An Inside Look at the Microgrid Market from Those Making It Happen

April 17, 2023
Growth is near ubiquitous but here are the markets where microgrid companies are the busiest.

The future is bright for microgrids across many industries, but growth in three sectors stands out: commercial and industrial facilities (C&I), data centers and utilities.

That’s what we heard in talking to a series of microgrid company executives over the last month who will participate in Microgrid Knowledge’s upcoming annual conference,  Microgrid 2023: Lights On!, May 16-17, in Anaheim, California. 

The upward inflection is particularly notable in regions “where the price of electricity is high, the grid is constrained and/or the grid is less reliable,” said Jon Erickson, senior project manager at POWER Engineers.

The energy trilemma

C&I businesses are looking to convert their solar plus battery energy storage projects into microgrids capable of islanding when the grid is down, according to Erickson.

“With grid reliability declining, businesses that cannot go with power disruptions — such as manufacturing facilities, distribution centers and casinos — are turning to microgrids,” Erickson said.

Peter Lilienthal, UL Solutions Global Microgrid lead and HOMER Software creator agreed, noting the increasing recognition of the fragility of the US electric grid and the need for resilience.

“Almost every C&I facility is a candidate for a solar-plus-storage microgrid, which can keep essential services operating without grid power or fuel deliveries,” Lilienthal said.

Matthew Wilhoit, vice president of partners and growth marketing at Bloom Energy, echoed that resiliency would drive growth in the power-hungry C&I market segment. He noted that while microgrids have traditionally been deployed to reduce outage risk, they are now being deployed to supplement grid power as well.

“Globally, demand for electricity is increasing while transmission and distribution infrastructure is struggling to keep up,” Wilhoit said. “When these types of capacity constraints limit business growth, many companies look to microgrids to provide 24/7 on-site power,” he added.

Likewise, Alex Marshall, group director at Clarke Energy, said that his company finds that organizations with significant peak demand charges are driving the growth of microgrids in the US. Marshall said that manufacturers, particularly those in the food and beverage sector along with chemicals and paper, have some of the greatest potential.

 “Industries with highly peaky loads and those seeking added resilience are, in our view, the ones that are set for the greatest opportunities for growth,” Marshall said.

However, he noted that growth is tempered by the need to balance resilience and sustainability with cost – what he called the energy trilemma.

Carbon reduction is king

Trudie Wang, vice president of innovation at Heila Technologies, said that in the face of looming climate change impacts, the C&I sector will be more driven than ever to rapidly adopt microgrids as a distributed solution. 

“The majority of this sector worldwide also now has strong motives to simultaneously reduce carbon emissions due to regulations, incentives and cost competitive enabling technologies,” Wang said.

She also said the adoption of distributed energy resources (DERs) within microgrids will enable C&I facilities to further unlock new value streams to save dollars.

According to Wang, the “demand side loads that have up until now presented a challenge to the grid can, when coupled with DER enablers as microgrids, instead become intelligent assets on an energy system that is transitioning towards more distributed, sustainable resources.”

Sunil Cherian, founder and CEO of Spirae, agreed that sustainability within the C&I sector is driving microgrid adoption. He said that diesel displacement is key for the C&I market because it provides not only significant cost savings but an immediate carbon footprint reduction.

“C&I facilities located in regions that experience power outages see immediate benefits by augmenting their emergency gensets into resilience microgrids by adding storage, solar and load control,” Cherian said.

He added that electric vehicle (EV) fleet charging is also driving the adoption of microgrids capable of demand limiting and load control at C&I facilities.

Standardization, please!

Bill Becker, business development – Hybrid Microgrid Control Solutions at ComAp agreed that commercial and industrial microgrids would be one of the hottest markets in the coming years, but he noted that ComAp is seeing “a serious uptick in customers seeking standardized, repeatable and modular solutions.”

He acknowledged that standardized solutions don’t grab the headlines like other types of microgrid projects, but they’re just as important.

Becker said the benefits of standardized C&I microgrids are most clear in areas where renewable penetration is high, energy costs are high, or the grid is vulnerable. He said that areas where these factors converge, such as California, are particularly interesting.

“The transformative change is the enablement of beneficial electrification, including electric vehicle charging with low carbon solutions and within the constraints of existing service connections or grid infrastructure.”

Jana Gerber, president, Microgrid North America at Schneider Electric, also pointed to standardization as a catalyst to accelerate microgrid adoption.

“Packaged, pretested and preconfigured microgrids offer higher affordability and shorter design, integration and deployment time,” Gerber said.

As a result, she expects to see microgrid growth particularly in midsize buildings and facilities. “Microgrids will become more accessible and affordable through this process, making the alternative energy source an attractive option for buildings looking to take control of their energy independence,” Gerber said.

The life-saving side of data centers

The data center industry is experiencing incredible growth because of the exponential increase in demand for data services from a wide range of clients, according to Jayesh Goyal, chief revenue officer at Enchanted Rock.

