The U.S. microgrid market is growing, with a record 546 microgrids installed during 2019. Most of those projects were below 5 megawatts. This is a continuation of the trend starting in 2017: The number of smaller, more modular projects has consistently grown each year.
As the market has grown, it has also attracted increasingly diverse financiers, according to a new Wood Mackenzie report.
As costs have gone down, investor interest has gone up
Increasing system standardization and the declining costs of energy resources have reduced development costs and boosted the growth of small microgrids.
Standardized systems remove the need for custom builds, so less time is required for construction. That’s also made it easier for financiers to evaluate multiple projects: Due-diligence costs are lower for a portfolio of locations that run similar technologies and have the same business model as opposed to a portfolio comprising multiple customized systems with different business models.
The investor landscape is diverse and will continue to expand
An increasingly broad array of financiers with patient capital are investing in U.S. microgrids, ranging from investor-owned utilities to private equity groups. In the next two years, WoodMac forecasts that more private equity players will enter the market, especially those with experience in infrastructure and oil and gas. Many of these firms are looking for above-market returns with levels of stability comparable to those historically associated with infrastructure investments.
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