COVID-19 and Microgrids: Boon or Bust?

How has the coronavirus outbreak affected adoption rates, future growth potential, and the pace of development for microgrids in 2020 and beyond? Definitive answers to these big questions are not yet possible given the lack of available data. Microgrids are not a unified or monolithic market. Each region, market segment, and vendor may be affected differently by COVID-19. There will be short- and long-term ramifications, but discernable evidence points toward overall double-digit growth in microgrids despite a severe global recession. However, market forecasts for 2020 and 2021 have been adjusted downward in recent Guidehouse Insights reports from factors including delays, supply chain issues, and the effects of social distancing on regulatory approvals and commissioning.

Despite analysis supporting robust future long-term microgrid growth, growth will be characterized by uneven effects on different market segments and by the desirability of different distributed energy resources (DER) options. US and global recovery is anticipated to also be uneven given the surges of coronavirus infection in certain US states and countries. COVID-19-related impacts and the mix of DER assets being deployed within microgrids were addressed in two recent Guidehouse Insights reports.

DER Deployments for Microgrids

Two trends are already under way that will likely be amplified by the spread of the coronavirus. The first addresses the mix of DER assets incorporated into microgrids. Guidehouse Insights forecast nine different DER options in this report. COVID-19-related impacts are a driver toward cleaner energy given increased concerns over air quality effects of the technologies chosen for resiliency services. Second, the costs of solar PV and energy storage will likely continue to drop. These two DER categories were already the most popular in 2020. They are anticipated to increase overall market share between 2020 and 2029, making up 78.4% of DER microgrid market share in 2029. This trend is only reinforced by the pandemic. While fossil fuel-based technologies will likely decline in a relative market share basis over the next 10 years, they are not all impacted in identical ways. Fuel cells, for example, can turn to biomass or hydrogen to substitute for fossil fuels.

COVID-19: Which Microgrid Segments Benefit - Which Suffer?

Some microgrid segments, notably applications for healthcare and businesses benefiting from shelter-in-place and social distancing, are seeing increased market traction. Yet these segments, including hospitals and data centers, face unique regulatory and cultural barriers to reaching their full potential as microgrid candidates. For example, hospitals are mandated to rely on diesel generators for backup power. Nevertheless, COVID-19 could be a lightning rod for reform, spurring on increased opportunity in these promising markets.

The pandemic and wildfires are accelerating interest in modular microgrids. Their popularity is increasing because they can be deployed quickly, require minimal social interaction, and reduce commissioning costs and delays because systems are pre-packaged microgrids in a box and ready to go. The California Public Utilities Commission formalized state policies that provide incentives for modular microgrids that rely on clean energy resources.

The new normal might spur greater interest in DER platforms that could compete with or even complement grid-tied microgrids, such as virtual power plants (VPPs). COVID-19-related impacts are placing a greater emphasis on smaller individual nanogrid systems for residents capable of providing resiliency services. However, the ability of residents to gather at community emergency shelters during power outages could be limited due to social distancing regulations. Some residents might fear that such group gatherings are too high of a risk. For parts of the US that face either hurricane or wildfire threats, individuals might elect to invest in their own home-based resiliency systems that could become assets rolled into VPPs so they can continue to shelter-in-place.