|By Marketwired .||
|February 4, 2014 07:30 AM EST||
BOSTON, MA -- (Marketwired) -- 02/04/14 -- Self-contained "microgrids" are emerging as a viable power option for users from datacenters to telecom stations to single family homes. While customer-owned microgrids are standard today, a new business model, Microgrid-as-a-Service (MaaS) offers a flexible ownership structure and presents the best opportunity to capitalize on this growing market, according to Lux Research.
Lux Research utilized 15 different generation sources and cost/revenue inputs to build a bottom-up microgrid financial model giving the internal rate of return (IRR) and levelized cost of energy (LCOE) as metrics for given sector- and business-model-specific input assumptions.
While all models of microgrid development can potentially be profitable, MaaS -- where the installing entity owns and finances the microgrid on behalf of the subscribing customers or power purchasers -- provides the most flexible growth opportunities.
"The complex planning required to deploy microgrids is enabling innovative business models to emerge as focus grows on local power quality and grid-wide performance, coupled with improved distribution generation and automation," said Dean Frankel, Lux Research Associate and the lead author of the report titled, "Microgrids: How Business Model Innovation Will Support New Development Opportunities."
Lux Research analysts built and evaluated several models in order to assess opportunities for utilities, and impact-investors and technology developers. Among their findings:
- Customer-owned microgrids and MaaS yield similar returns -- but to different parties. Based on an industrial base case, with 10 MW of generation from solar and natural gas, as well as energy storage, the returns for the customer-owned microgrid and MaaS are identical. However, the customer-owned model places all financial risk on the customer, while the MaaS model offers an opportunity for utilities and third-party financiers to strategically capture customers while diversifying from traditional power service opportunities.
- Pay-as-you-go (PAYG) model shows promise in developing world. Small-scale PAYG microgrid models can help profitably serving the 1.3 billion people who lack access to electricity. In India, Mera Gao Power runs profitable solar-driven microgrids, serving 25-30 paying customers per microgrid installation.
- Electricity and gas prices impact microgrid economics. As the retail rate of electricity increases, microgrids become a no-brainer investment as every 1 cent per kilowatt-hour increase in electricity rate translates into a 2% increase in IRR. Similarly, gas price fluctuations can drastically swing microgrid economics -- a 50% price increase from $4 to $6/mmBTU can completely wipe out any economic benefits of a microgrid implementation.
The report, titled "Microgrids: How Business Model Innovation Will Support New Development Opportunities," is part of the Lux Research Grid Storage Intelligence service.
About Lux Research
Lux Research provides strategic advice and ongoing intelligence for emerging technologies. Leaders in business, finance and government rely on us to help them make informed strategic decisions. Through our unique research approach focused on primary research and our extensive global network, we deliver insight, connections and competitive advantage to our clients. Visit www.luxresearchinc.com for more information.
Lux Research, Inc.
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