Cleantech Market Intelligence
Where are the Commercial Customer Microgrids?
One of the most frequent questions I get when making a presentation on Navigant Research’s microgrid market forecasts is: Why don’t we see more microgrids for commercial or industrial operations?
The answer is quite simple. If the emergence of a new energy cloud that features customer-owned distributed generation isn’t threatening enough to a traditional utility’s business model, imagine utility executives’ heartburn when contemplating their largest (and most lucrative) customers abandoning ship and investing in new technologies that allow them to seal themselves off from the grid.
Luckily for utilities, standard utility protocols embedded in utility codes limit the ability of many commercial customers to band together and create their own distribution networks or microgrids. In fact, when a commercial enterprise transfers power over a public right-of-way, it becomes, in essence, a utility. That means it is then required to comply with a long list of regulatory mandates – which scares it off.
Some commercial and industrial customers, especially large chemical and oil and gas facilities in states such as Texas, have created systems some might call a microgrid. (In Texas, they are called “Private Use Networks” or PUNs.) The vast majority of these are completely fossil fuel-based and may be able to island from the larger grid, but typically through manual intervention. These PUNs are not included in the Navigant Research global database of microgrids, since they do not share much with the vision of “smart” microgrids that integrate renewables and energy storage, and can seamlessly disconnect and connect from a larger grid.
Although variable solar and wind may still scare off many commercial customers, where a microgrid may make a certain amount of sense (such as a data center), other new generation technologies can seem less threatening. Enter the fuel cell, a power generation source that can run on multiple fuels, provide 24/7 power and, in the case of the Bloom “Mission Critical” offering, can island from the larger grid when it goes down.
Bloom Energy just announced a 500 kilowatt (kW) system for a data center located in Irvine, California for CenturyLink, and has deployed a handful of other microgrids that can displace uninterruptible power supply (UPS) systems at other commercial sites, including an eBay facility in Utah and a Macy’s in Connecticut. (As I have noted in previous blogs , Connecticut views deployments of microgrids as a form of economic development for two fuel cell companies that are competitors of Bloom: FuelCell Energy and ClearEdge Power.)
Consider this fact: Data centers spend approximately $25 million per megawatt of capacity due to the double redundancy of back-up power systems that burn increasingly expensive diesel fuel. . This is one reason why Colorado regulators just gave a green light to the Niobrara Energy Park, a microgrid serving data centers that could grow to 300 MW in size and will tap natural gas, fuel cells, wind and solar technologies. Given the expense of current existing redundant alternating current (AC) UPS systems, microgrid applications – especially direct current (DC) networks – appear to be a no-brainer from an engineering point of view. Regardless, since energy remains a small portion of the overall operations budget of data centers, the value proposition for conservative operations managers may still be a hard sell in the near term.
Nevertheless, Navigant Research believes that DC data centers will be one of the leading commercial and industrial segments for microgrids, and fuel cells could be a likely bridge generation source for these customers who still worry about what happens to their power supply when the sun doesn’t shine or the wind doesn’t blow. Unlike the overall microgrid market, which is dominated by North America, in the data sector segment, Europe and Asia Pacific will lead in vendor revenues.
DC Data Center Microgrid Revenue by Region, Conservative Scenario, World Markets: 2013-2025
(Source: Navigant Research)