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Today’s U.S. Microgrid Market: $24.6 Billion
Expected Growth by 2026: $42.3 Billion
CAGR: 11.4% Between 2021 and 2026
November 9, 2021
Note: CAGR is defined as: Compound annual growth rate, or CAGR, is the mean annual growth rate of an investment over a specified period of time longer than one year. It represents one of the most accurate ways to calculate and determine returns for individual assets, investment portfolios, and anything that can rise or fall in value over time.
Chart Source: https://www.naseo.org/issues/electricity/microgrids
Introduction:
When researching a variety of industry sources, we find that the “microgrid” market in the United States has gone from about $6 billion in 2020 to over $24.6 billion in 2021 (a span of one year).1 The following table provides us with some understanding of the magnitude of this market:2
According to Global Market Trends (“GMI”), market growth is attributable to at least some of these factors:
Rising uninterrupted and resilient power supply demand along with increasing electrification rate largely across the developing economies will foster the industry landscape. Rising penetration of distributed energy resources (DER’s) on account of rapid commercial and industrial development will fuel the business scenario.3
GMI goes on to say this as well:
High compatibility with grid networks along with no requirement of power supply inverters will drive the AC microgrid industry trends The AC microgrid market is estimated to register over 27% CAGR through 2027. Ability of this technology to provide lower transmission losses, minimal heat generation and effective high-end voltage levels across the network will sway the technology demand. In addition, these are highly compatible with grid networks and requires no inverters for the power supply which in turn propel the industry dynamics. Furthermore, rising installation of high voltage AC power networks along with deployment of large solar and wind farms connected with AC transmission lines will further sway the business scenario.4
Let us break this down for a moment in bullet point format vis-à-vis some of the factors that are driving growth in this sector:
Rising uninterrupted and resilient power supply demand
Increasing electrification rate largely across the developing economies
Rising penetration of distributed energy resources (DER’s)
High compatibility with grid networks
No requirement of power supply inverters
Lower transmission losses
Minimal heat generation
Effective high-end voltage levels across the network
Rising installation of high voltage AC power networks
We can then cross-reference and corroborate this information as follows:
The microgrid market revenue is expected to cross USD 33 Billion by 2027, as reported in the latest study by Global Market Insights Inc. Ongoing grid modernization coupled with the installation of advanced and sustainable generation sources across the network will propel the industry scenario. The rising renewable integration to lower the GHG emission along with strict regulatory norms to deploy power-efficient solutions will foster the business dynamics.
The lack of effective electric networks, current lags, voltage fluctuations, and grid failure have been primary concerns driving the remote microgrid industry across developing regions. Regulators have been predominantly integrating programs and initiatives to establish a sustainable electric network across these areas. Henceforth, distributed generation technologies along with the growing energy demand across isolated locations will positively influence the industry landscape.5
We then get to the “waste-to-energy” microgrids:
Waste-to-energy microgrids are capable of transforming waste into electrical and thermal power, and can be utilized in a remote or grid-connected capacity. The infrastructure of waste-to-energy technology not only provides emergency coverage as a back-up energy source, but it is also powerful enough to fulfill local demand while reducing operational costs. Waste-to-energy microgrid technology allows municipalities to use local energy sources to power local areas. While this sounds like an obvious solution, it is important to remember that many waste-to-energy plants generate power that is used outside of the grid. Incorporating a waste-to-energy microgrid keeps the power generated from waste-to-energy plants to remain local, instead of being shipped elsewhere. There are many benefits of utilizing a centrally located waste-to-energy microgrid. Not only would it reduce pressure on the grid, but it would also provide necessary back-up support for institutions like hospitals in emergency power shortages.6
So, the benefits of “waste-to-energy” grids include, but are not limited to, the following:
Allow municipalities to use local energy sources to power local areas
Capable of transforming waste into electrical and thermal power
Can be utilized in a remote or grid-connected capacity
Can generate power that is used outside of the grid
Reduces pressure of the grid
Provides back-up support in emergency power shortages
Overall, we’re looking at a substantial cost savings. The significant reduction in cost is an almost certain investment for countless entities seeking viable alternatives. In light of that, we look at this information:
Large fluctuations in demand can render regional grids extremely ineffective. All types of microgrids collect energy on-site and can store and regulate energy, which balance fluctuations based on demand. Because utility companies don’t have to worry about unknown potential costs, especially in emergencies, the operating costs of the operation are much lower than a regular grid set-up.7
Indeed, the fact that operating costs could be “much lower than a regular grid set-up” renders this solution to be most effective and timely, especially in today’s volatile market environment.
