Microgrid market to boom despite drop-off in DOD funds

Yeager, new report seem to agree on market dynamics

Rockville, MD (May 8, 2013) -- The leading independent, daily, professional news journal of the smart grid industry published a story comparing the opinions of electric utility industry luminary and microgrids expert Kurt Yeager of the Galvin Institute with a recent, high-priced report on the state of microgrids in the US and the world. The report authors and Yeager came to similar, important conclusions -- and the article was of such value to the industry that Smart Grid Today publisher Modern Markets Intelligence, Inc., is sharing it with the electricity industry free of charge.


The story has been slightly edited for this format and is included in its entirety below and at smartgridtoday.com/microgrids0507.

The US microgrid market will thrive over the next several years despite DOD investment in the sector drying up, Kurt Yeager, vice chairman of the nonprofit Galvin Electricity Initiative, told Smart Grid Today recently. Improving state regulations and added public interest in grid reliability in the wake of Hurricane Sandy will help microgrids gain broad penetration in the US power sector, he said.

Though the US in 2012 accounted for about 68% of global revenue in microgrids, that share is expected to drop to 30% by 2020, said a report released recently by research firm GlobalData, and the end of several DOD-funded microgrid projects partly explains that decline. The DOD accounted for 55% of microgrid projects deployed in the US in 2012, the report said. The report sells for between $3,995 and $11,985 depending on the number of users, the firm said.

Two DOD microgrid demonstration projects in Hawaii helped pave the way for smart grid innovation in that state, Hawaii PUC Commissioner Lorraine Akiba, told us in February (SGT, Feb-25).

But DOD investment in microgrids is not "going to make or break the market itself," Yeager told us yesterday. Improving US state regulatory structures will help counter the drop in DOD investment in microgrids, he added.

As more utilities charge performance-based rates for power or rates that decouple the power sold to customers from the return on that sale to investors, microgrids will prosper in local communities around the country, he argued. San Diego Gas & Electric (SDG&E) is an example of a large utility that managed to decouple and deliver more return to its investors, Yeager told us recently (SGT, Mar-20).

But on the whole, utility markets today "pit the stockholder against the customer," Yeager said. "That has to be changed." Yeager for many years ran EPRI before joining Galvin.

It is getting harder for US policymakers to ignore the payoffs of microgrids because "the economic pressures are growing" in a struggling national economy, Yeager said.

One of the most obvious benefits of microgrids is the bang-for-buck they provide in bringing distributed energy to the grid, he added. Cash-strapped municipalities can invest in microgrids rather than costly overhauls of the grid, Yeager said -- an observation echoed in the GlobalData report.

Upgrading T&D in the US through microgrids "could prove to be an economical alternative to countries looking to update their electricity infrastructure," the report said.

Local communities take over

Republicans and Democrats including President Barack Obama have said that the US "will never have a stable and secure 21st-century economy with a twentieth-century electricity system," Yeager reminded. But "so far, that's been a lot of rhetoric," he added.

The goal set by DOE of having 10 MWs in installed-capacity power come from "commercial-scale" microgrid projects by 2020 is one encouraging government policy, the report said.

But local communities that understand the benefits of grid reliability will be much bigger impetuses for growth in US microgrids than any government initiative, Yeager stressed. Local communities want "to fundamentally improve the reliability of their system," in the wake of Hurricane Sandy, the storm that last October knocked out power for large parts of the US northeast, he added.

Developing world rises

As the relative US share of revenue in the global microgrid market declines over the next several years, global growth will be driven by developing markets such as Brazil, China and India between 2013 and 2020, the report said, a projection that Yeager seconded.

Developing countries will increasingly turn to microgrids to electrify remote territories, the report added. China, for example, "will be using microgrids both to electrify rural areas for the first time as well as to modernize and optimize service in urban areas," Yeager told us.

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SMART GRID TODAY'S MISSION is to deliver daily, unbiased, comprehensive and original reporting on emerging trends, applications and policies driving the modern utility industry -- in a signature format that features highly concise and easy-to-understand news copy based on trusted reporting, exclusive interviews, informed analysis and strategic insights that our subscribers rely on to succeed every business day. Smart Grid Today is published 247 times a year by Modern Markets Intelligence, Inc. (MMI), publisher of independent trade news for the evolving energy industry of the 21st century. It is located in Rockville, Md. Sam Spencer founded MMI in 2009 after writing, editing, marketing, publishing, running and inventing trade news publications and related products for over 20 years.

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