If you don’t have sustainable energy, you have unsustainable energy.
Say what you want about Elon Musk, but his quote above is both simplistic and yet prescient to the nth degree about the world we live in (or should that be Xth degree?).
To go further into the lexicon of Muskspeak, the world is in tension between one side racing to create a new electricity ecosystem and the other side running a high-risk experiment that both the traditional grid or our atmosphere can handle what’s coming.
The editorial and industry leadership behind Microgrid Knowledge, of course, believes that the microgrid solution is the clearest and best choice offered at the intersection of sustainability and energy resiliency to date. Maybe something else will come along, but this makes the most sense yet.
Yes, microgrids are expensive and take a long time to go from concept to commission, but there is no other resource that can so efficiently combine the many paths to both decarbonization and adequately meeting enormous resource needs of the future. And they are not nearly as expensive as rebuilding and reallocating the utility transmission system.
Data center expansion, fueled by the growth of artificial intelligence (AI), is happening at such a breakneck pace that the world’s tech leaders such as Microsoft, Amazon and OpenAI are seriously engaging with small modular reactor (SMR) nuclear technology startups to create future connections. Fleet electrification, as the world of electric vehicles such as Musk’s Tesla portends, will require an added allocation of power that must scare the heck out of utilities.
2030 is little more than five years away, dear reader, and all signs point to a revolution in energy that puts microgrids at the center of the new era.
Given all that, Microgrid Knowledge sought out the wisdom of many of the industry’s leaders on the most compelling story lines for microgrids in the 2020s. These include priorities about customer education to really make the argument for the microgrid value proposition, a sustained incentivization pathway and some resolution of the conflicts that invariably develop whenever a historic infrastructure is reinvented.
Why it matters
The world of commercial and industrial (C&I) and mission-critical customers is certainly watching.
“We have heard from C&I customers how their business needs are changing rapidly and that they need an energy partner that can meet this rapid change,” said Steve Pullins, senior vice president and chief technical officer at public infrastructure microgrid developer AlphaStruxure, which has created several microgrids serving fleet electrification.
“Customers are fearful of long interconnection queues, high grid infrastructure costs and very long timetables,” Pullin added. “It’s not just about how much, how green and how reliable – it is also about how fast.”
The answers sometimes are foreboding in terms of time and expense. A microgrid cost study by the National Renewable Energy Laboratory six years ago estimated an average project cost of between $2 million and $5 million per MW, while the Lawrence Berkeley National Laboratory, working with others, reported that distributed energy resources (DER) and microgrid interconnection times can be as long as five years from design to operation.
Even so, the future of technology waits for no one while an AI, hyperscale data and manufacturing “reshoring” revolution gains momentum. An electric utility sector that only a few years ago predicted flat load growth is now scrambling to meet a predicted avalanche of demand and not get buried by it.
“AI data centers, and the supply chain connected to AI that supports manufacturing, has generated an all-out panic in load forecasts from most utilities,” Mike Fischette, CEO of microgrid-focused Concord Engineering, said in response to emailed questions from Microgrid Knowledge. “The idea of nuclear SMR to power data centers crystallize the panic.”
Read MGK’s Full Coverage on SMR Nuclear
Microgrid development growth is pretty much a given in the forecasting sectors, although there is wide variance in how far it’s come and where it’s going. Fortune Business Insights predicts the global microgrid market will triple from $11 billion to $37 billion by 2032, while MarketsandMarkets boldly contends that the global value of microgrids will reach nearly $90 billion by the end of this decade.
The 2020s are clearly rolling toward unprecedented microgrid expansion, but enormous long-term impediments still stand in the way of expected growth patterns. For that reason, Microgrid Knowledge reached out to many of its industry experts who are also advisory board members for the Microgrid Knowledge Conference, which will be April 15-17, 2025, at the Dallas Sheraton.
Below are the primary questions we asked, followed by more in-depth answers from our microgrid sector movers and shakers. This group includes Steve Pullins and Mike Fischette, as well as Jana Gerber, president of the North America Microgrid business at Schneider Electric, Samantha Reifer, director of strategic alliances for developer Scale Microgrids, and Andrew Wall, senior vice president and chief commercial officer with PowerSecure.
