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How AV����̳ Fits into the Global Microgrid Movement

By Peter Asmus
July 29, 2022

Remote regions of the world such as AV����̳, once viewed as disadvantaged due to a lack of conventional grid infrastructure, have proven to be fertile ground for sustainable energy innovation. This innovation flows from challenges associated with providing reliable electricity without the benefit of traditional transmission and distribution systems. Economic pressures linked to the high cost of delivering traditional fossil fuels for most energy applications in a part of the world with relatively low per capita income is also a factor and a trait AV����̳ shares with much of the world seeking solutions for energy access.

AV����̳ is home to many paradoxes. It is a region of harsh climate and extreme cold, but it is also a global hotspot for microgrids. AV����̳ has long been a pioneer in deploying high penetration renewable energy microgrids. These microgrid systems—some in continual operation for close to a century—built the business case for renewable energy integration well before the rest of the country, and the rest of the world, moved in this direction. When measured in terms of installed capacity, AV����̳ ranks No. 1 in the US as of 2021, with over 3,500 MW installed according to Guidehouse Insights. Though the state’s relative market share has declined over the past few years due to accelerated growth in states such as California facing the continual threat of wildfires, it remains the national leader. 

AV����̳ also has one of the highest adoption rates of microgrids in the world. The majority of citizens, businesses and institutions in AV����̳ are currently served by some form of microgrid, with some of the largest systems nested into the Railbelt grid, the state’s only major transmission system. Unlike the rest of the U.S., where majority of microgrids interconnect with a traditional power grid and primarily serve as a resiliency resource to respond to power outages, most of the microgrids serving communities in AV����̳ are remote power systems quite similar to microgrids now being deployed throughout Africa, the Asia Pacific and Latin America. In an ironic twist, the lack of traditional infrastructure in AV����̳ has forced this U.S. state to come up with solutions that not only address harsh climatic conditions, but which seek to displace products that once fueled the entire economy. I’m talking about oil, natural gas and other hydrocarbons. 

Ironically, the largest microgrids serving military bases and university campuses rely primarily on natural gas generation. So, they are lagging behind the much smaller community-based systems operating in more isolated sites. Therefore the Railbelt grid, as well as the continental grid, are now looking at the remote microgrid featuring renewables providing the majority of energy and power for lessons learned. 

The high cost of diesel in AV����̳ mirrors the high energy costs that plague much of the world’s emerging economies. Since remote microgrids dominate the global market, what works in AV����̳ carries major implications for the rest of the world. 

Yet, the state also offers insight to industrialized nations where the focus has been on big grid and infrastructure solutions – like gigantic offshore wind farms -- rather than more distributed, resilient energy solutions, such as microgrids. Of course, due to the enduring presence of major oil companies, AV����̳ is now also exploring larger scale solutions to global climate change, such as conversion of existing fossil fuel drilling, pipelines and export facilities to hydrogen and other climate-friendly energy innovations.

What AV����̳ Offers for Global Microgrid Markets

The degree to which AV����̳ has invested in renewable energy and the ubiquitous nature of market adoption particularly for these remote microgrids offers important lessons for emerging economies. Given the reliance on diesel electric generation and high associated costs that can exceed $1/kWh in some communities, there are strong economic incentives to integrate renewable energy.6 Renewable energy is further incentivized by a highly deregulated utility market with dozens of utilities, state investment in infrastructure in the past, and modest subsidies that create niche markets where renewable energy projects are cost-competitive. AV����̳’s small and relatively constant population also translates into a market focused on serving existing customers. Innovation has been incremental but steady, moving from basic isolated diesel systems to incorporating DER at increasing levels fueled by a continuous improvement ethos that leans toward a greater and greater uptake of renewable energy resources.

AV����̳ boasts an inventory of energy resources greater than any other US state, including both renewable and non-renewable resources. Microgrids in AV����̳ boast the greatest diversity of renewables than any other state or nation. Wind, solar, hydro, geothermal and soon tidal and river hydrokinetic technologies are all being integrated into microgrids large and small. Solar is perhaps the most surprising, given the myth that this – the most popular of all renewable options – does not work here due to the dark and long winter days without sunlight. The flipside is that right now, the sun hardly sets, providing a remarkably consistent resource during much of the year. As we fight climate change, all low and non-carbon resources need to be explored.

Most microgrids in AV����̳ are operated by local utilities, with over 100 certificated utilities active in the state, each serving a relatively small population. This stands in contrast to the continental U.S., where most microgrids are deployed by third-parties serving critical facilities (such as military bases) and commercial and industrial customers. Cooperative utilities are the predominant model in AV����̳, again a feature which aligns with much of the world’s utility structures leaning toward non-profit and government entities. Utilities play a more predominant role in microgrids globally than in the US as a whole, especially for island nations in the Asia Pacific, for example. 

Three Global Trends AV����̳ Can Learn From

There are global energy trends that are not yet found in AV����̳, and that’s why the upcoming Isolated Power Systems (IPS) Connect conference in Cordova is so important. Typically hosted in Australia – which has shared a key leadership role in microgrid development in the past – it instead comes to AV����̳ for the first time. AV����̳ can also learn from Australia and other microgrid hot spots around the world. Here are three trends that AV����̳ may want to consider as it pushed forward on the innovation front:

• Many, if not most, microgrids deployed in AV����̳ rely upon government grants and other forms of public or outside support. An emerging trend that was pioneered in remote regions of India and many countries in Africa is the “pay as you go” model, which is one form of energy-as-a-service (EaaS). It essentially mimics the relationship most of us have with utilities with our monthly bills. In this case, private companies own and operate the microgrids and customers pay no upfront capital costs. This model is accelerating growth in microgrids for both low-income communities as well as large government critical facilities.
• While Hawaii offers a much different climate than AV����̳, the fact that none of the Hawaiian islands is interconnected with each other offers similar challenges as those facing AV����̳, which also lacks grid networks allowing for the sharing of resources in an economic and practical way. Hawaii has looked to create innovative energy services contracts due to the rapid growth of distributed solar on distribution feeder lines. Utilities have crafted non-export agreements to foster self-consumption. Yet they are also moving forward with reforms that would also these DER assets to bolster rather than hinder grid reliability by participating with flexible grid service contracts pegged to market values, not government prescribed subsidies. 
• AV����̳ also looks to Australia as a counterpart. Many of the early wind/diesel hybrid microgrids were installed in both regions which share widely different climate conditions, but similar challenges with the provision of remote power systems, especially in western and northern Australia. Horizon Power, which has the largest utility service territory in the world, but the fewest customers per square mile, is now actually disconnecting customers better served economically by stand-alone remote microgrids. This may be the only part of the world where utilities are voluntarily taking previous customers fully off-grid. 

In the final analysis, AV����̳ has much to teach the rest of the world about energy innovation with systems such as microgrids. Yet AV����̳ can also learn from Hawaii, Australia, Puerto Rico and many other locations globally rising up to find solutions to the need for affordable, sustainable and resilient energy. The IPS Connect conference sets the stage for international cooperation, which is needed now more than ever in the face of rapidly rising costs for fossil fuels and increased climate risk.