The Rise of Micro-Grid Start-Ups

As the amount of residential and commercial solar installations continue to grow at a rapid pace in the United States, companies are looking to take the next step in bringing economically and technically sustainable renewable energy systems onto the energy landscape. This next step is the development of an integrated commercial and technological model to build a microgrid that can operate solely on renewable energy and independently from the larger energy grid system. Further technical details on how microgrids are built and what components are required for them to function properly can be found in this BERC article, ‘How To Build A Microgrid’.

Schematic Of A Microgrid with Utility Interconnection – Source: Microgrid Institute

The technological bottleneck in microgrid development remain energy storage technologies and power management systems, especially the inverter required to transform the electricity generated from the energy source, since they represent the most expensive components of the overall system. Not only do the individual costs of the storage and the inverter present a substantial obstacle in the commercial development of microgrids, but the integration of these complex technologies into the larger system can often lead to prohibitive costs and maintenance challenges when the different are not interacting properly. Current microgrid system can deliver electricity at a rate between 20 cents/kWh to $1/kWh depending on many factors. The Department of Energy aims to bring the price of renewable microgrid energy down to 14 cents/kWh by 2020, so that it will be competitive with retail electricity prices.

This process of integrating various types of complex technological products into a larger microgrid remains one of the largest bottlenecks in the deployment of microgrids due to the financing challenges it creates. New microgrid start-up companies have realized the opportunity presented by the integration challenge and have started to develop leaner and more systematic mechanisms to simplify the synthesis of microgrid and create a more appealing business model for microgrid systems. Two of the most prominent companies that have taken on integrated microgrid development are SunEdison and SolarCity.

SolarCity Workers Installing Modules – Source: San Jose Mercury News

Given that both SolarCity and SunEdison are among the largest deployers of solar power systems, both residential and commercial, in the United States, the expansions into microgrids seems like a natural extension to their current business models. SunEdison recently acquired an energy storage start-up Solar Grid Storage, which gives them the storage and power management capabilities required to build fully integrated microgrid. SolarCity, on the other hand, has already built integrated microgrid system in a pilot program in the Bay Area and the company expects commercial microgrid systems to be available for larger deployment in the summer of 2015. In its pilot program SolarCity partnered with Tesla Motors to combine Tesla’s energy storage capabilities with its financing and business model design strengths to develop a more coordinated approach to a solar powered microgrid based on both technological and business considerations.

SolarCity Modules Combined with a Tesla Battery – Source: Un Blog Verde

In the United States, the main market for microgrids are communities that are exposed to severe weather events, which could lead to grid outages such as during superstorm Sandy on the East Coast two years ago. Several states have already committed funds to energy resilience projects. These states include: Massachusetts, which already committed more than $18 million to 13 microgrid projects in state; New York, which launched a $40 million microgrid competition last year, New Jersey, which has pledged $200 to its Energy Resilience bank that may find microgrids particularly attractive; California, which announced $26.5 million of grant for renewable energy based microgrids, such as the ones proposed by SolarCity and SunEdison. SolarCity aims to target the US municipality market first, but the company is also thinking about providing microgrid solutions to island nations. Microgrids are particularly attractive for island, as many of them rely on fuel imports to supply their energy infrastructure. Hawaii, for example, relies heavily on petroleum to fuel over 80% of its energy needs, which has to be imported to the island. A functioning island microgrid system would monumentally change the energy landscape in Hawaii and many other island nations.