End Notes:
2. Ibid.
3. Ibid.
4. Ibid.
7. Ibid.
Defining a “Microgrid”:
A microgrid is a self-sufficient energy system that serves a discrete geographic footprint, such as a college campus, hospital complex, business center, or neighborhood. Within microgrids are one or more kinds of distributed energy (solar panels, wind turbines, combined heat & power, generators) that produce its power. In addition, many newer microgrids contain energy storage, typically from batteries. Some also now have electric vehicle charging stations.
The MGES Microgrid:
MGES is committed to bringing you clean, reliable energy, produced on-site, to power your facilities. An MGES designed microgrid can allow you to disconnect from the traditional grid and operate autonomously. MGES microgrids can be powered by a combination of distributed generators, batteries, natural gas, and/or renewable resources like solar panels.
Source: http://mg-es.com
A Look at the Global Micro-Grid Market:
Global Forecast to 2026
The global microgrid market size is expected to reach USD 42.3 billion by 2026 from USD 24.6 billion in 2021 at a CAGR of 11.4% between 2021 and 2026. The growth of the microgrid market is driven by factors such as rising focus on decarbonization by various end users and government, increasing demand for uninterrupted power supply, growing adoption of microgrids for rural electrification, and rising instances of cyberattacks on energy infrastructures. Initiatives by governments of different countries to encourage the development of microgrids are also fueling the growth of the industry.
COVID-19 Impact on the Microgrid Market
The microgrid market includes key companies such as ABB (ABB, Switzerland), General Electric Company (GE, US), Siemens AG (Siemens, Germany), Eaton Corporation Inc. (Eaton, Ireland), Schneider Electric SE (Schneider Electric, France), Honeywell International Inc. (Honeywell, US), HOMER Energy LLC (Homer Energy, US), S&C Electric Company (S&C Electric, US), Power Analytics Corporation (Power Analytics, US), and Exelon Corporation (Exelon, US). These companies have their manufacturing facilities and corporate offices spread across various countries across Asia Pacific, Europe, North America, and Rows. The microgrid hardware products manufactured by these companies are purchased by several stakeholders for various end use. COVID-19 has impacted the operations of the various microgrid hardware manufacturers companies, along with businesses of their suppliers and distributors. The fall in export shipments, delay in projects, and slow domestic demand for microgrid hardware in comparison to pre COVID-19 levels is also expected to negatively impact and slightly stagnate the demand for the microgrid market in short term.
Microgrid Market Dynamics Driver: Increasing demand for uninterrupted and reliable power supply
For more than a century, advanced economies abided by the ‘bigger is better’ philosophy for electric power supply. Massive grids were built that connected power plants to homes and businesses through wires that traversed thousands of miles. Electricity generated by large, remote power plants, which are connected to centralized power grids and use fossil fuels, is transmitted across different regions and countries. However, the shortcomings of these power plants in terms of inefficient power transmission, have become increasingly evident. Conventional grids are largely dependent on fossil fuels for electricity generation, leading to pollution and global warming. These grids are also vulnerable to natural calamities that usually result in network malfunctioning or blackouts. For instance, Hurricane Sandy that occurred in the US and Typhoon Haiyan that took place in the Philippines resulted in mass blackouts in major areas, such as New York and the islands of Leyte. For several days after the calamities, these areas lost access to electricity, leading to the growing demand for self-power generating plants or microgrids. According to the Eaton Blackout Tracker, there were more than 3,500 utility outages in the US in 2017. From 2016 to 2017, the duration of electric power outages in the country doubled, with an increase in extreme weather occurrences. A similar trend of increasing outages was also observed in 2018 and 2019, resulting in the growing adoption of microgrids in the US.
