Microgrids Aren’t Being Deployed as Quickly as the Market Requires. Here’s Why

James Gaymon has ambitious plans for deploying microgrids at African Methodist Episcopal (AME) Churches in Georgia.

AME’s Sixth District will install five microgrids at churches by the end of 2026, with the goal of rolling out the program to as many of its 482 Georgia churches as possible, many of which struggle with power outages.

But with the passage of the Trump administration’s so-called “One Big Beautiful Bill,” which phases out the investment tax credit (ITC) for solar and electric vehicles (EV), the AME program has been significantly undermined, said Gaymon, director of operations for social justice at the Sixth District AME church in Georgia.

The first five resilience hubs are expected to move forward, but the rest are in question because of the phaseout of the ITC, he said recently. He’s looking at other funding sources.

Clean energy announcements drop

AME’s microgrid plans aren’t the only ones in question as a result of the ITC phaseout. A report, Clean Investment Monitor Q2 2025 Update found that new project announcements in clean energy dropped in the second quarter of 2025.

According to the report, utility-scale clean electricity announcements totaled $21 billion, predominantly in solar and storage, which was 51% lower compared to the previous quarter.

New industrial decarbonization announcements were $2 billion, a 17% decline quarter-on-quarter and a 38% decline compared to second quarter 2024, the report said. Developers scrubbed $5 billion of investments in energy and industry projects during the second quarter.

“This report provides a snapshot of clean investment activity during debate and passage of the ‘One Big Beautiful Bill Act,’” the report said.

But the Big Beautiful Bill Act isn’t the only factor impeding microgrid deployment. Energy industry members say that transmission, interconnection, permitting and supply-chain challenges are also roadblocks.

Brian Nelson, renewables segment leader at ABB, which focuses on electrification and automation, said that building new transmission lines is increasingly difficult, and projects are often delayed by cost, permitting hurdles and community pushback. With a lack of sufficient transmission, it’s difficult to meet growing energy demand, he added.

“You can’t build a transmission line now, it’s so difficult,” Nelson said during an interview with Microgrid Knowledge at the RE+ conference in Las Vegas last week. “We’re going to be forced to be more distributive in energy.”

Delays slow the industry’s ability to meet market demand

Matt Coffel, chief commercial and innovation officer at microgrid provider Mission Critical Group, said that permitting authorities and supply chain constraints are slowing microgrid installations.

“These delays mean microgrids are not being adopted at the pace the market requires,” he said.

Aaron Christ, director of engineering of energy storage solutions at Concentric, which provides critical power equipment, said that regulatory complexity can slow microgrid deployment, especially because regulations differ by location.

Christ said that some microgrid projects also struggle with a lack of stakeholder agreement and unexpected integration challenges.

The microgrid and DER advantage

But flexible microgrids and other distributed energy resources (DER) can help solve the transmission challenge, Nelson noted.

“As large commercial and industrial customers demand more power, greater reliability, or new revenue opportunities, these challenges create strong incentives to look closer to the load,” Nelson said. “Microgrids emerge as a compelling option, providing localized generation and resilience without waiting on lengthy transmission upgrades.”

Utilities and large energy consumers are deploying microgrids because they can provide grid services, create flexibility and help keep energy costs in check, Nelson said. “Battery storage and new financing models make microgrids even more attractive for balance sheets.”

For virtual power plants (VPP), challenges include a lack of widespread awareness of the benefits that VPPs offer, said Ella Wynn Roseman, head of battery at EnergyHub, which creates VPPs.

VPP deployment grows faster than traditional infrastructure investment

“While there’s growing recognition in some utility and regulatory circles, broad understanding of the VPP value proposition still lags behind the pace of technology adoption. This lack of familiarity often results in hesitation or slower decision-making, particularly when VPPs are compared to traditional infrastructure investments,” she said.

And despite the challenges, VPP deployment is growing at a rapid pace, she said. That’s in response to a broader adoption of distributed energy resources (DER) such as EVs and behind-the-meter solar and batteries.

“Even in the absence of strong federal support, the underlying value proposition of these technologies is improving–higher storage attachment rates and increasing consumer interest are creating a larger base of assets that can be aggregated into VPPs,” she said.

VPP growth is also a response to the urgent need for new capacity spurred by data center and AI growth and electrification.

“VPPs offer a compelling solution here: they provide flexibility and resource adequacy without the lead time or capital expense of traditional infrastructure. Their ability to be built in months, not years, is particularly valuable as interconnection backlogs continue to delay new generation projects,” she said.

Also on the positive side, incentive programs such as California’s Self-Generation Incentive Program and Connected Solutions are helping speed microgrid deployment, said Jon Williams, CEO of Viridi, a battery energy storage supplier.

The need for resilience drives microgrid interest

While the microgrid industry faces many challenges, the need for resilience continues to grow, said Coffel.

“Resilience is the big driver – companies and communities want power they can count on during storms, heat waves or grid outages,” he said. “At the same time, sustainability goals and rising energy costs are pushing more organizations to look seriously at microgrids.”