There is little doubt about the importance of electricity for economic and social development. With a large part of the global population still not having access to electricity, governments around the world are investing in infrastructure to help deliver electricity to unelectrified or poorly connected areas. In this context, microgrids offer a practical solution to supply reliable power to these areas. They are also becoming an increasingly attractive option in cities where conventional grid power is unreliable. Microgrids have already started to make a difference in various parts of the world with several companies developing and implementing microgrid technologies that provide quality power while reducing greenhouse gas emissions by integrating more renewable energy.
Global market trends
Microgrids deployment, both grid connected and remote, has been on the rise globally. As of the fourth quarter of 2018, globally, Navigant Research has identified 2,258 microgrid projects representing 19,575 MW of planned and installed power capacity. Of the various segments, remote microgrids represent nearly 40 per cent of all microgrid capacity globally with a total of 7,604.4 MW. The next largest customer segments by capacity are commercial/industrial and utility distribution, with 5,542.9 MW and 2,307.9 MW respectively. The remote segment also leads the market in terms of new capacity additions.
In Africa, microgrids and off-grid home solar systems are being rapidly deployed in areas where the utility grid has failed. The current situation presents a tremendous opportunity for microgrid developers to harness new technologies and business models to scale solutions, and many entrepreneurs have been busy doing just that. Ascension Island in Saint Helena has added 1,650 kW of wind to its existing microgrid. Annobon Island in Equatorial Guinea boasts a 5 MW solar hybrid microgrid optimised by Princeton Power Systems. Graziosa blends solar, wind and gas turbines, nickel manganese cobalt (NMC) storage, and a fuel cell for its highly diversified microgrid. Graciosa in the Azores has reduced its fuel imports with the deployment of solar, wind and NMC battery storage. Other African islands diversifying their microgrid mix include Santiago and Sal Island. In South Africa, the Zwartkop Chrome Mine and the Thabazimbi Chrome Mine are operating on a gas-diesel hybrid microgrid. The International Energy Agency (IEA) estimates that as many as 220 million sub-Saharan Africans will gain access to electricity through microgrids by 2040. This translates into a deployment of 100,000–200,000 systems or a market opportunity of over $1 billion.
Contrary to the belief that microgrids are more suited to underdeveloped/developing nations, Canada has achieved significant success in the microgrid space. The country has been actively involved in the development of microgrids in areas occupied by remote indigenous communities. The country’s microgrid market is predicted to reach a deployment of over 400 MW by 2024. Growing electricity demand across remote and off-grid areas along with an upsurge in investments in clean energy technologoies will complement business growth. Furthermore, the ongoing development of distributed energy sources to minimise the dependence on conventional grids will enhance the industry outlook.
Challenges and the way forward
The market for remote microgrids is evolving. The focus of innovation is now shifting towards business models that reduce capital cost constraints, produce greater standardisation, and capture as much of the available revenue from deployments as possible. Many of these microgrids are designed to reduce diesel fuel consumption by integrating solar PV, distributed wind or hydropower. In 2018, the global market for remote microgrids represented about $3 billion in implementation spending, and it is expected to jump to more than $10.2 billion by 2027, notes Navigant Research.
However, the issues faced in the implementation of microgrids pertain to financial constraints and lack of advanced technological offerings. Developing countries face the challenge of ensuring that microgrids match up to the constantly evolving technological solutions. Further, in many third world countries, microgrids are expected to function as parallel systems, complementing the main grid and not substituting it. The developed countries, meanwhile, offer an interesting insight in this context. Microgrids in these countries are equipped with advanced technological features and primarily attempt to address last-mile connectivity issues. For these countries, the larger objective is the seamless integration of microgrids with the national grid.
To conclude, microgrids are emerging as a key solution for various global and national initiatives aimed at enhancing energy access and ensuring sustainable development. They are also a promising solution for private players affected by adverse power supply, including industries and commercial centres. Moreover, some areas in regions like Africa and India have very conducive conditions for wind and solar energy. These areas, which are otherwise out of the reach of the main grid, are ideal sites for the development of microgrids and renewable energy. According to industry experts, while North America leads the microgrid market today, going forward, the Asia-Pacific region is likely to emerge as the global leader for microgrid deployment, owing to its large and growing population that does not have access to electricity through the main grid.