Microgrids are a hot topic among those forecasting key future trends shaping the world’s energy infrastructure. However, few fully commercialized state-of-the-art microgrids with significant generation capacity are actually up and running in North America, the world’s leading market for microgrids. On the surface, the lack of progress in fully commercializing the microgrid paradigm might appear to be a symptom of the lack of clarity and long-term thinking in designing the overarching smart grid. Upon deeper analysis, the issues involved are a bit more complicated.

Pike Research has developed a propriety database that identified 1.3 GW of existing or planned microgrids, which served as the foundation for a 2009 market forecast. Though more than 0.7 GW of this total belonged to first-generation fossil-fueled petrochemical plants and college campuses and were excluded from the 2009 microgrid market forecast capacity of future estimates. Perhaps guilty of getting caught up in the smart grid and microgrid hype, the 2009 market forecast was fairly robust. It attempted to bridge the gap between what the Galvin Electricity Initiative (GEI) so exuberantly proclaimed and the microgrid forecast developed by Navigant Consulting issued in 2006, which offered a range between 1 GW and 13 GW of microgrids by 2020.

Among the key assumptions underlying the 2009 forecast that were adjusted for the recent release of a 2010 update are the following:

• The United States still has not implemented a meaningful carbon regulation regime, which the 2009 Pike Research market forecast assumed would have been enacted by now, given the political dynamics of last summer. The failures at Copenhagen in 2009 and in the U.S. Congress in 2010 have slowed down the rush to implement energy projects that cut carbon emissions including microgrids that aggregate renewable distributed energy generation (RDEG).

• The lack of a clear market for carbon-free energy hindered the evolution of the green technology/green jobs sector, further dissipating momentum in green power and distributed energy markets, reducing the need for near-term microgrids.

• The stimulus funds deployed on behalf of the smart grid have, in some cases, been frittered away on poorly designed rollouts of smart meters and automated meter infrastructure, underwriting utility overhead charges instead of creating new jobs linked to thoughtful and effective grid upgrades (including microgrids).

• The regulatory support for microgrid developments have yet to coalesce in the U.S. and throughout global markets, although some legislative activity is occurring with regards to military applications – one of the most promising near-term market opportunities – and within engineering circles at the Institute of Electrical and Electronics Engineers (IEEE).

Since last year, Pike Research has learned of more than 50 microgrid projects that are operating in some capacity or are in current development. All told, the Pike Research database now includes more than 140 microgrid projects totaling over 1.1 GW in capacity. If the “first generation” microgrids that have been operating at industrial sites and college campuses in the United States are added in, the total capacity of microgrids currently operating, or in the development phase, globally, climbs to more than 1.8 GW.

A clear market niche exists for cleaner, more reliable energy services tailored to the precise needs of underserved utility customers, both in the industrialized world as well as emerging markets for energy services in developing nations. Pike Research’s 2010 market forecast takes a more sobering view of the microgrid opportunity than our 2009 assessment, though the aggressive scenario shows microgrid capacity reaching nearly 4.5 GW by 2016. The new forecast recognizes that the cultural and financial shift necessary to enable this business platform tends to take longer than visionaries and venture capitalists have the patience for, but that potential exists for rapid growth toward the end of the market forecast period. And yet, Pike Research does see evidence that innovative firms can create viable value propositions even with today’s less than ideal market conditions. And federal military agencies have clear mandates – some funded, some not – to bring a host of microgrids on-line within the five year forecast period.

In contrast to the flat growth rates used in the 2009 forecast, Pike Research expects the adoption rate of microgrids to follow a trend more analogous to exponential growth during the forecast period. As with any new innovation, the adoption of microgrids will increase more rapidly as awareness of, and confidence in the technology’s capabilities to grow. The earlier years of the forecast period are expected to bolster the microgrid business case as increasing numbers of “plug-and-play” components and control systems are validated in pilot projects and commercial installations. Since 2009, significant progress has been achieved on the security, safety, and engineering standards supporting commercial microgrid deployments, which should drive technology cost decreases over the next five years. These milestones will set the stage for greater growth in the later years of the forecast period, an exponential growth trend that will continue to explode beyond 2016.