Microgrid Market Estimated to Reach US$ 118.8 Bn by 2026

Microgrid Market – Snapshot

A microgrid can be defined as a localized grid that can connect to and disconnect from traditional utility grids to provide better reliability and grid resilience. A microgrid is an interconnection between distributed energy sources and loads within well-defined electric boundaries. It acts a single controllable entity. Microgrids can operate autonomously, due to which they are highly useful during main grid failures and they can help in mitigating risks arising out of grid disturbances and failures.

Since a microgrid can easily connect to and disconnect from the main grid, it can operate in both grid-tied and island modes. Usage of microgrids offers several benefits such as grid modernization, integration of distributed energy generation sources including renewables, and integration of several smart grid technologies as well. It also helps in serving local loads from local power sources, resulting in the reduction of transmission and distribution losses and rise in overall efficiency of the system. Microgrids act as a support to macrogrids by handling the variability of power from local renewable sources and supplying ancillary services to sensitive loads and bulk power systems.

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Rapid industrialization and increasing demand for power likely to drive the market

Rising global population and increasing power demand have increased the dependence of end-users on utility grids to meet their power needs. According to the U.S. Energy Information Administration (EIA), the global energy consumption is expected to increase by around 56% by 2040. Moreover, the demand for energy is rising at a rapid pace, due to increasing industrialization and urbanization, which is not being fully met from main grids. As per the EIA, India and China have witnessed rapid industrial development and they are likely to account for 50% of the world’s total increase in energy usage by 2040.

Industrial development in these countries as well as that in the U.S. is driving the global energy sector. One of the major drivers of the global microgrid market is direct and indirect economic, technical, environmental, and social benefits from use of microgrids. Moreover, microgrids facilitate making real-time power dispatch decisions, which helps in minimizing losses and maximizing profits. Advancements in renewable energy technologies are also anticipated to drive the market during the forecast period. Microgrids can easily utilize renewable energy systems to generate electricity. Moreover, usage of renewable energy sources in microgrids has been increasing owing to almost zero-carbon emissions and benefits in terms of efficiency and costs.

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Operational challenges and high development cost expected to restrain the market

One of the major operational challenges faced by microgrids relates to their functioning in an isolated mode. During this functioning, microgrids need to maintain stability with the help of distributed energy resources. Microgrids generally face instability during oversupply as well as undersupply of electricity. Oversupply of electricity may cause a generator to trip off, resulting in loss of power supply to a microgrid. On the other hand, undersupply of electricity can result in equipment malfunction. Another challenge relates to installation costs incurred when a microgrid is employed to replace a conventional grid. For efficient functioning of microgrids; system engineers, monitoring systems, and relays need to be incorporated. This can significantly increase installation costs of a microgrid compared to a macrogrid. Lack of a well-defined regulatory policy framework is another restraint of the microgrid market. Ambiguous state laws pose a major obstacle in the path of microgrid deployment.