Growing the Microgrid Business in the U.S. & Underdeveloped Regions

On the Microgrid Executive MBA Discussion Board

How will the microgrid business grow and how can the model be adapted in underdeveloped or poor regions? Microgrid expert and course instructor Mahesh Bhave answers student questions…

Mahesh Bhave: Here is a good question from Student 1:

“How will you grow the Microgrid Business? This is interesting because the pro forma that has been provided could be slightly modified and you would have a pro forma to build a company, but not necessarily one for a project. But, we are not building a business, are we? We are building projects.”

How would you answer this from your perspective?

Student 2: If I was to develop business for microgrid, I would consider the following targets in the developing countries such as the USA:

1. Areas having electric capacity constraints that need grid upgrade in transmission/distribution and or generation. Microgrid seems to offer a compelling alternatives in terms of lower capital investment, low environmental/land impacts, etc. If the technology mixes of the microgrid have more renewable elements, then there might be additional advantage of running cost, etc. Potential customers could be the local electric utilities.
2. Areas without any distribution infrastructure yet. Microgrid would be an obvious choice for consideration. Potential customer could be the local electric utilities.
3. Customer premises that have high reliability requirements for their operations, e.g. data center, emergency response center, law enforcement, hospital, military installation, airport, etc. These customers would value the resiliency and reliability of microgrid to compliment electric service from the macro grid. Potential customers could be either the end-customers or the local electric utilities.

For under developed countries that do not have transmission and distribution infrastructure yet, then microgrid would be compelling offering.

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Student 3: …In developing countries, (but not only there), there are areas where distribution grids are not viable due to long distances, low demand and low ability to pay for the service. In poor countries and especially their poor areas, imported fuels and technologies are often difficult to acquire and relying on them creates dependence on donor organizations – or debt. What these areas need, in my opinion, is to tap into local energy sources, select appropriate technologies and develop local capacity to operate and maintain the systems. Even this is by far easier said than done. So, while I’m certainly interested in following the discussion on microgrid development in US, and thinking they will also eventually emerge into discussion in Finland where I live, what I’m here for is looking at standalone microgrids in this course. So hopefully we’ll keep an open mind to seeing all that microgrid development entails.

Student 4: I agree with your concern about a bias toward modeling microgrids more toward developed communities.
In the small community in the US in which I intend to evaluate, the county has the lowest per capita income in the state. Thus, even in the US, we can face a situation in which an incumbent power grid, supported by rigid franchise rules, is restraining job creation + community development. This is the case in the urban (like Detroit) and rural US. This  further illustrates the revolutionary potential within microgrid developments in diverse economic settings.

Mahesh Bhave: Hi Student 3. I appreciate your post, and the quote, “What these areas need, in my opinion, is to tap into local energy sources, select appropriate technologies and develop local capacity to operate and maintain the systems. Even this is by far easier said than done.” In one of my articles, I argued for “microgrids by mail,” that are small and simplified… we bring it into a village, open the box (think IKEA, “electricity in a box”), and press a button – electricity! Further, that the microgrid is customized via “checking/ticking boxes” on a Amazon-like website accessed on a smartphone (alas, battery powered in the absence of electricity.)

The World Bank talks about “Anchor Business Customer (ABC)” model of electrification- a cell phone tower as anchor representing sufficient demand, and therefore revenue, so that the adjoining village justifies investment.

Thinking small, scalable, and self-sufficient is most important. The designs and implementation will follow. 

I also argued for milk cooperatives to get into the electricity business – community ownership, local management.

Technically, this is possible. Why hasn’t anyone done it? What are the barriers? Thinking small, scalable, and self-sufficient is most important. The designs and implementation will follow.

The multinationals are necessary to “productize” electricity (or entrepreneurs of the caliber of Elon Musk, Richard Branson, or Bill McGowan) and they will create “microgrid as product,” once the urban and suburban markets where the grid exists, are also customers for their small, yet scalable, and inter-working federation, of microgrids.

And since “capital efficiency” justifies microgrids in urban and developed markets, as superior substitutes, I argued how Wall Street equity research analysts can make the case during the webinar, and we can discuss this more during our class. The productization of electricity will benefit all, including for rural, greenfield deployments.

The very word “off-grid” is a mistake. It references the “grid” when in fact no grid need exist, for intrinsically, electricity is a local business. Local generation, local consumption. “Grid” is improper word choice as barrier to creative, open thinking. At best we need “local electricity network” (or, LEN.)

Thus, it may be argued that the grid as we know it need not be. It exists because of the concentrated power of fossil fuels, or the ability of the Niagara Falls, to turn a rotor, and transport the electricity generated all the way from Buffalo to New York City. But if New York City could generate its own electricity, why Niagara Falls, and why transmission lines? Even Tesla, who pioneered this, wanted “wireless electricity” (likely in a small area) and Edison was all for small, Direct Current local area networks. See the BBC video, Shock and Awe.

The “grid” also indicates “network” and we know “network externalities” very well in telecommunications and the Internet. Yet electricity offers no comparable network externalities. Then why the talk of the “grid” as referencing electricity infrastructure? Once again, the use of language, with insidious metaphors and false associations, becomes a barrier to open thinking.

Then the talk of “smart” grid, insidious again. For the reality is: the grid as we know it is becoming obsolete, and all the “smart” horses, and all the “king’s men” cannot put it together again; the grid, where it exists, works, but is Humpty Dumpty.

Enroll in Microgrid Executive MBA today!

Mahesh Bhave – Visiting Professor, Indian Institute of Management

Mahesh Bhave is a Visiting Professor of Strategy at Indian Institute of Management, Kozhikode, India. He has worked in product management, strategy, and business development positions at Hughes, Sprint, and Citizens in the United States. He is the founder of a rich media communications start-up in San Diego, CA. He is an engineer from IIT, New Delhi and Ph.D. from Syracuse University. He is also LEED AP certified.

Mahesh is teaching:

• Free Lecture: What Business Are Electric Utilities In?
• Free Course: Microgrid Economics and Feasibility
• Free Course: Commercial Solar PPAs 101
• Microgrid Executive MBA Training