The clean energy transition has a visibility problem. Utility-scale solar farms and offshore wind installations attract the headlines, the capital, and the policy attention. But nested between those massive projects and individual rooftop panels sits a category of infrastructure that’s quietly critical and chronically overlooked: community-scale microgrids.
Brooks Sherman, a sustainable innovation strategist focused on storage and community energy, says that the gap isn’t a matter of technology or demand. It’s a failure of financing structures, regulatory imagination, and institutional inertia.
The stakes are rising. The average length of the longest U.S. power outage climbed from 8.1 hours in 2022 to 12.8 hours by mid-2025, according to J.D. Power, driven by increasingly severe weather events. In 2024, Hurricane Helene alone left 5.9 million customers without power across 10 states. Meanwhile, the Department of Energy has warned that blackout hours could increase 100 times by 2030 as AI data centers and new manufacturing drive electricity demand upward while aging generation capacity retires. In this environment, community microgrids aren’t a niche experiment. They’re a resilience imperative that the market has yet to fully fund.
The Investment Mismatch
The global microgrid market is growing rapidly, and is projected to reach $95 billion by 2030, up from roughly $43 billion in 2025. But that headline number obscures a stark imbalance. The majority of deployed capital flows to commercial and industrial microgrids, military installations, and campus-style systems for hospitals and universities. These are settings where a single creditworthy counterparty can anchor financing and where the value proposition in backup power for critical operations is easy to underwrite.
Community-scale microgrids, which serve residential neighborhoods, rural towns, Tribal lands, and lower-income urban districts, represent a far smaller slice of that investment. The reasons aren’t technological. The hardware, such as solar arrays, battery storage, smart controllers, is the same. The gap is structural: fragmented ownership, diffuse cost-benefit distribution, and an absence of standardized financing vehicles that can aggregate small projects into investable portfolios.
The Department of Energy took a meaningful step toward closing this gap in October 2024 with the launch of the Community Microgrid Assistance Partnership (C-MAP), which provides technical assistance and funding specifically for rural, remote, and disadvantaged communities in Alaska, Hawaii, and indigenous nations. It’s a signal, but not yet a solution at scale.
Who Gets Left Behind
The equity dimension of this underinvestment is hard to overstate. Long-duration outages are most prevalent in counties with large socially and medically vulnerable populations, including regions across the Northeast, South, and Appalachia. The people who most need a resilient, local energy backup are often the least positioned to pay for one.
Consider Highland Park, Michigan, a community ranking in the 94th percentile for low-income status in the U.S., where a winter storm in December 2023 left residents without power for four days. Residents who can’t afford backup generators or hotel stays had no recourse. Efforts to develop a community microgrid there have been driven by local advocates, not institutional investors. That’s a pattern repeated in vulnerable communities across the country.
Sherman sees this dynamic as emblematic of the broader problem. The communities with the highest need for decentralized energy resilience are exactly the communities where the conventional return-on-investment calculus breaks down. Closing that gap requires different capital structures that are patient, blended, and purpose-built for community settings.
Regulatory Challenges
Financing challenges don’t exist in a vacuum. They’re compounded by a regulatory environment still calibrated for a centralized, 20th-century grid model. As Lawrence Berkeley National Laboratory has documented, most existing legal and regulatory frameworks were designed for a one-way power system, which means community microgrids often have to navigate rules that were never written with them in mind.
One particularly vexing barrier: a microgrid that serves more than one property can be automatically classified as a public utility under many state statutes, subjecting it to the full weight of investor-owned utility oversight. Few community organizations or small developers have the legal resources to comply. The result is a regulatory structure that inadvertently penalizes exactly the projects that most deserve support.
Interconnection is another chokepoint. Linking a community microgrid to the main grid, which most projects need to do in order to buy power when local generation is insufficient, involves a process that is, as University of Pennsylvania energy researchers have described it, “prohibitively cumbersome, expensive, and opaque.” Utilities hold significant discretion over interconnection approvals, and their institutional incentives don’t always align with community microgrid deployment.
California’s experience is instructive. After years of rulemaking meant to commercialize microgrids, the state’s Public Utilities Commission issued a decision in November 2024 that many clean energy advocates called a missed opportunity and one that reinforced a challenging environment for private microgrid developers rather than clearing a path for them. Oregon has taken a different approach: its 2025 legislation introduced third-party interconnection consultants, concrete deadlines, and limits on utilities’ ability to deny interconnection requests. It’s a model worth watching.
What Better Financing Could Look Like
The financing models that work for utility-scale renewables, such as tax equity, project finance, long-term power purchase agreements with creditworthy offtakers, don’t translate cleanly to community microgrids. The projects are smaller, the customer base is more diffuse, and the revenue streams are harder to predict and structure.
There are emerging models worth scaling:
- Community bonds and green bonds can tap local stakeholders as investors rather than relying solely on institutional capital.
- Energy-as-a-Service arrangements, in which a third-party developer owns, operates, and finances the microgrid while the community pays a monthly service fee, shift the capital burden away from residents who can least absorb it.
- Revolving loan funds and blended finance structures that combine concessional public dollars with private investment can make projects viable that would otherwise fall short of market-rate return thresholds.
Sherman also notes that the aggregation problem is solvable. Standardized project structures, shared legal templates, and coordinated procurement across multiple communities could reduce transaction costs enough to make portfolio-level financing feasible. That’s the same logic that transformed community solar from a curiosity into an industry. The DOE’s original goal of 20 gigawatts of community solar by 2025 was only partially met as roughly 7 gigawatts came online but the trajectory shows what concentrated policy support and market development can accomplish.
The Opportunity in the Gap
The underinvestment in community-scale microgrids isn’t a permanent condition. It’s a market inefficiency waiting to be corrected. The demand is there. A nationally representative survey of nearly 2,000 U.S. residents found that the desire for improved power reliability is the strongest predictor of public acceptance for community microgrids, followed by expectations of faster disaster response and lower energy costs. These aren’t abstract values. They’re the lived experience of communities that have sat through four-day outages with no recourse.
The technology has arrived. Battery storage costs have fallen dramatically, solar is the cheapest form of new electricity generation in most markets, and AI-powered energy management systems are making microgrid operations increasingly efficient. The North America microgrid market is projected to nearly double by 2034, and the companies that figure out how to finance and deploy community-scale projects at scale will occupy a defensible position in that growth.
What’s needed now is for institutions to match the market opportunity in front of them with financing structures that fit the asset class, regulatory frameworks that stop penalizing community developers, and policymakers who understand that the clean energy transition isn’t complete until it reaches the communities that need it most. Sherman sees this not only as an equity issue but as a strategic opening: the segment most underserved by current capital markets is also the segment with the most unmet demand and the most room for innovation.
Community-scale microgrids won’t make headlines the way a multi-gigawatt offshore wind farm does. But they may matter more to the millions of Americans who’ve learned, the hard way, that the grid they depend on can fail them when they need it most.