Innovative state action last year across the microgrid policy landscape was not enough to change the U.S. microgrid landscape, said Think Microgrid in its new State Scorecard 2024. Think Microgrid is a coalition that serves as a unified voice for the microgrid industry,
No states received a top score for their overall microgrid deployment in the 2024 report. “Ultimately, the landscape characterized in the 2023 Scorecard resembles the landscape today,” the report said.
Even states that have dedicated approaches to microgrid policy and regulation have struggled to create attractive environments for diverse, scaled capital deployment, Think Microgrid said.
Microgrids are groups of distributed energy resources, such as solar modules on a home, connected to a battery system, that can disconnect from the grid and operate independently during a power outage. Microgrids provide resilience during network outages, price volatility and other “black sky events” by their seamless ability to connect to and disconnect from the larger electric grid at its point of interconnection.
Microgrids are different from basic backup power systems due to their intelligent control systems that flexibly optimize energy demand and efficiency. This intelligence allows its component technologies to communicate flexibly and interactively with each other.
The U.S. Department of Energy has a vision that 30% to 50% of electricity generation will come from distributed resources by 2035, with microgrids playing a key role in the transition. However, getting there is not without challenges, as noted in the Think Microgrid report.
Federal grants and tax incentives are impacting the U.S. microgrid market as it continues to rapidly grow and diversify. However, this growth is not occurring symmetrically, Think Microgrid said as “development in some microgrid families is occurring rapidly in response to business and policy opportunities while others remain limited.”
According to Wood Mackenzie, U.S. microgrid operational capacity reached 9 GW in 2024 G3, following a 26% average annual growth rate since 2021.
Wood Mackenzie found that overall, microgrid investments are targeting more critical infrastructure, manufacturing facilities and large energy consumers. Many third-party financed projects, which are a growing part of the market share, have benefited from public funding such as Federal Inflation Reduction Act (IRA) tax credits, Infrastructure Investment and Jobs Act grants and state grant and loan programs.
Public funding has targeted military infrastructure, underserved communities and transportation, aligning resilience and decarbonization drivers. According to Think Microgrid, the increased deployment of private capital can be in part explained by financers becoming more comfortable with microgrid project risk and steadily increasing demand for resilience and prime power across the commercial and industrial sectors.
State Scorecard
Similar to last year’s report, Think Microgrid did not assign any state an overall A grade this year (though some states received an A in specific categories). While states have innovated in certain categories, there are barriers inhibiting advancement toward commercialization. “The level of deployment is nowhere close to establishing microgrids as the building blocks of an electric grid where [distributed energy resources] represent a significant, meaningful resource for grid operations,” the report said.
Think Microgrid evaluated each state across five categories:
Deployment: Is there a robust market consisting of all forms of microgrids, from simple single-customer applications to more complex community microgrids?
Policy: Are there proactive and comprehensive efforts to establish clear objectives, modernize rules, and update regulatory frameworks?
Resilience: Is there a dedicated focus on practical opportunities to deploy microgrids that provide resiliency to customers, communities, and critical facilities?
Grid services: Are there pathways to establish open markets for microgrid services so that investments from both utility ratepayers and private capital are properly supported and encouraged?
Equity: Are there mechanisms for microgrid deployment to advance social equity and environmental justice, while driving decarbonization and clean air?
States were evaluated on whether their activities represent “meaningful progress toward the vision outlined by the [Department of Energy] and others,” Think Microgrid said in its report.
Deployment
Each state’s deployment score was based on the state’s deployed microgrid capacity compared to its peak electricity demand. This ratio was based on the capacity of the microgrid fleet to the state’s peak demand (using data from the Energy Information Administration’s Form 861 data) compared to the aggregate capacity of deployed microgrids in MW (using data from Wood Mackenzie).
Arkansas, Puerto Rico, and Texas received top scores for deployment this year. Last year, Arkansas was the only state to earn an A grade for deployment.
State Policy
Effective microgrid policies support commercialization or an ecosystem that robustly incorporates private, utility ratepayer, and public-sector capital, Think Microgrid said. A state’s policies were evaluated across its
planning (such as whether it has established goals and metrics to evaluate the performance of microgrid deployment),
rules (such as whether the state has established or clarified rules that empower cooperative and municipal utilities to develop innovative microgrids), and
incentives (such as whether the state offers low-interest loans for qualifying microgrid projects).
Maine earned the highest grade in the U.S. for its policies, with it being the only state to receive an A. Eleven states earned a B, an increase from the previous year’s eight states.
Resilience
Think Microgrid looked at regulatory activity, legislation, and state planning activities related to electric grid resilience, as well as engaged in collaborative activities with energy regulators and energy offices. To achieve a high score, state policy activities must include microgrids as a targeted resilience solution.
The authors noted that effective policy allows communities to tailor microgrid configurations to local resilience needs.
Hawaii was the only state to earn an A grade. Texas, the only state to receive an A for resilience in 2023, was downgraded to a B.
Grid Services
The report identified four potential market interfaces that microgrids can engage to receive compensation for services: wholesale markets, retail tariffs, distribution-level markets and direct generator-to-user contracts. Successful retail tariffs, the authors contend, provide compensation pathways for a range of microgrid services, including: energy exports during periods of excess generation, load-shifting during peak demand periods, resiliency services, and utility distribution investment deferral or non-wires alternatives.
States fared the worst in the grid-services category, with no states earning an A grade. However, Colorado, Texas, Maine, West Virginia, the District of Columbia and Puerto Rico all received a B grade, an improvement from just five states to receive a B the year prior.
Equity
Community microgrids can provide benefits to all residents, including resilience, clean air, workforce development, and economic development to vulnerable communities, so the report looked at how well the states prioritize such equity. This is accomplished by identifying and mapping vulnerable communities, and actively seeking to stimulate investment in those areas.
Similar to last year, Colorado, Connecticut, and New York maintained a top score for equity.
Advancing the future of state-level microgrid policies
Despite several states developing real microgrid roadmaps, Think Microgrid said many barriers and solutions to microgrid market growth remain unchanged. Accordingly, the report said legislatures, regulatory bodies or executives can advance microgrid policy through
rule changes, which remove barriers to or stimulate microgrid market growth,
planning activities, which identify opportunities for microgrids to serve states needs and plan deployment to advance public-policy outcomes, and
incentives. such as public financing opportunities that support the deployment of microgrids aligned with state public policy goals, as well as market design supporting compensation for unique microgrid services.
