Cleantech Market Intelligence
CHP, Solar PV Move Microgrids into the Mainstream
Microgrids are really just miniature versions of the larger utility grid, except for one defining feature: when necessary, they can disconnect from the macrogrid and can continue to operate in what is known as “island mode.” Because of this distinguishing feature, microgrids can offer a higher degree of reliability for facilities such as military bases, hospitals and data centers, which all have “mission critical” functions that need to continue to operate no matter what.
Along with enhancing reliability, microgrids serve another useful function: they can help the larger grid stay in balance. As the world moves toward an energy system that looks more and more like the Internet, with two-way power flows thanks to growing reliance upon on-site sources of distributed generation (DG), this increasingly dynamic complexity requires new technology. But some forms of DG – especially variable renewable resources such as solar or wind — create a greater need for smart grid solutions, such as microgrids. For example, recent trends in declining prices for solar photovoltaic (PV) systems certainly increase the need for aggregation and optimization technologies. Why? Distributed solar PV systems can create frequency, voltage, and other power-quality challenges to overall grid operations.
But how much solar PV will actually be deployed within microgrids over the next 6 years all around the world? This is one of the questions addressed in my latest report, Microgrid Enabling Technologies.
In order for a microgrid to continue operating in island mode, it has to include some form of on-site power generation. Without DG, a microgrid could not exist, so these DG assets are the foundation of any such localized smart grid network.
The ideal anchor resource for any microgrid is actually combined heat and power (CHP); a total of 518 megawatts (MW) of CHP capacity that will be deployed in microgrids this year. This technology leads all forms of microgrid DG deployments today and will continue to hold the edge by 2018 (with 1,897 MW, representing more than $7 billion in annual revenues) Given that it is a base load electricity resource that also provides thermal energy, today’s microgrid CHP capacity is the largest of any DG option besides diesel generators.
The bulk of CHP installations are with grid-tied systems within institutional campus environments. The current low cost of natural gas in North America translates into the ability for microgrids to provide lower cost energy services than the incumbent utility grid. For example, the University of California San Diego microgrid is saving over $4 million annually thanks, in large part, to on-site combustion of natural gas.
Still, Pike Research believes that declining solar PV costs will be one of the largest drivers for microgrids worldwide, and in terms of numbers of new installations, solar PV will be the market leader. (CHP will lead in terms of total capacity due to the relative scale of CHP systems compared to solar PV.) With the price of solar PV reaching grid parity in key markets by 2014 and 2015, the variability of this DG resource will necessitate a greater reliance upon energy storage (as well as the networking function of microgrids). All told, this microgrid solar PV market adds up to almost $2 billion globally by 2018.
Total Microgrid Distributed Generation Vendor Revenue, Average Scenario,
World Markets: 2012-2018
(Source: Pike Research)
If one also includes distributed wind and fuel cells in the overall microgrid DG mix, this segment of microgrid enabling technologies is, by far, the largest target of new investment: 3,978 MW of new generation capacity valued at more than $12.7 billion (see the chart above).