Navigant Research Blog

Microgrids Expand Across India

— May 13, 2015

Navigant Research’s data on the microgrid market has historically pointed to North America being the mother lode. The host of state programs supporting community resilience microgrids would seem to confirm this conclusion. But there is a counter argument that the developing world is the best microgrid market, and that’s why SunEdison’s move into northern India is so significant.

I think the Asia Pacific region’s microgrid market is likely to ultimately surpass North America, but not until 2030 or so. Recent data provided by Aalborg University in Denmark shows that China alone is planning on installing 4.3 GW of new microgrid capacity over the next 5 years, which bolsters this opinion. But China’s market is problematic due to the prevalence of nationalized grid companies and other unique vendor challenges.

To the Subcontinent

And then there is India. As one telecom infrastructure provider pointed out, there are more planned telecommunications tower deployments in India as there are in all African nations combined! (These telecom towers often serve as anchor loads for microgrids.) Couple that with a government policy of deregulating all microgrids 1 MW and less, and the stage is set for rapid innovation at the lower end of the microgrid market spectrum.

Back to SunEdison … Working with on-the-ground innovators, such as OMC Power, the company hopes to bring online 5,000 microgrids, ranging from 10 kW to 1 MW, by 2020, providing power to 20 million people. While it’s fascinating that SunEdison is moving into this market, given its success with the power purchase agreement model in mature economies such as the United States, largely through solar PV leasing arrangements, even more interesting is its choice of partners: OMC Power.

Having begun in 2011 by focusing on the concept of bringing power to rural developing nation markets, such as India, employing e-power device business models, OMC Power is now changing its tune.  In the past, the company focused on daily home delivery of solar-charged portable energy products (e.g., LED lanterns); its customers paid the equivalent or less as they had paid for diesel or kerosene. The company financed, built, owned, and operated hybrid off-grid micro-power plants that tap solar, wind, or biofuels to provide alternating current (AC) power to telecom sites and portable direct current (DC) power to local villages.

Finding Scale

According to chief marketing officer Par Almqvist, the company’s new direction is a natural evolution. “Once most communities get power, they want more of it,” Almqvist said in a phone interview.  In order to get to the right price point, it has become apparent to us we need to centralize power production. One must find an efficiency of scale.”

Almqvist still sees a role for e-power products and nanogrids, and in some cases, such options are the only viable path for electrification. Yet to reach scale, other business models must also be deployed. “We have proven that the perception that the bottom of the pyramid is a risky clientele is not necessarily accurate. What we’ve discovered is that, especially in rural northern India, people will pay for what is an essential service, especially when they can save money.”

The benefits go beyond economics. The mix of solar PV and deep cycle batteries will also allow telecomm operators to reduce diesel generation to less than an hour a day. This kind of result prompted the Rockefeller Foundation to announce another program that OMC Power is a part of–this one designed to bring power to 1,000 villages.


In Europe, Microgrid Ecosystem Emerges

— May 13, 2015

The microgrid market in the United States has reached a crescendo, with vendors (i.e., SolarCity) and utilities (i.e., Oncor) announcing new products and projects on a regular basis. Here in Europe (where I am, just outside Paris and getting a pulse on the European markets for distributed energy), it is all quiet on the western front.

Well, not exactly. If we focus on Germany, a nation that is ground zero for problems related to high penetrations of distributed renewables, two different companies offer a snapshot of how microgrids are gaining ground here, albeit in a more calm and steady pace of development.

The first is Younicos of Berlin, a company I chose as one of the top five to watch in 2013. The company has since secured a partnership with Samsung SDI with performance guarantees on lithium ion battery technologies. More recently, it secured financing for the development of its flagship remote island microgrid on the Portuguese island of Graciosa.

Diesel Reduction

Younicos will partner with Swiss battery manufacturer Leclanche on the project, which will add the following resources to the existing diesel generator sets:

  • A 4.5 MW wind farm utilizing General Electric wind turbines
  • 1 MW of solar PV
  • 2.7 MWh of lithium ion batteries

Of even greater importance to this project than the new partnership with Leclanche is the $3.5 million in convertible debt financing provided by ReCharge ApS, one of the Swiss battery vendor’s largest shareholders. The project, which has been delayed, in part due to the Euro crisis, should be online later this year. What’s most significant about this remote microgrid is that it will be able to operate in diesel-off mode for at least half of the time, realizing an annual renewable contribution of approximately 65%.

Along with the remote microgrid market, Younicos is also plowing forward with a number of grid-tied battery parks that not only provide frequency regulation services, but also are pioneering the development of new revenue streams that can flow from battery storage and grid-tied microgrids alike. The latest such deployment is in Dresden.  Due in large part to its purchase of Xtreme Power, Younicos has an operational portfolio of approximately 100 MW; the company claims its project pipeline totals over 2 GW of potential energy storage and microgrid projects.

Keep it Simple

The key to the innovation Younicos is bringing to the microgrid/energy storage market is its power electronics. Another pioneer in that regard is Easy Smart Grid of Karlsruhe, Germany. Rather than focus on complex communications and smart meters, this company is focused on simple inverter-based solutions that follow innovations by Robert Lasseter of the University of Wisconsin, prime architect of the so-called CERTS software, which can run a microgrid autonomously based on droop frequency. Droop frequency is a technique long used in power generation but that is now being used to control microgrids without the need for sensing or smart meters.  Thomas Walter, the brains behind Easy Smart Grid, takes this idea one step further. His controls technology, which can be applied to both grid-tied and remote systems, links small changes in frequency to pricing of power, enabling economic optimization without complex metering or other customized engineering solutions favored by larger technology companies. For example, if the frequency drops, that means demands on the system are up, and therefore the price of power is higher. This control concept also has immediate implications for the concept of virtual power plants and the emergence of the energy cloud.

