Microgrids are becoming important part of the frontier power markets for distributed energy systems. Advances in technology such as energy storage along with rising diesel prices, and favorable government policies have enabled an environment to support the economics of small-scale clean energy systems according to the second quarter Frontier Power Market Outlook report by BNEF.
India allocated $740 million for village electrification in its 2017-18 budget, the report noted. It was an increase by 8.6 percent to $835 million for Ministry of New and Renewable Energy (MNRE). India has set a target to build at least 10,000 microgrids and mini-grids using renewable technology across the country by 2021 with a total of 500 MW capacity under its National Microgrid Policy.
Similarly, many other emerging economies in Latin America, Africa, and Asia are seeing an upsurge in market fundamentals that support clean energy systems. According to Bloomberg New Energy Finance (BNEF), photovoltaic (PV) exports from China to Africa, Asia, and Latin America grew by 8 percent at $4.4 billion in 2016. It was mainly due to the demand in India, which alone accounted for 21 percent of China’s exports at $2.5 billion.
Islands are another destination for the growth of microgrids as it provides an opportunity to escape their reliance on imported and dirty diesel generators. International Renewable Energy Agency (IRENA) and the Abu Dhabi Fund for Development (ADFD) have pledged $44.5 million in January 2017 to develop four projects in the Pacific and Africa, including 30 MW of new capacity. Tesla, an electric vehicle and battery maker, is making grid-scale storage called Powerpack and installing it in microgrid systems.
The market for microgrids is still in its nascent stage, but the entrance of big technology companies such as Schneider and Engie have improved the outlook of the sector. Tech giants like Microsoft and Facebook along with Allotrope Partners and others have also come together to raise $50 million under Microgrid Investment Accelerator. The accelerator fund targets projects as small as 5kW, focusing on India’s Bihar and Uttar Pradesh states, Indonesia and Tanzania.
The sector is also witnessing an arrival of new companies with innovative business models focused on consumer adoption. For example, the sale of PV systems for solar irrigation can replace 8 million diesel-powered irrigation pumps in India and create a market for 40 GW of solar modules and $60 billion of equipment sale.
Mercom previously reported about the Indian government’s seriousness in pursuing the advancement of solar microgrids in the country. The Ministry of New and Renewable Energy (MNRE) has financially assisted the installations of microgrids in rural areas where it has provided financial support up to 30 percent of the cost of micro and mini grids systems for installation.
In April 2018, ABB, a Swedish-Swiss multinational corporation, announced the successful commissioning of the country’s first industrial solar microgrid at its Vadodara manufacturing facility, located in the western state of Gujarat.