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The Missing Microgrid Boom: If microgrids can help solve our load growth challenges, why aren’t we seeing more of them?

 
 
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Key Takeaways:

1. A new set of deep-pocketed customers focused on getting access to power as quickly as possible could usher in the customer pull and investment needed to push microgrid adoption beyond niche applications and into a role as a mainstream player on our grid. Technological advancements, particularly falling battery storage prices, provide an additional tailwind.
2. However, achieving scale will require speeding up design, making hardware interoperable, navigating supply chain constraints, and accelerating processes to tie microgrids into the centralized grid.
3. If you’re a startup founder, industry expert, or peer investor focused on this space, tell us about your startup or reach out to connect!

If new power loads are coming, will microgrids come too?

June X, 2025 — Conversations about rapidly deploying new electric loads – whether massive loads like AI data centers and new manufacturing, medium loads like EV fleet charging depots, or relatively small loads like retail EV fast chargers – inevitably turn to the costs and delays of interconnection and grid upgrades. These delays can be on the order of years, and costs can hamper the viability of a project. 

Microgrids, using the term broadly for everything from massive energy parks to C&I coordinated behind-the-meter assets, seem to be the perfect solution to the delays associated with the centralized grid. We have a long history of microgrid deployment for added resilience or for remote energy applications, and part of the appeal is the potential to be faster to develop and deploy than alternatives. 

Experts and microgrid companies have argued as much: just see articles touting the benefits of microgrids for data centers, energy parks to support large loads, and microgrids for fleet electrification.

So why hasn’t the microgrid cavalry showed up at scale (yet) to save the day?

We believe there are four barriers. Fortunately, we also believe each of these barriers can be  addressed, and this new wave of demand might provide the urgency and investment needed to make microgrids an important element in our energy future.

 
 
 
 

Is it finally microgrids’ time to shine?

Within certain circles, microgrids have been held up as an anecdote for the ills of the electric grid for a long time. As an example, the Technical Editor of T&D World found the concept old enough to need a short history (he argues the microgrid concept goes back to 1882). And yet microgrids continue to primarily support niche applications and haven’t yet ushered in an age of a more flexible, distributed grid. So why might this time be different?

While definitions can vary, in this piece we’re using the term microgrid expansively to include a system that actively manages both generation and load, and can be self-sustaining for a significant period of time. At scale, this can range from a system managing a large building or campus all the way to one managing a utility-scale solar and storage system paired with a hyperscale datacenter.

More narrowly-defined systems that we would put under the larger umbrella of microgrids include the following:

  • Minigrids or Community Microgrids: A minigrid is a localized energy system, typically servicing multiple buildings or an entire community that integrates DERs. Minigrids are typically an islandable system and are most often seen in rural settings where grid access is limited or risky. Ex: Calistoga Community Microgrid used by the City of Calistoga to provide power to downtown Calistoga during PG&E Public Safety Power Shutoffs during severe weather events.

  • Power parks/energy parks: Power parks or energy parks integrate utility scale generation with multiple large energy offtakers, all situated behind a single grid interconnection. Typically they can both receive energy from or supply energy to the grid depending on the supply and demand needs of the power park.

  • Energy management systems: Energy Management Systems (EMS) have been installed to help medium-to-large buildings manage electric loads for a long time. These systems generally aren’t considered microgrids. However, as they begin to not only optimize load but also manage generation/energy storage and facilitate resiliency during power outages, they begin to look more and more like small microgrids.

 

There are both market factors and technological advancements that could change the equation.

  • The speed-to-power imperative and an evolving customer set: Historically, microgrids were either serving remote areas or promoting resilience of critical infrastructure. Neither customer set had the deep pockets nor the existential need for power that we’re seeing from today’s AI data centers and advanced manufacturing facilities. In Europe, cost and geopolitical pressures are also making electrifying equipment in grid constrained areas a business imperative. These players are willing to pay a premium for microgrids if they can move faster than the alternative grid upgrades and provide additional value.

  • An increasingly electric-dependent world meets extreme weather: Even as we become more reliant on electricity, weather related outages are becoming more frequent.  This is leading utilities (and their regulators) to subsidize microgrid or minigrid development in vulnerable communities or at critical infrastructure. For example, the state of Colorado highlights three projects of various size and complexity across Larimer County, and the Texas Legislature authorized a $1.8 billion fund dedicated to microgrid deployment at critical facilities like hospitals, nursing homes, and water treatment plants.

  • Decreasing battery storage prices: Even microgrids incorporating solar and some storage have historically remained reliant on significant thermal generation from natural gas or diesel generators. Fuel costs and local air quality considerations often limit those resources to resilience-only applications. We expect most microgrids will still have some thermal generation. However, with cheaper battery storage, microgrids can lean more heavily on their storage resources and use those same batteries to generate revenue from energy arbitrage or grid services, improving overall project economics.

