Remote Microgrids Sector Poised for Growth
June 15, 2012
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Note: The following is an excerpt from a recent report on remote microgrids, published by Pike Research.
The fundamental concept of most microgrid applications can be summed up as follows: an
integrated energy system consisting of distributed energy resources (DER) and multiple
electrical loads operating as a single, autonomous grid either in parallel to or "islanded"
from the existing utility power grid. According to organizations such as the U.S.
Department of Energy, what some define as a "remote microgrid" is not a
microgrid, since by the DOE's definition, a microgrid must be connected to a larger utility
grid, with its defining characteristic being the ability to disconnect (seamlessly) from the
larger grid and then operate in islanding mode.
The truth of the matter is that remote
power systems number in the thousands. Most of these are powered up by dumb, dirty
diesel generation, hardly a technology platform of relevance to the smart grid and
fundamental networking advantages of the microgrid platform. Nevertheless, once
renewable distributed energy generation (RDEG) is added to the mix, these remote
systems (i.e. microgrids) begin to look like the classic traditional microgrids that have been
the focus of most of the DOE and U.S. Department of Defense funding. The closest
analogy to remote microgrids funded by the U.S. government are the so-called "mobile
microgrids" deployed at military forward operating bases (FOBs) in Afghanistan and Iraq,
as well as at other temporary or remote bases throughout the world.
A global survey conducted by the Australian Commonwealth Scientific and Industrial
Research Organisation (CSIRO) in early 2009 focused on microgrids that included some
level of renewable energy generation. It showed that the largest segments of microgrids
(34%) are between 1 MW and 5 MW in size, followed by microgrids greater than 5 MW in
size (19%). This survey defined a microgrid as having at least two generation sources
(with one being a renewable energy source) and some level of controls of the network, with
the ability to operate in island mode. Over half of the microgrids discovered that met this
criteria would fall into the remote microgrid category. Given that there are literally
thousands, if not millions, of remote power systems that simply burn diesel fuel and
operate without any smart grid functionality, this report has limited its inquiry to
systems that also include some level of renewable energy, serve more than a single load,
and exhibit some level of load balancing and optimization.
Since these microgrids never connect to a larger grid and, therefore, operate in island
mode on a 24/7 basis, a greater need exists for storage versus other grid-tied microgrids
that can reach outside the microgrid for help and resources. Many of these microgrids are
designed to reduce diesel fuel consumption by integrating solar PV, distributed wind, or
run-of-the-river hydropower (as is the case with the Bella Coola project in British
Columbia). Depending upon definitions of what constitutes a remote microgrid (as
opposed to a simple diesel remote power system) this category is now estimated to
actually represent the largest number of current deployments among all microgrids, though
village power systems feature the smallest average capacity.
Remote Microgrids Market Segmentation
There are four subsegments of the remote microgrid market:
- Village Power Systems: Perhaps the largest number of remote microgrids up and
running today would fall into this category, though data is extremely scarce due to the
small scale of such projects and a preponderance of installations in Asia. According to
leading purveyors of this remote microgrid subsegment, the average village power
system has a capacity of 10 kW. It typically provides power just to a medical clinic,
school, and/or community center in the center of the village. In the average scenario,
this subsegment will grow from an estimated 97 MW online today to 316 MW by 2017 at
a CAGR of 21.7%, representing revenue of $4.7 billion. Although the smallest in scale,
the investment required for village power systems per kilowatt is more than double any
other subsegment, hence the surprisingly robust market sizing figures.
- Weak Grid Island Systems: To a purist, microgrids that have any linkage to a larger
grid would not be considered "remote." From this report's perspective, these
systems belong in the remote microgrid camp since the underlying assumption is to
design and operate a power system as if the larger grid is not there (rather than the
other way around). Weak grid island systems could represent an even bigger
opportunity than the campus environment and military microgrid sectors that have been
the focus of Pike's analysis in 2011 in previous microgrid segment reports. At present,
this is one of the leading microgrid subsegments in the world, with 215 MW of current
online capacity. It will rise to 528 MW by 2017 in the average scenario at a CAGR of
16.2%, representing revenue of $3.7 billion.
