North America Projected To Lead the Worldwide Microgrid Market With Nearly 6 Gigawatts of Total Capacity by 2020

With the launch of dozens of successful pilot programs globally, the adoption rate of microgrids is expected to accelerate over the next several years. According to a recent report from Navigant Research, total microgrid capacity in North America will reach 5.9 gigawatts in 2020, representing 64 percent of worldwide capacity.

“The U.S. has pockets of poor power quality scattered across the country, as well as a structure of behind-the-meter markets for distributed energy resources that favors microgrids,” says Peter Asmus, principal research analyst with Navigant Research. “The latter has stimulated creative aggregation possibilities at the retail level of power service. Instead of being driven by grid operators or municipal utilities, which is the case in Europe, the microgrid market in the United States is customer-driven.”

The first U.S. state moving forward with a policy program to promote microgrids is Connecticut, which is responding to a pair of extreme weather events, according to the report: Tropical Storm Irene in August 2011 and a rare blizzard that hit the East Coast in October 2011. Both events led to massive power outages. This effort — which has authorized construction of up to 27 microgrid sites as of early 2013 — is supported by an initial grant and loan program of $15 million.

Market Forecasts

According to Navigant, there are five primary microgrid market segments — commercial/industrial, community/utility, campus/institutional, military, and remote/off-grid — in addition to utility distribution microgrids (UDMs) and microgrid enabling technologies (METs); the latter is the group of components that are deployed within microgrids. The following are the key assumptions that the research group makes in developing its forecasts for this sector:

  • Engineering Challenges: The plethora of companies offering hardware and software control solutions for microgrids will provide a rich diversity of IT and security solutions to validate the microgrid value proposition.
  • Extreme Weather Patterns Continue: The extreme weather events of 2011, 2012, and 2013 will continue, resulting in increased power outages and need for emergency response and resilient infrastructure globally.
  • Global Economics: The slow global economy will gain momentum, especially in key microgrid markets (i.e., North America and Asia Pacific). Developing countries will also benefit from efforts by the United Nations and others to end energy poverty through remote microgrids.
  • Utility Stance on Anti-Islanding Protocols: The historic anti-islanding bias of utilities will continue to erode due to technology advances with smart inverters and corresponding changes in protocols such as the IEEE 1547.4.
  • Electricity Prices: It is assumed that recent trend lines of increasing electricity prices will continue over time, but also that the shale gas boom will continue to depress power supply prices at the wholesale level in key microgrid markets such as the United States.
  • Government Cleantech Incentives: The forecasts assume that current incentives for key MET components (solar photovoltaic [PV] and wind power) will continue to shrink due to political pressures, a gradual maturing of technology, and wider disbursement of smart grid infrastructure.
  • Government Emissions Regulations: Current and planned regulations in place in the United States, European Union, and Asia Pacific will continue and will be enacted within current established timeframes.
  • Linkages to MET Sales: The growth of MET component sales will grow in parallel with microgrid market segments since these markets are mutually inclusive.

As a result of its updated market forecasts, Navigant sees the revenue from deployments of microgrids globally to be approximately $8.3 billion in 2013, increasing to more than $40 billion annually by 2020 in the average scenario. This is significantly higher than previous market forecasts due to new market intelligence suggesting that microgrids, including retrofit projects incorporating legacy assets, require greater investment than previously recognized. Still, the firm’s forecasts tend to be bullish on capacity (since many projects are under the radar) and conservative on revenue.


Geographic Market Shares

North America is the leading microgrid market today and that will continue over the course of the 7-year market forecast period. At present, North America features 63% of total global microgrid capacity (992 MW), with Asia Pacific coming in at a distant second place with 17% of global capacity (271 MW). Europe is in third place with 14% of global capacity (217 MW), and the rest of the world – including Latin America, the Middle East, and Africa – has the remaining 6% of capacity (101 MW).

North America will remain the global leader in microgrid capacity by 2020, increasing its market share to 65% of the global market (5,973 MW) by 2020, with Asia Pacific remaining in second place, but with a proportionately larger share (22%) of the capacity market (2,012 MW). Europe’s share of the microgrid market will decline to 8% (694 MW), while the rest of the world region declines slightly in market share to 5% (475 MW). Beyond 2020, Navigant expects that the relative shares of both Asia Pacific and the rest of the world will increase, with the Asia Pacific region emerging as the global leader within the 2025-2030 timeframe due to growth in remote and grid-tied systems and the slowing of deployments in North America because of market saturation and the resulting improvement in overall power grid performance. 

Source: Market Data: Microgrids (July 2013) by Navigant Research. Reprinted with permission.