Peter Asmus of Guidehouse describes results of his new report on the global potential for modular microgrids, systems that can be “pieced together like Lego blocks, thereby shrinking design and deployment costs.”
Peter Asmus, research director, Guidehouse
The beauty of the microgrid is it can be customized to meet the precise resiliency, economic, and environmental goals of any customer. This is possible because every microgrid is a personalized energy system made of available distributed energy resources (DER). Although its ability to customize is one of the microgrid platform’s strongest selling points, the downsides from the customer perspective can include time and money.
In response to time and money costs, there is a growing movement within microgrid ranks — modular microgrids. The alternative approach is to commoditize standard microgrid offerings that can be pieced together like Lego blocks, thereby shrinking design and deployment costs. Plug-and-play microgrids are attractive to financiers because they create a portfolio of similar assets, which transforms microgrids into a modular product. Although they are a minority portion of the market if measured by peak capacity, modular microgrids have the potential to make up the majority of systems deployed by 2029.
What exactly is a modular microgrid? Navigant Research, a Guidehouse company, defines modular microgrids in a new Modular Microgrids report as:
Meeting the basic definitions of a microgrid, with the distinguishing feature being the ability to island and operate autonomously but include the following attributes:
- Pre-configured key hardware components
- Ability to customize operations through software (often in the cloud)
- Streamlined deployment procedures that reduce the need for onsite engineering during installation
The list of vendors moving in this modular direction is growing. Among them are Enchanted Rock, Scale Microgrid Solutions, Tecogen, and Bloom Energy in the US and each has focused on grid-connected systems. Globally, there are hundreds of companies offering containerized, modular microgrids for off-grid energy access or remote mining operations. The firms range from startups to industry veterans. ABB and Schneider Electric are key international players.
The cost difference between a standard customized approach and a modular system can be substantial, according to BoxPower, which has deployed several modular microgrids to serve remote communities in Alaska. The company reviewed the cost of kilowatt-scale systems installed between 2012 and 2015 and found an average cost of $8.82/W. This compares to a kilowatt-scale system installed by BoxPower in 2019 that was $4.68/W. Some of savings can be explained by declining costs of solar PV, but other savings are attributed to modular pre-assembled systems shipped in containers to remote villages, which shrinks onsite installation costs. Additional vendors, such as Scale Microgrid Solutions, claim a 30% cost savings using the modular microgrid approach.
How big Is this market?
If measured by peak capacity, only a fraction of the global microgrid market is made up of modular microgrids — though, they are deployed across all application segments. The US modular microgrid market, and the international remote microgrid market are both driven by the commercial and industrial (C&I) sector. C&I captures 46.6% of the global modular microgrid market share while 40% is captured by the remote microgrid market. By 2029, however, C&I and remote modular microgrids will likely switch positions. Remote microgrids are anticipated to capture more than half of the total modular microgrid market while the C&I segment will likely only have 37.2% of the market.
All told, the modular microgrid market capacity is expected to grow at a compounded annual growth rate of 28.0% by 2029. Across all segments, modular microgrids capture 14.2% of the total microgrid market. By 2029, the modular market share is anticipated to grow to 22.9% and will represent the majority of microgrids deployed by project number.
Annual Modular Microgrid Capacity and Implementation Spending by Region
World Markets: 2020-2029
Why modular microgrids now?
Early deployments of microgrids focused often on fossil-based generation options. For example, remote off-grid systems were built around diesel generators whereas grid-tied systems often used combined heat and power systems to anchor the power generation portfolio. Though both options persist in many microgrids, there has been a gradual shift to reliance on larger penetrations of renewable energy. First wind and hydroelectric were popular, now solar PV is in the mix as energy storage systems often become the centerpiece for full microgrid functionality.
The shift to solar PV and batteries enabled the evolution for more modular system designs, since both technologies are extremely scalable and ideally suited to smaller microgrid deployments (typically under 1 MW). Modular microgrids can certainly contain other DER, including diesel or natural gas generators, but the surge in deployments of solar PV and storage energy systems drives the market toward modular microgrids. Another important trend over the last decade in the evolution of microgrid controls is the transition away from top-down hierarchical approaches. These approaches were inherited from a utility-paradigm way of thinking, however, the new trend embraces a more distributed approach to automation and control. Distributed device level intelligence — such as power electronics embedded in smart inverters attached to solar PV and batteries — sets the stage for modular microgrids.
Future modular microgrid trends
One industry that has demonstrated the value of modularity is the data center industry, which is also focused on uptime and resiliency. This industry is an area where the value of direct current (DC) architectures, which also leans toward modularity, makes sense for future application. Most data centers remain on alternating current (AC) networks, though, like microgrids, there is a growing trend toward AC/DC hybridization.
Data centers made modular construction the norm. Modular construction offers more flexibility and expandability and scalability benefits. These goals are achieved with sectionalized, incremental buildouts based on customized and preassembled designs, which are transported to project sites. Such a modular building block approach quickens the deployment process while commoditizing underlying infrastructure. In turn, costs are reduced, as are the prospects of long lead times for project development caused by customization of infrastructure.
In the future, microgrids and data centers may converge on issues of resilience and modularity and greater use of DC technology is likely. Yet a primary effect of modular microgrids is anticipated on the financing front. The trend away from complexity and perception of intense customization enables more standardized financing as portfolios of similar-scale microgrids address the perceived risks inherent in one-off projects. This standardization enables a more attractive value proposition to the financial community looking for scale, albeit in a different form than utility-scale solar or wind farms.
Peter Asmus is a research director at Guidehouse.
