The global microgrid market size was worth USD 26.2 billion in 2022 and is anticipated to reach a predicted value of USD 114.45 billion by 2031, registering a CAGR of 17.8% during the forecast period (2023 – 2031).
A microgrid is an autonomous, neighborhood-based energy system that supplies a particular area, such as a medical facility, college campus, or commercial district. It doesn't require the assistance of a centralized grid to function autonomously. When connected to the primary grid, a smart microgrid can also operate; even if it isn't, it operates as an electrical island. By lowering harmful emissions, renewable resources are used to their full potential, efficiency is increased, and long-term energy costs are predictable. A microgrid is a collection of interconnected loads and dispersed energy sources that can be either fossil fuel- or renewable-based and can function independently or in conjunction with the grid. Microgrids transmit, distribute, and manage electricity flow to the end users. Microgrids use renewables, such as solar PV and wind turbines, to generate energy for use in smaller community-based systems. These clean energies are integrated with microgrids to reduce carbon footprint, increasing the adoption of microgrids and subsequently driving the market.
Microgrids use renewables, such as solar PV and wind turbines, to generate energy for use in smaller community-based systems. These clean energies are integrated with microgrids to reduce the carbon footprints of electricity generation on the environment. Governments of several countries worldwide are taking initiatives to reduce the carbon footprint on the environment. The microgrid can disconnect from the central grid and operate independently, thus enabling it to strengthen grid resilience, helping mitigate grid disturbances, and allowing it to function like a grid resource for quicker system response and recovery in case the primary grid is down. The excess energy generated on small-scale systems can be stored on a microgrid system for future use or fed back to main power grids when necessary.
On-site electricity production and storage through the deployment of clean energy resources enable new development to become self-sufficient and help fill the gaps in overpower generation, steep ramps, and voltage control problems for the existing central grid if renewable energy resources are deployed in large quantities. The combination of different renewable energy generation resources in a microgrid can be integrated into the grid. It can increase the penetration of small-scale renewable energies to reduce the carbon footprint in developing countries. Hence, increasing the deployment of clean energy resources will likely drive the market over the forecast period.
End users are becoming increasingly reliant on utility grids to supply their energy needs due to population growth and rising electricity demand. By 2040, global energy consumption is predicted to rise by over 56%, according to the U.S. Energy Information Administration (EIA). Additionally, the energy demand is growing quickly and cannot be fully met by main grids due to increased industrialization and urbanization. For businesses in the microgrid market, these gaps translate into revenue opportunities to expand their power supply services. According to the EIA, India, and China are undergoing rapid industrial development and are expected to use 50% more energy globally by 2040. The growth of the microgrid market and the global energy sector are fueled by industrial development in these nations and the U.S.
Investments in microgrids are regarded as high risk because of the lack of long-term track records, difficulties in estimating and increasing community energy demand over time, and particularities of each community and project. The drop-in renewable energy source (RES) prices have led to the growing popularity of microgrid systems in many developing economies. But factors like the high upfront costs and long payback periods of RES pose a significant barrier to the widespread deployment of microgrids.
Microgrids are expensive as they are unique in components used and custom installations. A commonly quoted price range for a microgrid is USD 2 to USD 4 million/MW. The renewable-based microgrids represent the most significant percentage in terms of costs required for the initial infrastructure setup. The microgrids are made up of various types of equipment from different vendors. Projects tend to change as they are developed or as they mature. As a result, microgrids do not fit into a traditional financing model, which restricts development. Also, ever-changing regulations and technology make microgrids appear risky to investors. All such factors hamper the market growth.
The dependence of end users on utility systems to supply their energy demands has increased due to the rise in the global population and increase in power consumption. By 2040, global energy consumption is predicted to rise by over 56%, according to the U.S. Energy Information Administration (EIA). In addition, the electricity demand is growing quickly and needs to be fully fulfilled by the main grids because of increased industrialization and urbanization. According to the EIA, China and India have experienced rapid industrial growth and will likely use 50% more energy globally by 2040. The global energy sector is driven by the industrial development in these nations and the United States.
By application, the global market is segmented into institutional sites, commercial facilities, remote off-grid communities, and other applications (utility/grid-connected communities, military, etc.).
The commercial facilities segment accounted for the largest market share during the forecast period. Electricity use in commercial buildings is estimated to increase during the forecast period, with increasing annual disposable incomes and as urban migration continues across the globe. Microgrid in commercial facilities is used for continuous power supply during power outages at peak hours, especially in developing countries. Unlike microgrids intended for a public purpose or to serve the needs of a distribution utility, commercial microgrids are oriented toward making a profit. Besides, microgrids are gaining popularity in commercial facilities because of their adaptability, expandability, the need for increased reliability on electricity, and the increased affordability of distributed energy resources (DERs). Key factors, like rising energy bills and electricity price volatility, are expected to drive microgrid adoption in commercial facilities and be a key to unlocking future segment growth. Further, developing hybrid energy systems in a commercial building with a microgrid ability to respond to various needs encourages multiple private players to invest in the market. In 2020, Sri Lanka utility company, the Lanka Electricity Company (LECO), and the University of Moratuwa (UoM) launched a pilot project consisting of a commercial microgrid and a research development facility will study renewable energy and smart grids in the country. The microgrid project is being carried out with USD 1.8 million and is expected to reach completion by 2021. In 2018, the New York governor approved the integration of microgrids in the USD 13 billion JKF airport project, which is likely to propel the global market.