Winner of the third best European start-up award for Smart Energy last year, Walters’ company is currently seeking investors, and it has also been in discussions with Younicos about piggy-backing on projects such as Graciosa, where its technology could offer a way to manage resources on an economic basis from the demand side without overly complex versions of a smart grid.


Alaska Builds a Microgrid Future

— April 15, 2015

Alaska was in the midst of a heat wave when I arrived there in early March, with temperatures hovering around the freezing mark, and reaching 40 °F  the day I left. The lack of snow forced the annual Iditarod dog sled race to a new route farther north, a sign many locals attributed to global climate change.

I went to Alaska because the state is ground zero for microgrids, with more deployed here than any other state in the United States, with some nearly 100% supplied with renewable energy. Alaska’s often harsh environment means that microgrid performance can literally be a life-or-death situation. When one such system failed more than a decade ago in Kotzebue, a city with a population of 3,700 and located 30 miles above the Arctic Circle, the entire water and wastewater system froze, and it took months to bring water back online.

Call to Arms

Held in Anchorage, the Islanded Grid Wind Power Conference demonstrated that Alaska can show the rest of the world how to create more resilient and sustainable power systems in the face of immense logistical challenges. While the rest of the world seems to be turning to solar power, wind is still king in Alaska, where towns like Kotzebue only have 35 days during summer where the sun rises above the horizon.

Most microgrids in Alaska are run by utilities—rural cooperatives, municipal utilities, or Native Alaska village corporations. Some of these entities, especially tiny villages on remote islands, have limited operational capacity, so technology choices must be wise and easily reparable. That’s why some companies, such as Intelligent Energy Systems, often rely upon older turbines that can be fixed the old fashioned way: with a wrench.

Beyond Diesel

Other companies, such as TDX Power, an Alaskan Native corporation created by individuals whose ancestors were the slaves of Russian fur trappers, are building innovative wind heating systems that validate the thermal energy benefits microgrids bring to the table. They’re also investigating new business models, given that Alaska is now about $4 billion in the red due to declining oil prices. Ironically enough, this shortfall is limiting future financial support for renewable energy development, forcing developers to find creative microgrid financing solutions.

Perhaps the most interesting company I saw was Innovus Power of Fremont, California. Innovus offers variable-speed diesel generators that come embedded with what is, in essence, a microgrid controller capable of supporting renewable penetration levels of up to 100%. Leveraging power converter innovation from Northern Power, the company says its gensets can eliminate the need for curtailment or expensive energy storage, and can serve as backbones for microgrids that combine dispatchable power and renewable integration capabilities.

Governor Bill Walker pointed out that while Alaska has more energy resources than any other U.S. state, its power prices are the highest. Microgrids integrating renewable energy are a key part of the future strategy to change that situation.


Community Resilience and the Future of Small Grids

— February 19, 2015

The spate of extreme weather events in recent years has stirred up interest in the concept of “community resilience”—i.e., the creation of more reliable and resilient power grids. The debate rages on how best to provide such services. In a forthcoming report, as well as a webinar on March 17, Navigant Research will analyze and forecast the size of the market for one of the most promising pathways forward: community resilience microgrids (CRMs).

Ground Up

The drive for increased grid resilience comes from community stakeholders, many of whom also value energy independence, sustainability, and local economic development goals. In New York, crowds as large as 100 to 150 people have shown up at recent community meetings, often braving snowstorms, to learn how they can become involved in developing greater resilience at the community level.

This is the segment of microgrids where the most innovation will occur in terms of business models and regulatory reforms. Why? Many of these systems challenge utility franchise rules that prohibit transfers of power services over public rights-of-ways. It may make inherent sense, in terms of both emergency responses and sustainable urban design schemes, to bundle different kinds of customers served by different utility rate classes into a single microgrid. Such novel aggregations, however, bump up against long-standing utility prohibitions on sharing of power.

Smaller Is Better

In essence, each third-party CRM requires a negotiated settlement and special use exemptions (though there are a few interesting exceptions to this generalization).

It is these issues that are at the core of New York’s Reform the Energy Vision (REV) proceeding, perhaps the most comprehensive review of regulations pertaining to resiliency in the nation.

Some providers, such as the Clean Energy Group, argue that microgrids are the wrong focus, asserting that solar PV and energy storage nanogrids, such as those recently funded in Massachusetts, are a better solution. In the short term, this may be the wiser move, especially if they could be aggregated via a centralized control schemes into virtual power plants.

Such nanogrids represent modular building blocks for energy services that support applications like emergency power for commercial buildings, as described in Navigant Research’s report, Nanogrids. These grids typically serve a single building or a single load, generally below 100 kW in capacity—and thus do not violate regulations prohibiting the transfer or sharing of power across a public right-of-way.

Unquestionably, small grids (including both microgrids and nanogrids) represent a major element of the future of the power sector—an essential building block for the Energy Cloud that will encompass distributed generation resources and intelligent networks to meet energy demand, rather than centralized hub-and-spoke power grids. This spring, Navigant will offer a new collaborative study called The Future of Small Scale Microgrids and Nanogrids that will bring together utilities and their suppliers to better understand the risks and opportunities of this emerging market landscape. Click here for more information.


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