Islands Are the Low-Hanging Fruit for Microgrids

If you’re looking for the easiest place to deploy microgrid technology, look at islands.

That was the general consensus of presenters at the 4th Military & Commercial Microgrids Summit in Washington, D.C., held June 17-19. In addition to a presentation about a microgrid being developed for Necker Island—owned by Sir Richard Branson, founder of the Virgin Group—panels on financing and remote microgrids also examined the circumstances that make islands some of the best locales for deploying microgrid technologies.

Favorable Financials

In February, NRG Energy won the bid for engineering and developing a renewables-driven microgrid with energy storage designed to reduce the amount of diesel used for power generation on Necker Island. Mark Crowdis, president, renewable energy for GBX Associates LLC, noted that on Necker and other Caribbean islands, electricity costs 36¢ to 66¢/kWh, so “economics are not the problem.”

There can, however, be problems if you try to develop a microgrid around a traditional power purchase agreement (PPA), because microgrids operate most effectively when integrated with some form of energy efficiency and demand response, but PPAs don’t incentivize efficiency. To get around that mismatch, the Necker project and others are using a contract form called, in this case, a “Diesel Reduction Agreement” that is designed to eliminate the fossil fuel over time.

Though high-net-worth island owners may have one set of motives for developing microgrids, governments of other islands may have a somewhat different set of reasons.

In a panel discussing microgrids for remote communities, Dr. Peter Lilienthal, CEO of HOMER Energy, said his firm is especially bullish on island grids that burn diesel.  HOMER Energy is a software spinoff of the National Renewable Energy Laboratory. HOMER software is used by more than 107,000 users for early analysis of microgrids. It simulates how various configurations would operate and examines the economics of those configurations. In doing so, Lilienthal said, it bridges the technical and financial worlds.

There is a business case for any place that burns diesel fuel, such as remote microgrids, he said. Islands, he and others agreed, also pose few cybersecurity concerns. Islands offer an ideal environment for renewable energy, backed up by storage and/or diesel generation and optimized by microgrid devices—from sensors to controllers.

Allison Archambault, president of the nonprofit EarthSpark International, talked about how her organization is focusing on bringing small-scale renewables and microgrids to Haiti. On that island, most households spend $10 a month on candles and kerosene, both of which are bad for human health and pose a fire hazard. That expenditure is equivalent to $20/kWh, she said, making small renewable deployments economically attractive.

In places like Haiti, Archambault said, microgrids are “leapfrogging” the central station and large grid model familiar in industrially developed nations. In 2012, EarthSpark launched the first prepaid microgrid for a small, low-consumption grid in Les Anglais, Haiti. It started with 14 customers and has grown to 54. All are using second-generation smart meters, which enable the prepayment part of the model.

Not Completely Idyllic

In some parts of the world, however—even when, as in Indonesia, government policy supports electrification—financing can be problematic. Charles Feinstein, World Bank section manager, water and energy for East Asia and the Pacific Region, admitted that institutions like his still “don’t get” microgrids, their financing, and delivery model.

Another obstacle identified by Larisa Dobriansky, senior vice president of regulatory and energy policy at General Microgrids, is a confusion over how agencies such as the World Bank and Asian Development Bank use terms. In many cases, “microgrids,” “minigrids,” and “nanogrids” are defined by kilowatt size—regardless of the technologies involved. In many places, she noted, “minigrids” consisting of traditional wires and poles—even when integrating renewable generation—do not offer the functionalities of a microgrid that depend on “smart,” two-way communication capabilities.

There are also some difficulties in working with island governments. Several speakers noted that cultural tensions (including jealousy over who controls new grid assets) and corruption can counterbalance the advantages of few to no regulatory obstacles. Though adding cleaner and cheaper renewable generation might be seen as a positive, many islands are deeply dependent upon taxes levied on imports of diesel used to operate existing generation. The suppliers of and lobbyists for fossil fuels also have much deeper pockets than microgrid developers, Crowdis noted.

Even the absence of regulatory obstacles can be a negative, Marc Lopata, president of Aximuth Energy explained, because regulations help developers defray liability.

Dobriansky noted that most power systems around the world are subsidized in some way, which results in the business case for microgrids—which do not enjoy preferential treatment—being held to a higher standard. For example, in Indonesia, Feinstein said, 20% of the government’s budget goes toward subsidizing energy. Those subsidies disproportionately are an advantage for upper middle and upper class citizens.

Sweet Spots

When the panelists were asked where, geographically, remote microgrids would work best given policy, regulatory, and finance dynamics, Lopata answered Hawaii and Puerto Rico. In Hawaii, which already has tremendous solar photovoltaic penetration, microgrids could take loads off the stressed grid.

Lilienthal made the distinction between microgrids developed to provide energy access (as with EarthSpark projects) and those designed to provide assistance to island utilities that need help—an easier proposition, in his view. Western Alaska was his first choice. Australia and resort islands like Aruba also look attractive. Overall, from his experience, “Islands are the low-hanging fruit.”

Dobriansky also mentioned Alaska and added that the U.S. Department of Energy is focusing on that state for microgrid development. Though Alaska isn’t an island, many of its remote communities exist as virtual islands where electricity service is concerned.

In fact, Alaska had just been in the news the previous month for a microgrid deal. On May 6, ABB announced it had received an order to deliver two PowerStore units as part of a microgrids solution to “stabilize the power grid and increase renewable energy” on Kodiak Island in Alaska. The deal involves ABB’s Microgrids Business in Raleigh, N.C., and Kodiak Electric Association (KEA), a rural electric cooperative that generates and distributes electrical power in Kodiak, using hydro, wind, battery energy storage, and diesel gensets.

The ABB PowerStore uses flywheel technology to store energy. This flywheel can be rapidly charged and discharged at a high duty cycle without experiencing performance degradation, whereas batteries will suffer chemical wear-and-tear during partial or rapid charge/discharge cycles. (For more on the pros and cons of various energy storage technologies, see “Energy Storage Technologies Primer.”)

ABB said its PowerStore units will provide voltage and frequency support for a new crane to be installed at Kodiak Island’s port facility. The units can also extend the life of the existing battery systems by up to six years and provide renewables integration by helping to manage intermittencies from a 9-MW wind farm on the island.

For more coverage of this microgrid event and market trends, see:

The State of the Microgrid Market: Promise and Present Realities

Interest Growing in Commercial and Community Microgrids

Military Microgrids: Wanted and Needed but Tough to Deploy

—Gail Reitenbach, PhD, Editor (@GailReit, @POWERmagazine)