ORIGINAL REPORTING: Mixed-ownership models spur utility investment in microgrids

Public purpose microgrids: Mixed-ownership models spur utility investment in growing sector; Thinking of microgrids as public infrastructure — and financing them like it — could point the industry to new growth

Herman K. Trabish, August 30, 2016 (Utility Dive)

Editor’s note: Microgrid growth continues to fight against market forces.

Rainstorm-driven floods and worsening seasonal wildfires are making companies and communities realize a backup power supply is an increasingly good bet. That trend promises to open up new opportunities for microgrid deployments that provide power on-site and without the grid. U.S. cumulative microgrid capacity is expected to reach 4.3 GW by 2020, according to GTM Research’s U.S. microgrids 2016. That represents a 116% increase in annual installed capacity from now until then. But analysts say many business opportunities remain closed off by mainstream private sector financing models, which fail to take into account the public service microgrids can play.

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Increasingly, however, utilities and other investors are using a financing tool known as private-public partnerships (P3), or “public purpose” financing. From 2010 to 2014, about 90% of microgrids were owned by the end user, but that share fell to 74% of the market in 2015 and is expected to be only 38% of the market in 2016. Utilities’ market share, which was 2% in 2014 and 5% in 2015, will jump to 18% in 2016. The big finding, however, was in mixed ownership. Though virtually nonexistent in 2013, the share of microgrids owned by multiple entities jumped to 10% in 2014 and was expected to be 38% of the market in 2016. Often these mixed ownership models include money from public institutions alongside utilities and private end users. This more diverse microgrid marketplace has two major drivers. Regulated utilities see opportunities to replace bulk power system investments with microgrid deployments. Private sector off-takers are increasingly interested in owning and operating specific microgrid assets through long-term power purchase agreements… click here for more

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