Strong Microgrid Market Projections and the Business Models that Drive Them

Navigant Research has recently published “Market Data: Microgrids,” an update to the last comprehensive global market forecast for all regions and market segments since 2016.

The report predicts that the global microgrid market will grow from $6.3 billion in 2018 to $30.9 billion by 2027 with a compound annual growth rate in capacity (CAGR) of 21.7%. According to Navigant, the largest markets by 2027 will be Asia and North America, while the region with the fastest growing microgrid capacity will be the Middle East & Africa with a CAGR of 27%.

The different market segments analyzed in the report for microgrid capacity growth and spending include campus/institutional microgrids, commercial & industrial (C&I), community, stationary military bases, utility, and remote.

Navigant Now Estimates Market Growth for Microgrid Business Models

This report includes a new feature, which is a breakdown of microgrid markets globally and regionally by business model categories. Those categories in order of their prominence in the current marketplace include:

  • Energy as a service (EaaS): Includes PPAs, pay-as-you-go and other 3rd party financing arrangements; includes grid-tied and remote microgrids.
  • Utility rate base: Common for remote microgrids on islands; some mainland utilities face regulatory hurdles in rate-basing their own microgrids.
  • Owner financing: This has been the traditional funding approach for campus and institutional microgrids relying on CHP and diesel generators.
  • Government funding: Projects funded by grants, mostly pilot projects or microgrids built for public benefit.
  • Other: A catchall category for other financing approaches.

Report author and Navigant Research Director Peter Asmus says that while the top three financing methods for microgrids are now roughly similar in their ability to drive microgrid growth, EaaS will eventually emerge as the top business model. “Energy-as-a-Service” is a noteworthy trend,” he notes, “and that is one reason the Commercial & Industrial sector is emerging as the fastest growing market market segment.”

Asmus explains that microgrids are a much riskier undertaking than a standard solar PPA, or a traditional campus microgrid based on CHP and run by an energy or facilities manager. When solar, wind and batteries are added, the microgrid becomes considerably more complex to design and operate. It’s appealing for commercial customers to enlist experts to develop and manage these systems, and treat them as operating, rather than capital expenses.

Asmus also points out some other interesting findings in the report, including the fact that Asia Pacific market dominance, traditionally based on remote microgrids in developing countries, will persist, at least for a while. A response to population growth and lack of access to reliable grid infrastructure, remote microgrids will continue to create important business opportunities. But, by 2027, the worldwide market for all grid-tied microgrid types – including commercial/industrial, campus, community, military and utility distribution – will be much larger, at 11,576 MW for all grid-tied systems, compared to 4,230 MW for remote microgrids.

HOMER International Microgrid Conference, October 8-10, 2018, San Diego

Peter Asmus will be a keynote speaker at the HOMER International Microgrid Conference, talking about microgrid industry trends. Peter is Research Director for microgrids at Navigant Research focusing on emerging energy distribution, integration and optimization of smart grid models such as nanogrids, microgrids and virtual power plants. Asmus has 30 years of experience in energy and environmental markets, as an analyst, writer, and consultant. His expertise also extends to renewables such as wind power, marine hydrokinetics and solar energy.

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