By type, the global market is segmented into customer microgrids, remote power systems, and other types. The customer microgrid accounted for the largest market share during the forecast period. The customer microgrid is self-governed, acting as a single controllable entity that usually operates in utility grid-connected mode and can be disconnected from the grid to work in island mode for resiliency. In June 2020, the Australian Government awarded USD 13.2 million for Microgrid Feasibility Studies. Under this fund, the nation will study and analyze the different microgrid networks, including customer microgrids. The first tranche of funding is expected to assist 17 project studies looking at microgrid technologies to replace, upgrade, or supplement existing electricity supply arrangements in off-grid and fringe-of-grid communities in regional and remote areas. In the future, consumer microgrids are expected to grow to provide an alternative and backup grid network to disaster-prone areas in different regions like the United States and Japan. Additionally, airports, railways, and malls are expected to accept the consumer microgrid network in the upcoming period.
North America accounted for the largest market share during the projected period. The market is expected to witness considerable growth during the forecast period because most of the demand comes from the region's United States, Canada, and Mexico. As of 2019, most of the country's electricity is produced through natural gas and coal. Power plants produce electricity, distributed through an intricate network of substations, transformers, and power lines that link electricity producers and consumers. Additionally, the entire electricity grid in the United States comprises millions of miles of low-voltage power lines and hundreds of thousands of miles of high-voltage power lines, along with distribution transformers that link thousands of power plants to hundreds and millions of electricity consumers nationwide. The Government of the United States, due to the concerns over air pollution, is taking steps to reduce the reliance on coal and is encouraging the use of gas and renewables. This power industry transformation is expected to require expenditure on building new power plants and constructing a new transmission and distribution network. The US electricity grid is a complex digital and physical system. As of 2019, there are more than 7,000 power plants, 160,000 miles of high-voltage transmission lines, and more than a million miles of low-voltage distribution lines. However, due to automation, the grid has become more dependent on computers and data-sharing and more responsive to changes in power demand. The high dependability on automation and its complex nature make the national grid vulnerable to cyber-attacks. Due to the requirement of significant investments for reforming power grids and concerns over the vulnerability of the national grid to cyber-attacks, remote power systems, such as microgrids, are becoming a preferred choice in terms of economic viability and reliability, which, in turn, is expected to drive the market growth.
Europe is the second largest region. The development of microgrids is among the major strategies implemented by the governments in Europe to reduce T&D losses. With the availability of a considerable number of microgrids in the region, the requirement of power transmission between various locations is reduced significantly, which is one of the significant steps toward achieving grid resiliency in the power network. The increasing power demand is met by augmentation in power infrastructure, and microgrids are efficient modes to meet the increased power demand. The centralized conventional power generation plants are being phased out in some European countries to reduce harmful emissions from power generation. The centralized power plants are based majorly on coal-fired power generation technology, one of the major emitters of greenhouse gases. Microgrids mainly include power generation based on renewable energy sources, which do not have any detrimental effect on the atmosphere. Therefore, the microgrid market in Europe has a bright prospect in the near future, and the majority of demand is expected to come from the United Kingdom, Norway, Germany, and others. The UK is a net food exporter; hence, agriculture is an integral part of its economy. UK'sUK's agriculture sector is large and covers more than 60% of the country's total land area. Although the country's power grid is increasingly dependent on renewable sources, the agriculture industry is more interested in power backup systems. It is becoming more dependent on reliable power systems (microgrids), thus, driving the microgrid market.
Asia-Pacific is the third largest region. Moreover, microgrids are playing a growing role in the evolution of the traditional electricity system toward a more distributed and modern grid in countries like India, China, Australia, and others. Over the years, China has witnessed high rates of electricity demand, owing to the unprecedented growth of the economy, coupled with factors such as rapid urbanization. According to the State Grid Corporation of China (SGCC), the largest of China'sChina's two state-owned utility corporations, China'sChina's energy demand in 2030 is expected to exceed 10 Petawatt hours (PWh). Thus, the growing economy and increasing rapid urbanization will likely require a continuous power supply source in the country. This is likely to propel the need for microgrids, as they provide electricity during disruptions in the primary grid in the country. Furthermore, recent trends and developments are expected to provide an excellent opportunity for the studied market. For instance, in September 2020, Sungrow supplied a flexibly built microgrid system with energy storage for the combined 2.2 GW solar PV & 202.86 MW storage project in China. In addition, a few recent developments in the rest of Asia-Pacific are also expected to provide an excellent opportunity for the microgrid market. For instance, in June 2020, the Federal Government of Australia announced funding for a series of microgrid feasibility studies that are likely to seek to unlock more secure, affordable, and reliable energy for regional and indigenous communities.
Major companies in the global microgrid market are
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