Alaska Microgrid Technologies: Micro-Industry or Big Business?
One of the most pressing (and frequently noted) challenges in Alaska is the cost of energy (both heat and power) in isolated, rural communities. Many are faced with inefficient energy systems that come at a considerable cost not only to community residents but to the state as a whole. In the 2014 fiscal year, the State of Alaska issued $39.6 million in disbursements to communities through its Power Cost Equalization program, which pays a large share of the electrical costs for rural residential consumers in an effort to keep rates low. The crippling cost of rural energy also inhibits the development of community businesses, which must pay market rates and are ineligible for Power Cost Equalization reductions. Adding the cost of heating and transportation fuels drives a large portion of the remote community population into energy poverty, a term generally used for those that expend more than 10 percent of their income on basic energy needs.
This adversity has spurred innovation, however. One emerging market to arise from this challenge is in the development of new microgrid technologies. According to market research firm Navigant Research, the estimated global microgrid market will reach $20 billion by 2020, with Alaska’s market share potentially accounting for over $290 million. These projected trends indicate a growing opportunity within the state—the commercialization of microgrid research and innovation. Such advancements could not only reduce the costs of energy for thousands of Alaskans but the technologies developed here could be implemented in other developing parts of the world where microgrids are common.
What Are Microgrids?
Microgrids are small-scale electricity systems aimed at achieving a particular local goal such as reliability, carbon emission reduction, energy diversification, and cost reduction. Essentially, microgrids function like a small-scale version of a traditional power grid—they generate, distribute, and regulate the flow of electricity to consumers, but do so locally rather than as part of a much larger integrated system. A growing trend is to take a more holistic approach to energy systems within microgrid communities and also consider ways to leverage heating and water and waste water services as part of the systems that can be utilized to balance supply and demand within these microgrids.
Alaska’s microgrid context provides a “living laboratory” unique in its scope of grid size, energy resource diversity, and operating environment. Alaska’s high cost of power, which so often functions to its disadvantage, actually provides the state with a unique asset in the field of microgrid testing and research. Many novel technologies that have not reached maximum cost efficiency yet, and thus are cost prohibitive in other parts of the nation, are cost effective in Alaska’s rural communities, where power can cost as high as $1 per kilowatt hour. This provides Alaska with an early adopter and first mover advantage in developing integration and operational expertise that so far has not been fully exploited.
These advantages have allowed the state to emerge as a leader in the integration of renewable energy into microgrids with diesel-powered systems and implementation of energy storage and demand response solutions to maximize the effectiveness of the renewables. These advancements that were pioneered in Alaska take on global importance, as small-scale grids are widely used in developing countries. The US Department of Defense also utilizes them when working in remote locations where reliable energy from a large-scale grid is either unavailable or insecure. These trends are fueling the growth of the microgrid market.
Microgrid Advancement in Alaska
A recent effort has been launched to strengthen Alaska’s role in the microgrid landscape. In early 2015, Alaska received a special designation as an i6 Innovation Center through the US Economic Development Administration. The i6 challenge, a competitive, nationwide grant application, issued twenty-six awards to fund the creation of regional innovation centers aimed at supporting startup creation, innovation, and commercialization.
One of those i6 challenge awardees was a team led by the University of Alaska Fairbanks. The team includes partners from the Alaska Center for Energy and Power, the University of Alaska Fairbanks Office of Intellectual Property and Commercialization, and the University of Alaska Anchorage Business Enterprise Institute. The award will fund the establishment of the Alaska Center for Microgrid Technologies Commercialization, aimed at further strengthening Alaska as a leader in the area of microgrid research, development, and innovation. This center aims to take a two-pronged approach in accelerating development of relevant and viable microgrid technologies. The Alaska Center for Energy and Power’s Power Systems Integration Team, through a competition, will award sixty days of engineering consulting, with research and development support and testing in their five hundred kilowatt hybrid-diesel microgrid laboratory. The technology development effort will be augmented by business model, marketing strategies, and intellectual property development support by the Business Enterprise Institute and the Office of Intellectual Property and Commercialization to improve the chances for viable microgrids technologies commercialization. This fully integrated support system is well positioned to power the next wave of microgrid commercialization and research in Alaska.
With the recent news of Alaska’s i6 designation, one thing has become clear—Alaska’s microgrid designation could generate a lot of energy within the business community.
Marc Mueller-Stoffels and George Roe are both research professors at the University of Alaska Fairbanks Alaska Center for Energy and Power, and Samuel Callen is Associate Director for the University of Alaska Center for Economic Development.
This article first appeared in the August 2015 print edition of Alaska Business Monthly.