Corporate Vision March 2017

104 CORPORATE VISION / March 2017 , JohnMurray, Senior Analyst, Delta-ee tells us whymicrogrids are one of the hottest topics in the industry right now in this special guest article. Microgrids: Coming of Age or Niche Opportunity? With an increasingly distributed energy system, rapidly falling energy storage costs, and a growing demand for flexibility and energy autonomy, microgrids are fast becoming a key topic of commercial relevance in many global markets. In short, microgrids are one of the hottest topics in the industry right now - and key players don’t want to be left out. As Delta-ee’s latest Multi-Client Study gets underway, we reflect on our initial findings from recent engagement with key players in the microgrids space, and consider the following questions: • Who is interested in microgrids? • How active are those interested in the development of microgrids? • What will be the greatest enabler for microgrid market growth? A graphical representation of a microgrid, with multiple distributed loads and generation assets. Utilities are exploring microgrid opportunities Utility companies are actively exploring the opportunities and threats associated with the emergence of microgrids, but manufacturers are also taking a keen interest. We know of a number of manufacturers who are developing microgrid solutions today, with the objective of widening their service offerings to include energy services through an ESCO business model. The continued emergence of manufacturers offering energy services alongside their hardware, is a very real threat to the established utilities in some countries and sectors. Aside from utilities and manufacturers, a significant proportion of those who expressed an interest in microgrids identify as housing developers or housing associations. The interest from these companies is noteworthy given the applicability of microgrids, in a community energy application, as a force to drive down energy prices and improve grid resiliency and reliability – in both urban and isolated contexts. Most companies at an early stage of developing strategies – but competition is growing The largest share of industry stakeholders we engaged with (39%) stated that they are in the early stages of exploring and understanding microgrids as an opportunity, highlighting the relatively early nature of microgrid activity within many companies. While this result is not highly surprising given the early stages of Delta-ee’s research, what was perhaps most interesting is nearly a third of those spoken to are ‘actively engaged’ in developing microgrids but without having a fully developed strategy, product or service - yet. What this suggests to us is that there are many companies currently in the ‘strategy development’ phase that are considering how best to position themselves to maximise the opportunities associated with this space. Following this consideration, we believe it will only be a matter of time before many of these companies come to market. Therefore, we can be sure that the ‘microgrid’ space will become a whole lot more competitive in the next 5 to 10 years. Multiple enablers likely to play a role in a growing microgrid market Our recent research suggests the following factors as being important for microgrid growth over the next 5-10 years, from most to least important: 1. Microgrid component price reductions 2. Innovative business models 3. Regulatory reform 4. Increased promotion and competition A reduction in component prices will undoubtedly spur microgrid growth. For example, as we have found in a case study of the Cronimet Swartkop Chrome mine in South Africa, generating off-grid power using solar PV is often now much more affordable than using diesel generators. This is largely attributable to the rapid decline in the cost of solar PV panels over the past 10 years. Our research shows that less than 20% of stakeholders identified policy reform as an important enabler of market reform as this is something which is largely location specific. It is, however, becoming more common for early developers of technologies to inform policy development as regulatory frameworks often lag behind industry developments. What we think There are a range of actors at different stages of development, with a large number of companies taking an interest in microgrids. Microgrids will undoubtedly evolve to become a very important, perhaps disruptive, market opportunity within the energy industry. It is therefore time to act sooner rather than later. Delta-ee’s Microgrid Multi-Client Study is the perfect tool to help position your organisation towards the leading edge of microgrid developers and provide insight into developing the right strategy for your company before being crowded out of the market. If you have any queries or want to find out more about Delta- ee’s Microgrid Multi-Client Study, e-mail John Murray, Senior Analyst at Delta Energy & Environment (john.murray@ delta-ee.com) or find out more here: https://www.delta-ee.com/ micro-grids.html K Company: Delta-ee Name: John Murray Email: [email protected] Web Address: www.delta-ee.com Address: Floor F, Argyle House, 3 Lady Lawson Street, Edinburgh, EH3 9DR Telephone: +44 (0)131 625 1011 1702CV28

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