What’s next in the microgrid industry?



What’s next in the microgrid industry?

 

With the increase in distributed generation penetration levels and the reduction of energy storage costs, microgrids are receiving a great deal of attention, and no wonder – microgrids can help defer transmission and distribution upgrades, which could cost as much as $1.5 trillion by 2030 in the US [1]. But what is a microgrid and what impact are they having on the market? This post includes a definition of microgrids, as well as a look at capacity and market forecasts, market segments, ABB microgrid projects, and the future of microgrids.

Microgrid definition

According to the U.S. Department of Energy Microgrid Exchange Group, a microgrid can be defined as:

“… a group of interconnected loads and distributed energy resources within clearly defined electrical boundaries that acts as a single controllable entity with respect to the grid. A microgrid can connect and disconnect from the grid to enable it to operate in both grid-connected or island-mode. “[2]

Microgrid capacity and market forecasts

Global microgrid capacity is expected to increase from 1.4 GW in 2015 to 7.6 GW in 2024. This is more than 400% growth in capacity over 10 years [3]. The global microgrid market is set to reach $23 billion in 2021, a notable growth from its current level of around $12 billion [4].

The overall growth in both capacity and market of the microgrid are due to the improvement on resiliency, reliability and renewable energy usage. As shown in figure 1, the largest market in 2015 is Asia Pacific, with the 581.9 MW of the total capacity. North America is the second largest with 490.7 MW capacity in 2015. This trend changes by 2024, as the North American microgrid market reaches 3.0 GW, while Asia Pacific is expected to grow to 2.8 GW.


Figure 1: Annual microgrid market capacity and implementation revenue by region [3]

Microgrid market segments

Microgrids can be categorized based on the size, connection to the grid and applications. The global capacity of each microgrid market segment in 2017 is shown in figure 2.

1) Remote microgrid: This is also called and island or off-grid segment. This type of microgrid is in geographically-remote areas with a weak interconnection to the utility, a common scenario in developing countries. The main objectives are having access to electricity and reduction of fuel costs. Remote projects have the largest share of the global market, as shown in figure 2.
2) Commercial & industrial (C&I) microgrid: This is a microgrid with single or multiple ownership models. The global C&I microgrid is expected to reach 5,389.1 MW by 2026 from 448.3 MW in 2017. This growth increases the market share from 16 percent in 2017 to 35 percent by 2026 [5]. Typical customers could be mining companies, oil & gas companies, data centers, etc.
3) Utility distribution microgrid: This technology enables utilities to manage distributed energy resources at the distribution system. The main barrier for this microgrid segment is required regulatory reforms. It is expected that capacity and revenue of utility distribution microgrids will reach 241 MW and $917 million in the US by 2024. This is a significant growth from 29 MW capacity and the annual revenue of $161 million in 2015 [6].
4) Community microgrid: This type of microgrid is mainly in residential areas, with the objective of providing uninterrupted power supply. This opportunity is mainly in urban and rural areas.
5) Institutional/campus microgrid: As the name implies, this type of microgrid includes buildings with a single ownership such as a campus or an institute. The objective is to increase the reliability and the power quality.
6) Military microgrid: This is the smallest segment in terms of global capacity. The main objective is to focus on the cyber security of the reliable power supply at both island and grid-connected modes.


Figure 2: Global microgrid power capacity market share by segment [7]

ABB microgrid projects

ABB is involved in more than 40 microgrid projects all over the world. Table 1 highlights a few ABB microgrid projects that are under construction, in service or planned.

Table 1: A selection of ABB’s microgrid projects [8]

The future of microgrids

Microgrid projects will be more economical in the near future, because of cost reductions in solar photovoltaics and energy storage systems. This techno-economic trend results in shorter payback times and higher rates of return on investments, making microgrids a more attractive prospect for potential customers.

Direct current (DC) microgrids are an emerging trend for future opportunities. These microgrids can save 4-8% more energy in buildings. The main barrier of DC microgrid development is the lack of market-ready appliances, standards and losses at the low-voltage level, as well as some safety issues such as arc flash. [9]

The increasing number of microgrid projects in the distribution system brings the need for new regulations and market infrastructure. The concept is that multiple microgrids can communicate to each other to buy and sell electricity without utilities being involved. These “blockchain microgrids” allow local energy trading at the distribution level [10]. The decentralized market, Transactive Energy (TE), is a system of economic and control mechanisms that allows the dynamic balance of supply and demand in the electrical infrastructure using value as a main operational parameter [11]. TE enables a number of users to partner with traditional electricity providers to generate buy, and sell electricity using the automated control [12].

ABB Microgrid Advisory Group

Microgrids are clearly a fast-growing industry with a bright future.  If you’re considering whether to invest in a microgrid project, or are building a microgrid, ABB’s Microgrid Advisory Group can help! Register to receive updates on ABB’s Microgrids Advisory services and be notified of newly available microgrids case studies, webinars and events. Visit our website, ABB microgrids solutions to read about ABB’s experience in microgrids projects.

References

  • [1] Chupka, R. Earle, P. Fox-Penner, and R. Hledik, “Transforming America’s Power Industry: The Investment Challenge 2010-2030,” technical report, The Brattle Group, prepared for The Edison Foundation, Washington, D.C., 2008.
  • [2] “Microgrid Definitions,” Microgrids at Berkeley Lab, 2015. Available at: https://buildingmicrogrid.lbl.gov/microgrid-definitions
  • [3] “Market Data: Microgrids, Campus/Institutional, Commercial & Industrial, Community, Community Resilience, Military, Utility Distribution, and Remote Microgrid Deployments: Global Capacity and Revenue Forecasts”, Navigant Research, Report 1Q 2016.
  • [4] “Microgrids, Update 2017 – Global Market Size, Competitive Landscape, and Key Country Analysis to 2021”, Global Data, June 2017.
  • [5] “C&I Microgrids, Grid-Tied and Remote Microgrid Forecasts, Technology and Policy Market Drivers, and Key Players”, Navigant Research, Report 2Q 2017.
  • [6] “Utility Distribution Microgrids, Utility Technology Disruption Report”, Navigant Research, Report 2Q 2016.
  • [7] “Microgrid Deployment Tracker 2Q17, Commercial and Industrial, Community, Utility Distribution, Institutional/Campus, Remote, and DC Microgrids: Projects by Region, Segment, and Top 10 Countries and Companies”, Navigant Research, Report 2Q 2017.
  • [8] ABB Microgrid projects. Available online at http://new.abb.com/microgrids/references
  • [9] Richard Brown, “Direct Current as an Integrating and Enabling Platform for ZNE”, Lawrence Berkeley National Lab, March 2017. Available online at http://www.energy.ca.gov/research/notices/2017-03-09_webinar/presentations/LBNL_Presentation.pdf
  • [10] Mengelkamp, Esther, Johannes Gärttner, Kerstin Rock, Scott Kessler, Lawrence Orsini, and Christof Weinhardt. “Designing microgrid energy markets: A case study: The Brooklyn Microgrid.” Applied Energy, June 23, 2017.
  • [11] “GridWise Transactive Energy Framework Version 1.0”, Grid Wise Architecture Council (GWAC), Jan 2015, available online at http://www.gridwiseac.org/pdfs/te_framework_report_pnnl-22946.pdf
  • [12] Mel Olken, “Transactive Energy Providing an Enabling Environment”, IEEE Power & Energy Magazine, May/June 2016.

 

Written by: Hamideh Bitaraf, Ph.D., Microgrid Advisor, Energy Portfolio Management, ABB Enterprise Software