Navigant Research Blog

C&I Customers Are the New Rage in Today’s Evolving Microgrid Landscape

Peter Asmus — May 8, 2017

The world of microgrids offers a spectrum of vendor opportunity. Each market niche has its own set of opportunities and barriers and vendor leaders and laggards, as well as preferred business models.

While governments and policy wonks tend to focus on the surge of interest in both the utility and community resilience microgrid sectors, the commercial and industrial (C&I) microgrid segment is now coming to life.

Just how big is the total C&I microgrid market? As discussed in the recently published C&I Microgrids report, Navigant Research expects the global capacity of these microgrids to reach 448.3 MW in 2017. This figure is expected to grow dramatically to 5,389.1 MW annually by 2026 at a compound annual growth rate of 31.8%.

Slow in Uptake, Quick to Catch Up

Thinking in terms of the typical evolution of a market, it makes inherent sense for the C&I sector to be slower in its uptake of microgrids than other microgrid market segments. With a razor sharp focus on the bottom line and an aversion to risk, the private sector initially lags behind other market segments that are privy to explicit government support. Yet, when the stars align on proven technologies and viable financing business models, businesses move swiftly.

Here are three reasons Navigant Research forecasts that C&I is emerging as the fastest growing of all microgrid markets over the next decade:

  • Steep drops in the cost of distributed solar PV and energy storage. While this trend benefits all microgrid developments, it is particularly pertinent to the C&I segment. C&I customers place a premium on reliability but also do not want to pay a premium for energy services. The lower the cost of key microgrid enabling technologies, the more attractive the microgrid value proposition becomes.
  • Major advances in software controls translate into the ability of microgrids to maximize the value of legacy assets (such as backup diesel generators) and new technologies (like solar and batteries). One of the primary sticking points in the past was confidence in the ability of smart inverters and software overlays to manage diverse distributed energy resources to substitute for the tried and true pure fossil fuel solutions of the past. Multiple commercial projects validate that this is now possible.
  • Business model innovation that addresses the fierce internal competition for fiscal resources within a corporate structure. Vendors offering no money down power purchase agreements, sometimes coupled with software as a service controls platforms, limit upfront capital expense. A microgrid looks a lot better from a corporate balance sheet perspective, as it is viewed as an ongoing operations and maintenance (O&M) expense.

Evolving Opportunity

As Navigant Research noted in its Market Data: Microgrid O&M Revenue Opportunities report, the microgrid O&M revenue opportunity is much larger than originally thought. As the fleet of all global microgrids grows, vendors are waking up to the opportunity. Likewise, both vendors and potential microgrids hosted in the C&I space are beginning to recognize the inefficiency of old school backup diesels, uninterruptible power supply systems, and redundant utility feeds. This is especially so for data centers, which have long focused on uptime linked to mission-critical loads, but abhor new technologies and anything that might be perceived as a risk.

Perhaps the best way to understand how C&I microgrids will lead future growth are these statistics: in 2017, C&I microgrids—both grid-tied and remote—are expected to capture just under 20% of the total implementation spend. By 2026, that market spending share is anticipated to surge beyond 35%.

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