japan, for example, the Fukushima nuclear plant disaster sparked interest in renewable energy, he said.
India and China, on the other hand, are dealing with air pollution and leaders believe they need to solve that problem with renewables.
In addition, the Mercatus report identified demand for renewable energy in South America and Africa. “The populations that don’t have access to electricity and water use diesel or kerosene, which is expensive compared to solar,” he said.
There’s very fast payback for solar in these countries, Patel said.
However, the businesses that have historically sold diesel and kerosene in these countries are trying to scare the residents away from solar.
“There’s a kerosene and diesel cartel; local warlords that are trying to terrorize the solar industry,” he said.
The Mercatus report also found strong growth in storage.
“It’s still very early and a lot of the technology out there is still pretty expensive, but as the dynamics change, storage is a pretty big straw on the camel’s back for accelerating the growth of renewables,” said Patel.
The emerging countries are investing in both large-utility scale renewable projects and distributed generation.
“Contrary to assumptions that declining oil and gas prices would dampen investments in clean energy, we see no correlation between these trends. What we do see, with US $12 trillion flooding into the market, is the onset of energy transformation. Most of the growth is in developing regions, so that’s where energy producers are investing more heavily. There’s a real opportunity for these markets to leapfrog fossil-fuel dependence, similar to how Africa’s mobile phone revolution skipped the landline era,” said the press release.