  • Increased electricity price volatility: A world with higher penetration of intermittent generation resources will likely create more electricity price volatility, even as it brings overall costs down. This creates opportunities for microgrids to unlock value from their energy storage assets beyond just backup power.

Unlocking Microgrids at Scale

With market tailwinds and technology advancements, we’d expect microgrid deployments to be rapidly taking off. However, there are a number of friction points still holding the industry back. We’re excited about – and looking to invest in – innovations to solve them.

Pain point: Custom snowflake projects

For most projects, engineering, permitting, and interconnection remain bespoke and slow. Each project is treated as a custom build.

Opportunities:

  • Improved project planning, design, and operations tools.

    • Software has been used across a number of industries to accelerate design, simulate various scenarios, and accurately estimate project pricing. For microgrids to deploy at scale, we’d like to see continued planning software innovation that also provides continuity with operations software. Using the same underlying software for planning and operations ensures that the same assumptions are applied throughout both phases, which in turn helps actual system performance match modeled system performance. 

    • Example startups: Xendee, Microgrid Labs, Tibo, H.E.A.T Solutions, simpl.energy

  • Modular microgrid configurations

    • While each project will have different specific needs, as hardware costs fall the benefits of modular systems that are easy to deploy could outweigh the value created by custom-engineering the system. We were excited to see the US Department of Energy fund several modular microgrid projects for resilience or remote power applications in 2024 and would like to see the learnings drive modularity in other applications. 

    • Example startups: Box Power

  • Efficient coordination of supply, demand, capital, and the grid

    • Massive energy parks supporting AI data centers or large manufacturing centers will need some custom design and engineering. However, in these cases platforms that can help align the gears between generation suppliers, load developers, financiers, and utility interconnection can accelerate the process. 

    • Example startups: Reload, Scale Microgrids (recently acquired by EQT)

Pain Point: Hardware interoperability

Because microgrids are integrating such a wide range of systems, it’s inevitable that they’ll need to manage various components from a number of OEMs. This can create significant integration challenges. Today, most projects rely on legacy DERMS systems or custom gateways. 

Opportunities

  • Improved operational software tools with easy-to-implement integrations

    • While much easier said than done, purpose-built software that can ease upfront integrations and support ongoing coordination among a wide range of hardware OEM products can greatly accelerate microgrid deployment. 

    • Example startups: Elexity

Pain Point: Grid interconnection

We believe the vast majority of microgids will be grid connected and islandable. By taking advantage of the grid’s inherent diversity of supply, load shapes, and weather microgrids can avoid adding the equipment needed to support the most extreme of scenarios, all the while still limiting the need for grid upgrades and providing backup services. Therefore, although microgrids can accelerate timelines for development by avoiding costly and labor-intensive grid upgrades, projects often still must coordinate with the utility and may need new interconnections. 

Opportunities

  • Improved grid modeling for interconnection

    • By speeding up interconnection modeling with powerful new tools, utilities, ISOs/RTOs, and developers can all advance projects more rapidly.

    • Example startups: Pearl Street Technologies (Powerhouse Ventures Portfolio Company recently acquired by Enverus), Piq Energy, Think Labs (Powerhouse Ventures Portfolio Company) 

  • Improve site selection to leverage sites with sufficient power, land, and other resources. 

    • Projects that can best identify sites that have both sufficient power for grid interconnection, sufficient land for the load-supporting microgrid, and the other resources necessary for the load’s economic activity will have an advantage making their projects a reality. 

    • Example startups: Othersphere, Kevala, Paces

Pain point: Equipment delays and increased import costs

Microgrids will need some of the same electric grid components, like transformers and switchgears, that have recently seen their wait times expand drastically. And because much of the supply chain for solar, battery, and, in some cases, natural gas generators and fuel cells remains outside of the United States, it is subject to the higher costs and uncertainty of US tariffs and international trade dynamics. 

Opportunities

  • Alternative technologies

    • Emerging alternative hardware solutions, like solid state transformers, are beginning to be commercialized.

    • Example startups: Heron Power (Powerhouse Ventures Portfolio Company), Amperesand, DG Matrix

  • Improved predictive maintenance and monitoring

    • Getting more uptime and longer life out of existing assets through sophisticated predictive maintenance and monitoring can help projects remain reliable while also reducing costs.

    • Example startups: Raptor Maps (Powerhouse Venture Portfolio Company) 6oHertz, Zeitview 

We’re looking to support these solutions

At Powerhouse Ventures, we back early-stage founders building innovative software to accelerate energy abundance across power generation and infrastructure, mobility, buildings, and industry. If you’re currently working on an early stage startup focused on microgrid development, are a potential user of a microgrid, or are an industry expert or investor in this space, we’d like to connect!

Authored by Powerhouse Ventures Principal Gabe Cuadra, Powerhouse Ventures Senior Associate Lucy Reading, and Special thanks to Brianna Rivera for her support in this research.

To read more about our work at Powerhouse and Powerhouse Ventures, visit our Insights page.