- Industrial Remote Mine Systems: This subsegment of the remote microgrid market is
the least mature, but also boasts the highest growth rates due to an expected upswing
in interest in shifting to more sustainable energy strategies for sites controlled by large
multinationals. Globally, nearly 75% of existing mines are remote operations, though
very few deploy renewable energy generation. At present, the total capacity of
industrial remote mine systems is estimated to be 35 MW. This remote microgrid
subsegment boasts the highest CAGR in the average scenario - 40.0% - and
represents corresponding revenue of $1.8 billion by 2017.
- U.S. Mobile Military Microgrids: This last category of remote microgrids is the least
developed, but has the most policy and financial support from the U.S. DOD. At
present, these systems are being deployed in pilot projects in combat missions at FOBs
in Afghanistan and other remote DOD sites. This subsegment is included in this report
since many of the systems at FOBs will likely become village power systems to serve
humanitarian services once U.S. troops pull back from combat zones such as
Afghanistan. Despite the projected decline in FOBs - a negative growth rate of 20.5%
- the average scenario for mobile military microgrids (currently limited to U.S. DOD)
shows a robust 2011-2017 CAGR of 49.2%. However, total capacity will still be modest
at 20 MW and revenue will reach just over $32 million by 2017.
Remote Microgrids Landscape
Developing countries comprise approximately 80% of the world's population, but consume
only 30% of global commercially traded energy supplies, making them the top prospective
market for remote microgrids (especially village power systems). As energy consumption
rises with increases in population and living standards, awareness is growing about the
environmental costs of energy and the need to expand access to energy - especially
cleaner electricity - in new ways. A widening recognition of the contribution renewable
energy makes to rural development, lower health costs (linked to air pollution), energy independence, and climate change mitigation is shifting renewable energy from the fringe
to the mainstream of sustainable economics. Remote microgrids can serve as the anchors
of new, appropriate scale infrastructure, a shift to smarter ways to deliver humanitarian
services to the poor. It is this fact that lies behind financial support rendered for remote
microgrids by the United Nations, the U.S. Agency for International Development (USAID),
and entities such as the Clinton Climate Initiative and the Bill Gates Foundation.
While many companies active in a broad range of microgrid markets are also eyeing this
sector, among them firms such as General Electric, there are also a number of specialists
that currently command market-leading positions. For example, in the village power
systems subsegment, OutBack Power Technologies, which offers customized inverters
and load controls optimized for rugged, remote applications, is by far and away the leading
vendor. For larger-scale remote microgrids, often deployed on weak grid islands,
Powercorp, with its patented flywheel PowerStore system, can also claim a market-leading
status. The purchase of Powercorp of Darwin, Australia by German transmission and
distribution giant ABB is a clear sign that larger, well-capitalized companies are beginning
to recognize this sleeping giant of a microgrid market. Note, though, that while remote
microgrids actually represent the most commercially advanced of the microgrid sectors,
they are still flying under the radar for many investors and vendors.
Remote Microgrids Market Forecast
Remote Microgrid Capacity
All told, the remote microgrid market today represents 349 MW of capacity globally. By
2017, however, this microgrid sector will grow to over 1.1 GW of total capacity, an amount
that equals or perhaps even surpasses all other microgrids combined that are in the
current planning stages or that have already been deployed. In the average scenario, total
remote microgrid capacity represents a 2011-2017 CAGR of 21.6%. This contrasts with
the aggressive scenario, which assumes that the economic recession eases beginning in
2012 and that the recent decreases in RDEG costs - and increases in diesel fuel - follow
recent trends. In this optimistic scenario, total remote capacity will exceed 1.6 GW.
Remote Microgrid Revenue
Total projected revenue for the remote microgrid sector will reach more than $10.2 billion
by 2017 under the average scenario at a CAGR of 21.4%. The base scenario - which may
hold if current economic trends are sustained - would still result in a healthy $4.5 billion
market. In the unlikely aggressive scenario, revenue would reach $14.7 billion by 2017
based on a CAGR of 28.9%.
Source: Remote Microgrids by Pike Research (published June 2012). Excerpt reprinted with permission.
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