Sorting Through the Confusing, Competitive Landscape of the Microgrid Market

The microgrid market today is in flux. Most projects being implemented around the world feature teams with a variety of players – large and small – each contributing specific components and services to pilot projects, the majority of them still considered to be in the R&D phase.

The lack of operating experience of microgrids in a purely commercial setting translates into a competitive landscape where most microgrid players are not sure who their direct competitors are (although there are exceptions to this general rule). The companies with the most specific expertise in actually managing and controlling resources within the microgrid are still validating their software or hardware systems. It is within this space that the most fervent competition exists.

Pike Research predicts that the microgrid market could reach as high as 4.6 GW by 2016.

Each microgrid market segment – whether a commercial building cluster or a remote community – is characterized by different priorities. Within the federal government sector, and especially in the case of military bases, islanding for reliability purposes is paramount. For commercial institutions, islanding may still be important, but the buying and selling of services from onsite generation or aggregated demand reductions to the distribution utility is often more important. Furthermore, many projects touted as “microgrids” fail to meet the Pike Research or federal Department of Energy (DOE) definition, but are still precedent setting projects focused on clustering innovation at the distribution level of service.

Take the case of Schneider-Electric. In 2010, the company launched a new venture whose prime goal is to serve as a broker between utilities and large customers, especially those that own large amounts of commercial buildings. The Schneider Electric version of a “microgrid” is really a “virtual power plant” (VPP) focused on capturing and aggregating demand response (DR) resources from large commercial clients. With new managers quite familiar with the evolution of DR markets, they appear to have a very unique strategy, targeting advanced wholesale/retail markets like the PJM control area.

Schneider-Electric is currently serving as an advisory and likely partner in the innovative 400-500 MW aggregation known as Northern Westchester County Energy Action, a non-profit organization representing 14 different towns utilizing Con Edison’s transmission lines to prove-out the concept of “community choice aggregation.” Through its association with Joule Assets, Schneider Electric may be opening up the New York market to precedent setting residential customer aggregation programs, setting the stage for microgrids.

Several other companies are often bandied about as microgrid system integrators, yet most of them lack a portfolio of microgrid projects to which they can point. Well known market players such as Johnson Controls, SAIC, and others claim that they are also in the microgrid space, yet none of these firms has a single microgrid online delivering energy services. Other “integrators” such as Chevron Energy Solutions consistently decline to discuss strategy or goals, and therefore their long-term strategies in the microgrid arena remain a mystery. To date, Chevron is only involved with one microgrid project – the Santa Rita Jail in Alameda County, California.

Nevertheless, several new integrators have made a splash. For example, Eaton entered the microgrid market earlier this year. A global provider of power distribution, power quality, and industrial automation products for 100 years, Eaton was at the receiving end of a $2.4 million stimulus grant to validate its microgrid at the U.S. Army Engineer Research and Development Center’s Construction Engineering Research Laboratory (CERL). The Eaton microgrid architecture will then be demonstrated at Fort Sill, Oklahoma.

Honeywell, another major federal contractor and microgrid integrator, launched its microgrid business last year when it was awarded a cost plus fixed fee $4.6 million contract to develop mobile microgrids for the U.S. Army Tank Automotive Research Development Engineering Center. The systems can integrate distributed solar PV as well as legacy on-site fossil generation. The microgrid will be deployed for the first time at Wheeler Air Base, Hawaii. This is a remote microgrid system that the Army claims could reduce fossil fuel consumption by 60 percent if deployed widely.

Honeywell is also partnering with Washington Gas Energy Systems and others to develop a 25 MW commercial microgrid for the Department of Homeland Security’s new headquarters in Washington, D.C. Recent changes to proposed federal budgets however, may delay project implementation due to federal spending cuts.

Then there are microgrid evangelists such as General MicroGrids, formerly known as Balance Energy (and formerly part of defense contractor BAE Systems), which offers a business model clearly tilted toward utilities, rather than end-use customers, with islanding capability often being a secondary concern. The company is set to announce its first major microgrid in California, with the possibility of a pipeline of projects that could add up to 200 MW, but that’s all I can say right now.

The microgrid landscape is also quite dynamic. Pareto Energy of Washington, D.C. claims they were informed in early March that Army bases in Virginia were suddenly withdrawing from plans to develop microgrids due to intervention by Dominion Power, the investor-owned utility, signaling that even DOD markets are subject to uncertainty.

The bottom line on microgrids is that no one company yet offers the complete array of services to satisfy all customers. What that means is that for now, most companies would prefer to partner and learn. However, once the current pipeline of pilot projects are up and running and have been validated, don’t be surprised to see some mergers and long-term partnerships develop, setting the stage for a clearer competitive landscape with some winners and losers.

Article by Peter Asmus, appearing courtesy the Matter Network