What is the most compelling thing which could propel sustainable microgrid growth going forward into 2025?
Samantha Reifer, Scale Microgrids: “New demand from bridge power/grid constrained sites is already doing an immeasurable amount to drive microgrid growth. The question will be how quickly can our industry scale to support it.”
Jana Gerber, Schneider Electric: “To propel sustainable microgrid growth into 2025, it’s key to keep building upon the incentives, like the federal Investment Tax Credit and the tax credit transferability provided by the Inflation Reduction Act.”
Statewise, she added, “Notably, California is leading the way through its Energy Code Title 24 that mandates solar PV and battery energy storage systems in buildings. Title 24 applies to new buildings and existing buildings applying for a building permit for renovations or additions, including offices, financial institutions, retail spaces, warehouses, convention centers and other commercial buildings, with the goal to increase grid efficiency and reduce duck curve evening peak.
“Because of this, we’ll see Title 24 spur a wave of microgrid developers in the area, granting more efficient, reliable energy resources. As such, we’ll also see a need for upskilling, allowing more people to understand the benefits of microgrids and be trained to install, commission, operate and maintain the systems.”
Steve Pullins, AlphaStruxure: “The most compelling action for steady microgrid growth is customer education. Today, knowledge of solar PV pros and cons is mainstream within the customer community, but the other technologies are well behind from a customer awareness perspective.
“I am working with a multifamily real estate team for a new build that had heard of energy storage but had not heard of fuel cells. Imagine a region ripe for combined heat and power where fuel cells had never been heard of? The customer community still needs to learn that their energy options are far greater than PV on the roof and a utility transformer in the yard.”
Mike Fischette, Concord Engineering: “Much of the idea of microgrids hasn't fully been addressed in terms of the fuel. While multi-DER microgrids are the basic makeup, the general public doesn't realize that natural gas supply and infrastructure will jump to support most of the microgrids. This conflicts with many climate change activists.”
Andrew Wall, PowerSecure: “We continue to see growth in microgrid interest directly related to uncontrollable grid outages, grid capacity restraints and long-term grid congestion. While our potential customers show a great deal of interest in the incentives provided by utilities, organized energy market incentives and stimulus funds are driving the implementation of microgrids.”
Is the microgrid sector gaining traction on its value chain argument, overcoming the concerns about costs and benefits? Or not?
Fischette: “The reasons (he listed) in question No. 1 have increased the awareness for microgrids but there still isn’t enough of an acceptance to actually building them or making the commitment. Our experience shows most developers of data centers and industrial complexes are studying (microgrids) but the commitment is still lacking because of data center customers and industrial tenants' timidity to the concept. Utility old school ‘we have the power available’ still clouds the decision.”
Gerber: “Microgrid solutions have emerged as a game changer in strengthening facilities and communities against energy disruptions while advancing their commitment to sustainability and will continue to enhance those efforts. At a time where there is an emphasized need and importance to decarbonize, microgrids provide the flexibility to source clean, self-generated power from local distributed energy resources, such as solar PV panels and battery storage. Resilience is still, and will remain, a foundational benefit of microgrids. However, putting a cost value on resilience without a recent experience is challenging for customers (new to the market), and there is no standard provided by the market based on location or utility.”
Reifer: “Yes, as prices go up and power becomes constrained, microgrids are cost-effective and valuable not only for customer sites but the grid. Value stacking is being proven across the country by operational projects and proving to be more successful than originally quoted.”
Wall: “If you are referring to the value chain as the value of a microgrid to a business versus other business investments, I would say that microgrid investments are still lagging (behind) other business investments. However, in the next two years we will see microgrids on par with other business investments. Companies are starting to see tangible evidence that an investment in a microgrid does provide overall business value. A company making an investment in a microgrid to ensure continuity of service where there is a cost-sharing model with a utility or monetizing installed capacity in the greater energy markets sees a shorter return on investment than other business investments.”
