Microgrid Market: Industry Players Analyze What’s Needed Next to Spur Growth

The microgrid market is growing and evolving, but new regulations and policies are needed to ensure it thrives, according to top industry players.

Says Greg Clark, senior project manager, Power Engineers, “We believe the microgrid market is in a state of transition: from a specialized niche market of emergency power systems dedicated to mission critical facilities, to a more prominent market that includes a variety of different participants including institutional, government, municipal, and even utility owners.  There is a high level of interest in resiliency and reliability from a wide spectrum of our clients.”

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Graham Leard, territory sales manager, G&W, agrees that “evolving” is a key way to describe the industry. The market is transitioning as it works to find its place in a very traditional market, he says.

And Tim Peer, vice president district energy, Bond Brothers, says one of the strongest areas of this changing market is microgrids with combined heat and power (CHP), especially those in the academic and healthcare markets.

“The resiliency benefit associated with the on-site generation helps get past the internal financial hurdles and competition for capital,” he says.

These industry leaders expect significant microgrid market growth in the next five years.

Clark says he believes the market will transition away from “isolated pilot projects, and will be enabled by the growth of distributed generation resources, energy storage technologies, and standardized control platforms.”

Leard says the success of the microgrid market over the next five years will depend on how well microgrids boost reliability for their own grid as well as the larger distribution grid.

“The greater this positive interoperability, the greater the acceptance that microgrids will enjoy,” he says.

Real estate developers: A new frontier for microgrids? 

GE’s Jayant Kumar sees real estate developers as an emerging and influential segment – and one the industry needs to cultivate more.

“When they are building real estate for a mini-city or a new community, they are really considering microgrids,” says Kumar, the global digital grids program director for GE Grid Solutions.

Such heightened interest is coming from real estate developers nationwide, he says, not just from the storm-vulnerable Northeast or green-leaning California.

Microgrids will appeal to real estate developers even more as project economics improve. This will come about as solar and energy storage costs drop, says Kumar. Such non-software components comprise 60 to 70 percent of a microgrid’s cost.

Real estate developers also need to be educated about the value of using microgrids to leverage wholesale energy markets and manage energy resources, so that they come to see microgrids “as a value proposition, not a cost,” he says.

City officials can play an important role in cultivating microgrid installation. So that’s another segment Kumar identifies as important to educate. He wants to see city planners inquiring about microgrids when developers come before them with plans for new real estate projects.

All of this will become easier, says Kumar, as the microgrid industry continues to move beyond prototypes and proof-of-concept projects into successful commercial installations. He points to GE’s microgrid project at the Portsmouth Naval Shipyard in Kittery as one such real-world example.

Peer says Bond Brothers expects steady demand, noting that many of these projects take two to three years to get off the ground. His company is experiencing an increase in renewals of projects installed 20 to 25 years ago, he notes.

“CHP-based systems will continue to comprise the majority of microgrid solutions. The thermal host is the primary asset so we do not see a huge play for systems without that basic foundational platform,” he says. His company expects to see more conversions of existing steam-based thermal platforms to lower-grade hot water systems, he says.

Advancing the microgrid market and model

To help continue to move the market forward, regulatory policies need to change, providing compensation for microgrid owners, the industry players say. What’s also needed are common standards.

The industry would benefit from policies that allow microgrid owners to put power back on the grid. This would create more incentives for deploying microgrids, Clark says.

“Business models need to be created to allow participants who are able to provide needed grid support to be compensated fairly,” he says.

G&W’s Leard says the industry needs a roadmap that details how microgrids can be configured to meet the needs of their owners and also interface with the distribution grid In positive and synergistic ways.

“This will require the development of standards and regulations in order to guarantee this operability and provide a positive benefit to all stakeholders,” he says.

To Peer, the biggest obstacle to microgrid growth is the franchise rights related to utilities.

“Most of the other issues related to environmental permitting, interconnection, standby service, technology and automation are fairly mature and well understood,” he says.

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