Without some form of distributed generation (DG), the vast majority of microgrids would not exist. So, it should come as no surprise that such assets represent the single most lucrative microgrid enabling technologies (MET) segment today.
A prime mover technology for microgrids is diesel generators, which are widely deployed as back-up emergency power generators thanks to their ability for black start. However, they are also often legacy assets upon which microgrids are layered and, more often than not, microgrids are specifically designed to reduce diesel fuel consumption.
In Navigant Research’s report, Microgrid Enabling Technologies, the amount of DG being deployed within microgrids is forecast in terms of capacity and of annual vendor revenue. If one looks at new capacity additions, diesel generators have captured the largest market share, followed closely behind by natural gas generators (which also serve as the basis for combined heat and power applications.)
An important caveat on these estimates: Only systems that incorporate some level of renewables are included in the tally for remote microgrids. If one were to include all diesel generators deployed cumulatively, Navigant Research’s data suggests that they would represent more than 65% of total microgrid DG capacity.
Decline of Diesel
Another key assumption moving forward with microgrids is that new diesel capacity will decline over time, given the high cost of fuel, tightening air quality regulations, and the emergence of new power electronics technologies, lessening the need for a fossil prime mover.
While fossil DG capacity is still expected to exceed that of renewable capacity deployed within microgrids in 2014, the higher capital cost attached to solar PV, wind, hydroelectric, and biomass translates into higher vendor revenue per megawatt. Fossil fuel DG (diesel and natural gas generators plus fuel cells) is expected to represent 58% of total DG capacity in 2014, according to our forecasts; renewables will most likely capture the other 42% of the DG market. On a revenue basis, however, renewables are expected to capture 23% of total MET vendor revenue in 2014, compared to only 9% for fossil fuel DG.
Notably, the largest category of revenue in 2014 is technologies not actually included in the forecast, since they cannot be quantified on the basis of generation capacity (i.e. smart meters, smart switches, and other distribution or building infrastructure). The majority of microgrids being deployed today incorporate significant amounts of legacy DG. (Most of the community microgrids under development in New York and Connecticut add no or very little DG capacity.) As a result, large investments into integration hardware – distribution infrastructure that cannot be quantified on the basis of generation capacity – represents a large piece of the overall investment pie for these retrofit microgrid projects. But this category is likely to decline as an overall percentage of total vendor revenues by 2023, as renewables, energy storage, and software increase in market share over time.
DG Capacity Market Share in Microgrids: 2014