Data centers require constant access to electricity to power their servers, and outages can result in significant financial losses. Goyal said, “For critical facilities like hospitals, lack of access to data can not only be expensive, but more importantly, it could be life-threatening.”

This need for reliable power is what’s driving microgrid growth in the data center sector. Microgrids can also help the industry replace traditional diesel backup generators with more sustainable solutions.

“Microgrids can not only meet the data industry’s need for backup power, but can do so sustainably and can also offer opportunities for additional sources of revenue for the facilities,” Goyal said.

Javier Gonzalez, senior manager of sales PowerGen Americas at Rolls-Royce Solutions, agreed. He noted that growth in the data center segment will largely depend on a shift to more sustainable technologies.

Utilities actually do like microgrids

Perhaps surprising to some, experts are also predicting expansive growth in utility microgrids. Andy Miller, director of finance and business development at PXiSE Energy Solutions, said that growth in this sector will happen as microgrids become an increasingly cost-effective non-wires alternative to address system reliability and power quality.

“Over the last several years, we have seen meaningful reductions in the cost of distributed energy resources,” he said. “The mass production economies of scale for DERs combined with learning curve efficiency gains from integrating these assets at scale have significantly increased the number of opportunities to cost effectively implement utility microgrids.”

Miller also noted that energy storage supply chains are catching up with demand and this will support increased demand for utility microgrids.

What do utilities think about microgrids? See survey results.

Robb Homolka, global commercial hybrid microgrid manager for the electric power division at Caterpillar, agreed that utilities are a growth area for microgrids.

He noted that advanced technologies such as high-capacity energy storage and distributed energy resource management systems are making microgrids more financially viable at scale. 

Homolka also said that “government incentives, including investment tax credits and solar renewable energy credits, are helping to tip the business case in favor of hybrid solutions.” Those hybrid solutions could include generator sets capable of using next-generation fuels, solar photovoltaics (PV), energy storage, combined heat and power and combined cooling, heat and power systems.

Need to charge your car? Find a microgrid

Lilienthal noted that the other big driver for utility microgrids will be the rapid adoption of EVs.

“Electric power grids in the US cannot accommodate fast chargers in most locations,” he said. “Since additional capacity won’t be available soon, microgrids are needed to power fast chargers.”

Erickson agreed, noting that C&I businesses in California are electrifying their trucking fleets. He said that EVs usually rely on grid power, often in congested service areas.

“Microgrids can ease the electrical demand on the grid, offer opportunities for energy arbitrage and provide resilience when the grid is down,” he said

Everything, everywhere, all at once

While those we interviewed see C&I, data center and utility sectors as the hottest microgrid markets in the coming year, they also said that growth is near ubiquitous across customer sectors.

The military, the US’ largest employer, stands out in particular.

Michael Boswell, vice president of power and infrastructure at Concord Engineering Group, sees the military’s strong presence in the microgrid market continuing. But he added that we could see shifts in the business model used by the military.

“The Department of Defense (DOD) has clearly been a leader in adoption of microgrids, but it appears that performance contracts may not always be the best vehicle for development of new or integration of existing distributed generation into a microgrid,” Boswell said.

He noted that Concord is seeing capital projects implemented through the allocation of funds from the DOD Energy Resilience and Conservation Investment Program.

Brandon Marcum, project engineer at Schweitzer Engineering Laboratories, said that the US military has been “moving, as a cohesive entity, toward fully self-sustaining installations for several years.”

He added many pilot and research projects have been funded to find the best mix of fuels, batteries, PV arrays, inverters and microgrid controllers.

“As is common for engineering, we often see a lag of several years between concept and commercial products that solve the problem,” Marcum said. He added that several potentially viable solutions will likely come to market this year.

Right In your backyard

Marcum noted that most of these solutions will not be restricted to military applications only. “That technology will easily find a place in community-based microgrids, leading to significant secondary growth there in the years to come,” he said.

Tim McDuffie, senior business development engineer at Smarter Grid Solutions, also mentioned the community microgrid sector, particularly in California. He said, “As the impact of climate change continues to take shape, California legislators have taken to prioritizing community level energy resilience hubs in areas most vulnerable to climate change.”

McDuffie also said that a key development in California on the utility side is the Microgrid Incentive Plan and its precursor, the Community Microgrid Enablement Program. He said these initiatives put power into the hands of communities to sustain themselves during adverse weather conditions caused by climate change.

“Microgrids are entering a new era where utilities play a key role in their development, but state, federal and local funding sources are going to community stakeholders so that they can make the best decisions on how to use them,” said McDuffie.

Dive deeper into microgrid trends. Subscribe to the free Microgrid Knowledge Newsletter and register to attend Microgrid 2023: Lights On!, May 16-17, in Anaheim, California.

About the Author

Kathy Hitchens | Special Projects Editor

I work as a writer and special projects editor for Microgrid Knowledge. I have over 30 years of writing experience, working with a variety of companies in the renewable energy, electric vehicle and utility sector, as well as those in the entertainment, education, and financial industries. I have a BFA in Media Arts from the University of Arizona and a MBA from the University of Denver.

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