A new analysis issued by Wood Mackenzie quantifies what we’ve seen anecdotally at Microgrid Knowledge. Microgrid development continues at a rapid pace even as the economy faces headwinds.
“Despite the global COVID-19 pandemic and associated macroeconomic challenges causing a two-year slowdown in the US, the microgrid market is developing at a rapid pace and 2022 is on track to be a record year for installations and scheduled pipelines,” said Elham Akhavan, senior research analyst at Wood Mackenzie.
Here are five key takeaways from the analysis by Wood Mackenzie’s Grid Edge Service.
- The US microgrid market reached 10 GW in the third quarter of 2022, with more than 7 GW in operation and the rest in planning or construction. “From a microgrid capacity perspective, if the market continues to develop at a rapid pace, we will see more than 20% growth in annual capacity installation across the US compared to last year,” said Akhavan.
- Commercial and industrial businesses lead microgrid development, specifically retail stores and manufacturing. Next came the government, driven by the military, followed closely by the residential sector and education.
- Microgrid customers are increasingly choosing third-party financing and ownership rather than owning a microgrid themselves. Called microgrid as a service (MaaS), or energy as a service, use of the model grew 25% from 2019 to Q3 2022, while direct ownership by customers dropped 31%. Wood Mackenzie cites an influx of diverse investors eager to finance long-term projects, often with ESG attributes.
- Utilities are warming up to microgrids. Wood Mackenzie pegs total utility microgrid capacity at 1.1 GW with 35 MW of microgrid capacity coming online in 28 states in 2022. “Although utilities typically look to rate base microgrids, some are partnering with developers to offer microgrids to their customers under MaaS agreements. For example, Enchanted Rock announced a utility partnership program in early 2022 that enables utilities to offer comprehensive ‘resilience-as-a-service’ to its customers.”
- Solar and energy storage use within microgrids has grown significantly, up 47% in 2022 over 2019. More than 175 solar- and solar-plus-storage microgrid projects were scheduled to come online by the end of 2022.
Where microgrid growth is happening
“The West Coast, led by California, is growing substantially, with a strong pipeline due to go into operation by 2024. This is followed closely by the Southwest market which has expanded more than three times since 2019. Texas is the frontrunner, with two of the leading developers in the region, PowerSecure and Enchanted Rock, having installed all capacity so far in 2022,” Akhavan said.
Wood Mackenzie also cited growth in the Northeast where competitive grant programs incentivize resilience projects for critical facilities. The Southeast, however, has yet to recover to pre-pandemic microgrid growth, according to the analysis.
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