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What are the commercial and industrial customers saying about how microgrids fit into their facility planning? Has that conversation evolved over the years?
Gerber: “The key drivers for commercial and industrial customers using microgrids include power availability for electrification growth, utility outages and legislation like California’s Title 24. Because additional loads, such as expansion of a facility and/or electric fleets, have increased recently, customers are looking for added flexibility and scalability to meet their energy needs.”
Reifer: “It is growing, not only from commercial and industrial customers but the real estate sector that is looking to serve these entities; not only for immediate power needs but also as ESG teams get more teeth to implement programs and look to claim sustainability benefits.”
Wall: “There are few companies now that are not at least investigating inclusion of a microgrid in new facility builds or major facility expansions.”
Fischette: “Industrial tenants seem to get the idea of microgrids, however, our experience has been the use of solar PV assets on large-scale logistics roofs is becoming a hurdle because the tenants want to own the power and attributes as opposed to allowing the campus to create a full-scale mixed battery and generation microgrid.
Many property managers, he added “don’t see the microgrid as an asset but more like an impediment to signing a lease. This is a major problem.”
So let’s dive a little deeper into another part of real estate: Is the residential microgrid potential staying strong, gathering momentum or still finding its direction?
Pullins: “Single-family dwellings have found their niche with solar PV plus battery systems that can island when the grid is lost — so millions of solar rooftops is doable and happening. Multifamily buildings where the PV potential is very limited is a different story. This sector is driven mainly by commercial real estate development and still finding its way. These facilities are hard to decarbonize more than 20% with the traditional approaches prevalent today. Creating an all-electric multifamily building to decarbonize is 100% dependent on the greenhouse gas emissions of the grid. So, multifamily facilities that tout their greenness will need microgrids that can integrate lower carbon sources of energy, such as solar PV, geothermal, fuel cells and energy storage etc. to make it so.”
Gerber: “The residential microgrid potential is gaining momentum while working through standardization and paths to market valuing and understanding the technology in a decentralized market. However, home builders are still figuring out how they can integrate microgrids in order to reduce energy costs. We're seeing high interest in residential community microgrids. The integration of solar and battery storage is certainly a value add, as well as incentives for California residents, which will help accelerate this in 2025.”
What’s missing? What other compelling thing about microgrids is not discussed enough in 2024?
Reifer: Gap, bridge and bring your own power solutions are going to drive significant microgrid capacity for the foreseeable future as building electrification, fleet electrification, AI data centers and the onshoring of manufacturing drive supply shortages on the grid.”
Pullins: “I think it is important to discuss how local ordinances and laws will drive a different energy future for dense urban cities. For example, New York City’s Local Law 97 requires every building over 25,000 square feet to meet a certain carbon footprint or pay a fine every year if it doesn't meet the standard. The first penalty year is 2024, and a significant backlash is brewing albeit the buildings had five years to prepare. The penalty is quite stiff at $268 per metric ton of GHG emissions.
“We don’t see fossil natural gas bans at the federal or state level, but we do see a growing number of cities adopt such ‘no gas’ strategies. This is a critical issue for microgrids as such local laws can be helpful or hurtful to microgrid growth in the near future.”
Gerber: “Around 2 billion people worldwide do not have access to clean and reliable energy, greatly limiting their chance to achieve better quality of life, work or study. In 2025, I believe we’ll see big progress and movement in terms of microgrid access reach, affording more communities the benefit of clean, efficient and reliable energy. Another compelling microgrid topic is the significant need for integration. Currently, there are a vast number of DER vendors in the market, overcomplicating the transition to clean energy. In a market where there is vendor saturation, microgrids offer a complete solution for a customer to deliver resilience, in a sustainable way.
“In 2025, I think we’ll start to see a lot more organizations begin to gravitate toward this, integrating clean energy solution providers into one single partner.”
Wall: “Hybrid microgrids will continue to gain momentum. The value of being able to economically balance a hybrid microgrid to increase energy savings and to environmentally optimize hybrid microgrid emissions will unlock the greater value. Additionally, the use of other forms of energy without having to change the energy assets will prove to be very valuable.”
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