The research study covers the present scenario and growth prospects of the global microgrid market for 2016-2020. The market size has been calculated from the revenue generated from the demand generated by different end-users in any region in the microgrid market. The Americas, EMEA, and APAC are the key regional markets.
As of 2015, the Americas dominated the microgrid market with a market share of 43.35% because of rapid advances in the energy sector. The market in this region was valued at USD 5.172 billion in 2015 and is expected to reach USD 10.457 billion by 2020, growing at a CAGR of 15.12%. The US is expected to be a major revenue contributor in the Americas.
According to Sayani Roy, a lead analyst at Technavio for research on the power sector, “The rise in the number of initiatives from the US government for the implementation of energy-efficient power solutions is driving the market growth in the region. For instance, the US government provides funding for technologies that help in improving the resiliency of power systems.”
Technavio energy analysts highlight the following three factors that are contributing to the growth of the global microgrid market:
- Need for better power system compared with traditional grids
- Rise in natural calamities
- Growing support from governments
Need for better power system compared with traditional grids
Rising energy cost, aging infrastructure, mass electrification, and climate change are some of the common problems faced by the power industry. These problems are common across the world in any power industry, albeit at different levels.
For instance, the North American power grid is vulnerable due to its aging grid infrastructure. It is estimated that more than 65% of transmission lines and transformers are at least 25 years old, and more than 50% of circuit breakers are about 30 years old. While the power utilities in Asia suffer from low electrification rate, 765 million people still lack access to reliable grid electricity in the region. The traditional grid is hierarchical in nature, where power is generated from a central location, which is then sent through the transmission system to the substation and distribution lines, and finally to end-users. During this process, about 8% power is lost in transmission and distribution. Therefore, the need to overcome the challenges faced by a traditional grid and introduce a new level of sophistication in its functioning, in a highly controlled environment, has driven the need for microgrids.
Rise in natural calamities
Natural calamities, such as earthquakes, storms, hurricanes, and tornados, damage the transmission and distribution infrastructure, clearly revealing the vulnerabilities of utility grids. Natural calamities, whether big or small, result in grid failure, leading to power cuts in the residences of millions of people as well as commercial and industrial sectors. Such power outages can extend from a few days to weeks.
For instance, in July 2015, major floods in the northern Philippines due to Tropical Storm Linfa led to major power outages. Therefore, the destruction caused by natural calamities to the power grids has emphasized the need for an alternative backup solution that will ensure continuous power supply.
“Natural disasters are making a business case for microgrids, and are driving their adoption across the world, especially in regions that are frequently affected by natural calamities, such as the southern part of the US. As a large portion of the power can be generated on site, microgrids provide a higher degree of reliability for mission-critical facilities such as military bases, hospitals, and data centers that need to function continuously under any circumstance,” says Sayani.
Growing support from governments
In March 2011, a devastating earthquake with a magnitude of 9 and a tsunami together hit the Tohoku region in Japan, causing catastrophic damage to the district’s energy supply system leaving millions of people without power for many days. As a result, the Tohoku Electric Power Cooperation stopped supplying power; however, the Sendai Microgrid, which was one of the four major New Energy and Industrial Technology Development Organization (NEDO) projects to be developed in Japan, was able to supply continuous power within its service area despite the devastating damage to the power system.
Similarly, in 2012, when the US was hit by Hurricane Sandy, millions of people and several medical centers and other critical infrastructure facilities were left without power. In the midst of the outage, 15 MW combined heat and power (CHP) generator and 5.3 MW solar microgrid installed on Princeton University in New Jersey were able to power the university campus for three days.
Thus, the resilience demonstrated by microgrids during natural calamities led to the introduction of policies and support from governments worldwide.
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