Navigant Research Blog

Devastating Storms Make the Case for Microgrids

— November 6, 2012

Hurricane Sandy underscores a compelling reality: today’s power grid is wholly inadequate for today’s hyper-digitalized economy.  With more than 8 million people without power for a matter of days, not hours, momentum is growing for technology solutions, as described on this blog by my colleague Bob Gohn.

Recent evidence corroborates the notion that more severe weather is now business-as-usual.   According to the Center for Research on the Epidemiology of Disasters, 100 million to 200 million people were affected by weather-related disasters between 1980 and 2009, with economic losses ranging from $50 billion to $100 billion annually.  The March, 2011  earthquake and tsunami in Japan was just one obvious example during 2011.  (The Sendai 1 MW microgrid at Tohoku Fukushi University operated for 2 days in island mode while the surrounding region was without power.)  Such natural disasters underscore the need for resilient infrastructure for vital electricity services.

The U.S. power grid was graded a lowly D+ by the American Council of Civil Engineers in 2009.   Lawrence Berkeley National Laboratory (LBNL) statistics show that 80% to 90% of all grid failures begin at the distribution level of electricity service.  The average outage duration in the United States is 120 minutes and climbing annually, while the rest of the industrialized world is less than 10 minutes and getting better.

It has become quite clear that the modern, digital economy requires a more advanced, robust, and responsive power grid framework than what we have today.  While many features of the smart grid can help manage outages and allow power to be restored much quicker than in the past, the most provocative technology that has evolved to mitigate the whims of Mother Nature is the microgrid.  Otherwise, potential on-site distributed energy resources (DER) solutions rooftop solar photovoltaic systems, combined heat and power plants, batteries and other storage devices (including electric vehicles) became stranded assets, going offline as the larger network of nuclear, coal, and natural gas plants also shuts down in the midst of a storm.  Incorporating distributed resources within an islanding microgrid can provide emergency energy services even as the larger grid awaits repairs and restoration.

The increasing frequency of severe weather is prompting utilities to reconsider their historic opposition to customer-owned microgrids that can disconnect from the larger grid and island, allowing critical mission functions to stay up and running.

Microgrid Capacity by Region, 4Q 2012

(Source: Pike Research)

Pike Research has now completed the Q4 update to its Microgrid Deployment Tracker.  All told, Pike Research has identified a total of 3.2 GW of total microgrid capacity throughout the world, up from 2.6 GW in the previous update in 2Q 2012.  As a region, North America is still the world’s leading market for microgrids, with overall planned, proposed, under-development, and operating capacity totaling 2,088 MW.  The microgrid solution to power outages extends to other regions of the world, including India and other regions where power grids are extremely weak, whether the weather is good or bad.




CHP, Solar PV Move Microgrids into the Mainstream

— October 16, 2012

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.

Anchor Resource

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).


Advanced Batteries + Solar PV + Microgrids = Market Growth

— October 8, 2012

Advanced batteries are consistently heralded as a future panacea for cleantech, without which renewables will remain niche applications and a distributed grid architecture will never materialize.  To a large extent, though, advanced batteries remain materials science experiments, more commonly found in labs than on the grid.  Likewise, the pace of innovation seems slow, especially in a world accustomed to advancing at the pace of Moore’s Law.  But if advanced batteries became the focus of consumer demand (from individuals, households, commercial buildings, and utilities), and the process of innovation became a conversation between materials science and real-world needs, we could see a dramatic acceleration of this market.

Consumer electronics brought lithium-ion batteries to the forefront of public awareness, making battery life and replacement a central issue for makers of smartphones and tablet computers.  Users consistently challenge the cycle life and functional limits of their devices, which has begged a targeted response from battery vendors.  The industry’s advances over the last 20 years have been generated through interaction with the physical world and the marketplace.  The challenge with larger format batteries, particularly for grid-scale applications, is how to get early versions of these systems deployed and interacting with the physical world.

Grid-scale demonstrations are costly and can be controversial, depending on the source of the funding.  In the United States, this work has largely been done by the Department of Energy.  Deploying advanced batteries in remote microgrids or in conjunction with distributed solar PV, though, could drive these technologies in the same fashion that consumer electronics drove the evolution of lithium-ion batteries, through smaller deployments visible to consumers.  The industry would benefit from a larger number of deployments, a broader variety of end-use applications displayed, and economies of scale that would begin to bring costs down.

This scenario might not be that far from reality: the competition on cost between diesel fuel and solar PV now makes distributed solar a more attractive investment than diesel generators.  According to McKinsey, the cost of power coming out of diesel generators ranges from $0.30 to $0.65 per kilowatt-hour.  Solar PV can now produce power for about half that cost.  In niche applications such as uninterrupted power supply in emerging economies, rural electrification, and island power, there is a clear economic case for deploying solar PV, which becomes a dispatchable, high-quality resource when paired with battery storage.

These small-scale deployments would provide the industry with another source of product feedback on technical integration with renewables, demonstrate potential revenue models, and ultimately generate larger demand for advanced batteries.  Microgrids are also a popular new technology for U.S. military applications, a historically strong contributor to advanced technology innovation.


India’s Microgrid Moment

— August 24, 2012

As noted earlier by my Pike Research colleagues, the massive power outage in India that left over 370 million people in the dark in late July could open up opportunities for cleantech in booming South Asia.  It could also help make India one of the world’s top hotspots for remote microgrids.

Remote microgrids can serve as the anchors of new, appropriate scale infrastructure, a shift to smarter ways to deliver humanitarian services to the poor.  That’s why financial support for remote microgrids has come from the United Nations, the U.S. Agency for International Development (USAID), and non-government entities such as the Clinton Climate Initiative and the Bill Gates Foundation.  Even Greenpeace has endorsed the concept, with a report extolling a bottoms-up distributed renewables strategy to export surplus solar power out of the Indian state of Bihar via microgrid networks.

Clearly, relying upon centralized coal plants to fuel India’s expanding economy is not a viable solution.  As climate change expert Joe Romm points out in a blog on The Energy Collective, mobile phone towers powered by off-grid renewable energy sources may be pointing the way toward viable energy supply solutions for India.

Just as the developing world leapfrogged landlines – the equivalent of today’s centralized transmission grid – to move directly to mobile and wireless telecommunications, it may skip to distributed microgrid networks (the analogue of cell phones), rather than building out massive long-distance transmission networks.  More importantly, from an environmental point of view, these remote systems will not rely on diesel power generation, the default source of power throughout much of the developing world.

At present, entrepreneurs view India as an attractive market since all microgrids under 1 megawatt (MW) in size are deregulated, which means that these systems can be developed by the private sector with a minimum of government red tape.  Among the leading innovators is Simpa Networks, which has developed a “pay-as-you-go” business model that allows villages looking for simple systems to power lighting and mobile device-charging services.  Billing its service as a “progressive purchase,” the firm relies upon smart meters to measure consumption.  Customers purchase power in much the same way millions of cell phone users buy prepaid cards.  The difference is that customers are slowly investing in their own solar PV systems, which are typically paid off within 3 to 5 years.

One of the first microgrids to be deployed in India to service more affluent customers was installed by smart meter vendor Echelon for the Palm Meadows Community in Hyderabad, India.  This 86-acre gated community with 335 homes and residential services offers another peek into the future for India.  The community ties into the grid at a dedicated substation and sources energy in bulk from the utility.  While the community still runs primarily on diesel generators, a pricing plan can reduce consumption to help respond to peak demands.  The microgrid will also incorporate solar PV into rooftops that will feed energy back into the grid, creating a solar infrastructure with payback options.


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