Three Reasons to Watch the SolarCity Microgrid Play

SolarCity MicrogridWhen it comes to market signals, SolarCity’s move into microgrids this week was a clanging, light-flashing, the-train-is-arriving announcement.

The solar giant’s arrival is a big deal not so much because of the product it will offer — a solar and battery microgrid called GridLogic — but because of how SolarCity has changed electricity markets already, and what it’s got planned for the future.

Here’s how we see SolarCity influencing the U.S. microgrid industry.

1. The start of a beautiful friendship

So far combined heat and power has dominated the grid-connected market in the U.S. and diesel has been used for most remote microgrids. Everyone seems to like the idea of pairing solar and microgrids too. But few solar microgrids have been installed so far in the U.S.

Now not one, but two major U.S. solar companies are positioning to build microgrids in the U.S. The second company is SunEdison, which earlier this month acquired Solar Grid Storage, a company already in the microgrid space.

“The entry of both SolarCity and SunEdison into the microgrid market in a big way points to the growing maturity of the market and the role of solar PV in both grid-tied and off-grid applications,” said Peter Asmus, a principal research analyst at Navigant Research, who has been tracking the microgrid market.

He added: “Most importantly, it points to how business models that have successfully driven down the cost of solar PV are migrating over to the microgrid space.”

While SunEdison seems to be focused more on solar plus storage than  microgrids per se, it has the means and the experience to take projects to the next step and develop full-fledged microgrids in the U.S. SunEdison has been building solar microgrids internationally in energy-impoverished areas, as part of its goal to bring electricity to 20 million people by 2020. Meanwhile, its new acquisition, Solar Grid Storage, became an early entrant two years ago into the U.S. solar microgrid market with a commercial building project in Maryland.

Cities are increasingly eyeing microgrids to increase electric reliability, and solar to boost their renewable energy portfolio. Solar microgrids offer communities a chance to pair them into one project. SolarCity, in fact, is specifically targeting the municipal microgrid market.

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2. Yes, there will be microgrid financing

In these early days of microgrids, it’s not surprising that financing isn’t always easy to find. The real issue is not so much getting the money, as finding a financing strategy that makes microgrids affordable to a large swath of customers, big and small.

How do you do that? Solar was asking this question a decade ago. And once it found the answer, solar adoption skyrocketed.

Interestingly, it was these same companies, SunEdison and SolarCity, that led the way in solving the solar financing problem. Their models require no upfront capital investment by the customer, who instead pays for solar through a regular monthly bill, much as they do grid electricity, and typically at a lower cost.

“SolarCity has deep experience with project financing — we’ve created funds to finance more than $5 billion in distributed generation projects,” said Daidipya Patwa, senior project manager of Solarcity’s Grid Engineering Solutions team. “We will apply our structured finance expertise to create ‘pay-as-you-go’ options for microgrids that include distributed energy resources (solar, storage, conventional gen), communications systems that link the distributed energy resources, and intelligent software to manage the microgrid.”

So these aren’t just big solar companies that are moving into microgrids; they are big solar companies that get what it takes to achieve mass in retail electricity markets.

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3. Utilities are you in or out?

Utilities have been characteristically slow (with some exceptions) about entering the microgrid market. SolarCity’s arrival shows the fence-sitters that it’s time to move — or else history may repeat itself.  The utility industry hesitated a decade ago when it came to offering distributed solar, leaving a vacuum that companies like SolarCity and SunEdison quickly filled.

The same could easily happen with microgrids, which share a lot of the same market characteristics as distributed solar. Microgrids appeal to the American energy user for some of the same reasons; microgrids are local energy that offer a path for households and communities to gain control over their power supply.

More significantly, SolarCity is not just a utility competitor that wants to steal away some megawatt sales. It prides itself in being a disruptor that is waging a war on the conventional utility grid model. As it tries to capture several prime microgrid prospects — municipalities, remote communities, military bases and hospitals — it’s also trying to remake the economics of the power industry.

And this war is finding allies now among state policymakers, most notably in the electric power-hungry Northeast. New York is leading the charge with its Reforming the Energy Vision, an evolving policy designed to elevate the use of distributed energy in electric markets. In New York, at least, it may already be too late for utilities to take ownership of the microgrid market in any big way.

As a potentially big player, SolarCity also may bolster the prospects of smaller microgrid vendors in the supply chain. Patwa said that SolarCity will form its microgrids out of products and services from trusted partners as well as in-house technologies.

Will  SolarCity’s strategy work?

Of course, all products are launched with great hope. It seems that SolarCity has a lot to offer the microgrid market — and vice versa. But as Navigant’s Asmus points out: “Whether this approach will be successful, remains to be seen. A microgrid is more complex than a solar PV system, though it is the inverter and advanced energy storage that are the key gateway technologies for wider deployment.”

For its part, SolarCity sees huge opportunity ahead, driven by electricity as a necessity of modern society, one that isn’t always guaranteed.  SolarCity points out in a news release that  the 21st century saw 3,496 natural disasters, nearly a five fold increase over the 1970s.

“Many municipalities, particularly remote communities, are looking for resiliency in the face of more severe weather events across the globe and growing concerns about preparedness. Microgrids and backup power are solutions to these issues, but existing products in this space can be complex and costly, making them difficult to adopt. With GridLogic, we’re providing a cost-effective solution that represents the melding of our existing technology – solar and energy production, batteries and intelligent management software – into a compelling package for customers,” Patwa said.

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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.

Comments

  1. Thrilling article! A movement I am very excited and passionate about. What can we do locally to be involved? I’m early in my career as an energy engineer and very motivated to be a part of a sustainable future.
    Surely these companies anticipate electric vehicles as playing a major role in the transition to micro grid communities? Imagine a world, likely within 5 to 10 years, where we begin to see electric vehicles dominate the market. Suddenly storage isn’t such a problem as more and more people literally drive around in portable storage. Will battery technology advance fast enough to meet the opportunity? Is graphene in the cards? How do we connect with the average end user to make them more than interested, but passionate about such a change? Thank you for sharing this.

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