Restraint: Huge installation and maintenance costs of microgrids
The initial costs involved in the installation and maintenance of microgrids are 25%–30% higher than that of conventional electricity grids. They include costs for setting up a complete microgrid infrastructure, right from the deployment of communication systems to the installation of smart meters, as well as their regular maintenance. The costs of installing smart meters are 50% higher than the costs involved in installing electric meters. Distributed energy resources (DERs) used in microgrids are also costlier than those used in traditional centralized power stations. The capital expense to build a new microgrid or convert another system to a hybrid microgrid can range from the tens of thousands to hundreds of millions of dollars. The most expensive part of a microgrid is the generation assets such as solar PV arrays, batteries, and/or combined heat and power systems. A large amount of capital is also required for investments in grid automation, and microgrid controls systems that can intelligently monitor and manage all the components, controlling the way the microgrid consumes and produces energy. As microgrids can store, convert, and recycle energy, as well as offer better reliability and power quality than traditional grids, their costs are higher than traditional grids. This acts as a barrier to the growth of the microgrid market.
Opportunity: Rising investor interest in EaaS business model to minimize costes
Energy-as-a-Service (EaaS) is a business model whereby customers pay for an energy service without having to make any upfront capital investments. EaaS agreements operate under the premise that the risk should not be placed upon the microgrid host. These agreements can be highly customized to the host’s energy need, goals, local regulations, and available energy resources; monthly service fees are based on usage. The EaaS model has various benefits. For instance, since microgrid construction is flexible, there is no need to build the project all at once. If the host expands operations later, perhaps, when a business park adds more buildings, microgrid capacity can be added. This flexibility also allows the microgrid to incorporate new technologies. In 2018, Schneider Electric, with Duke Energy’s REC Solar business unit, deployed an advanced microgrid at Schneider’s Foxboro, Massachusetts facility. The microgrid was the third project to be financed with an innovative Microgrid as a Service (MaaS) business model, which was created to offer greater power resilience to industrial and commercial customers, without requiring an upfront outlay of capital.
Challenge: Lack of standard and regulatory frameworks related to microgrid operations
Microgrid technology, being relatively new, is still dynamic and volatile in terms of regulatory frameworks. For instance, regulations and policies for the integration of microgrids with large grids are still being formulated. The existing regulatory frameworks pose some barriers to the acceptance of microgrids. For instance, according to the Institute of Electrical and Electronics Engineers (IEEE) Standard 1547, grid-connected power inverters detect faults in grids and cause shutdowns. This standard is driving research in the area of static switches used in microgrids that are capable of disconnecting and reconnecting grids in sub-cycle times. Research on the formulation of new standards related to the operations of microgrids and the new generation of energy management systems is also being conducted. Microgrids, which can help improve access to electricity, can be fully leveraged only with the help of a proper regulatory framework, which is currently missing. Thus, the lack of standard and regulatory frameworks related to microgrid operations acts as a challenge for the growth of the microgrid industry.
Grid connected segment to register higher CAGR during the forecast period
The grid connected segment is projected to register the higher CAGR during the forecast period, by connectivity. Grid connected microgrids comprise multiple generators, distribution systems, and sophisticated controls. They offer a number of benefits, such as grid resiliency, improved power quality, and low impact on the environment, thereby leading to increased demand. The growth of this segment can be attributed to the expansion of utility-based grid networks globally, coupled with the large-scale harnessing of renewable sources of energy, including offshore winds.
Controllers for microgrid hardware segment is expected to witness higher CAGR growth during the forecast period
The microgrid market for controllers segment is projected to register the higher CAGR during the forecast period, by hardware type. Smart meters are expected to witness increased demand globally due to the growing requirement for record maintenance by utility companies for monitoring and billing purposes. Smart meters enable remote data collection for billing and offer improved power quality (PQ).
The commercial & industrial segment for the microgrid market is expected to witness higher CAGR growth during the forecast period
The microgrid market for the commercial & industrial segment is estimated to grow at the highest CAGR during the forecast period, by end use. The growth of this segment can be attributed to the consistent requirement for uninterrupted electricity supply to carry out smooth industrial operations to lower downtime, improve the efficiency of the workforce, and reduce equipment damages. Increasing government initiatives to promote the use of clean energy and minimize greenhouse gas (GHG) emissions is also driving the growth of the microgrid market for commercial & industrial end use.
APAC is projected to register the highest CAGR growth during the forecast period
APAC is likely to be the fastest-growing microgrid market during the forecast period. The growth of the market in APAC can be attributed to the high rate of rural electrification in several economies such as India, Malaysia, and the Philippines. The large number of unelectrified islands in Indonesia and the Philippines, and the lack of proper electricity infrastructure in emerging economies led to the demand for costeffective microgrids in the region.
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