Why Microgrids are at an Inflection Point

Microgrid Knowledge

Microgrid installations are accelerating in a range of settings, including communities, industrial operations, ports and airports, business parks, fire and police stations, schools, data centers, water treatment facilities, military bases and other operations.

North America is on track to see the microgrid market grow to $10 billion in the next seven years, according to Navigant Research, a Guidehouse company. Worldwide the market is expected to grow from roughly $3 billion to $30 billion over that time frame.

As aggressive as that forecast sounds, it may underestimate microgrid penetration, given recent events. Since Navigant published its forecast in 2018, activity has picked up dramatically, with California appearing to bring the microgrid market to an inflection point.

For example, Pacific Gas & Electric intends to rely on microgrids to power a significant number of its customers during future public power safety shutoffs. The utility is planning to add 522 MW of microgrids in 2020. To put that in perspective, that’s nearly as much microgrid capacity as the entire US added in 2019, according to a Wood Mackenzie report. On top of that, businesses, cities, schools, additional utilities, and others in California have been issuing plans to build microgrid projects of their own since the wildfire shutoffs, making the state an epicenter of development.

Communities, too, are seeking more control over their energy production and use. In seven states, including California, this trend has led to a rise in community choice aggregators (CCAs), entities formed to secure power on behalf of the residents, businesses and public accounts in a municipality or county. California’s first CCAs appeared in 2011 and the state now has nearly 30 operating or in planning.

CCAs attempt to use their collective buying power to drive down energy costs for the community. CCAs attempt to use their collective buying power to drive down energy costs for the community. They also work to reflect community values. So in green-leaning California., the CCAs offer customers the choice of using power that comes at least partially from renewable sources. California’s CCAs also focus on electric reliability, so several are exploring microgrids. Redwood Coast Energy Authority in Humboldt County already has a microgrid under development. Monterey Bay Community Power has released an application seeking customers to host microgrid projects.

CCAs and microgrids are a natural fit: both champion local energy that can reduce costs, accelerate sustainability, and improve reliability. As a result, adoption of CCAs is likely to foster more microgrid installations.