The Microgrid Compass is Pointing North: Five Takeaways from This Year’s Rural Energy Conference for Alaska

An influx of federal funding from the Inflation Reduction Act and the Bipartisan Infrastructure Deal is flowing into Alaska. Speaker after speaker urged conference attendees to move quickly, predicting this spigot of federal dollars from these two programs will shut off within the next year. This instilled a clear sense of urgency for rural Alaska representatives, who are competing with applicants for federal dollars across the rest of the country. Due to the high number of very small and geographically isolated communities in Alaska, the state has historically been – and remains – highly dependent upon federal government grants and other forms of public sector assistance to address critical infrastructure needs, including pots of money earmarked for Alaska. This dependence upon grants made historical sense because tiny utilities with high energy costs pegged to high diesel fuel prices had limited choices.

Many speakers voiced support for augmenting such grants with new business models as well as tapping tax incentives and other forms of support that could invite greater participation in Alaska’s energy economy from the private sector.

Many large federal grants still have strings attached. A great example is the Grid Resilience and Innovation Partnership (GRIP) funding for a high voltage direct current (HVDC) line for the Railbelt Grid – which serves the majority of Alaskans including the urban centers of Anchorage and Fairbanks. It will require over $200 million from Alaska entities to match the similarly sized federal allocation. Nevertheless, the good news for rural Alaska is that matching requirements have been greatly reduced or dropped for many other federal and state programs supporting smaller, community-scale rural energy projects. A list of projects proposed or moving forward in rural Alaska benefiting from various federal grants and incentives tied to new business models are listed in Takeaway 4 below.

Of course, the challenge remains retaining and/or training a local workforce to benefit from this influx of project opportunities. Long timelines from proposal to award and then actual deployment also remain a challenge as is navigating Alaska’s harsh environment for logistics and construction.

2. Project champions can emerge from diverse stakeholders.  

Alaska features a geography larger than California, Texas and Montana combined. With a population of less than three-quarters of a million people, it is the classic “be a big fish in a small pond” kind of place. In other words, a single person can make a huge difference – but only if they collaborate and create partnerships. Alaska’s decentralized energy sector is a myriad of diverse stakeholders – Tribal governments, regional and village corporations, public and private utilities, local and regional governments, and federal and state agencies (to name a few). No other word was repeated more often at the conference than the word “partnerships.”

Project champions can be someone like Ingemar Mathiasson, energy manager for the Northwest Arctic Borough (NAB), a county-equivalent regional government in Alaska. He spent 16 years developing and fostering a regional energy steering committee that has met twice a year since its inception. The steering committee was a crucial forum for pulling the right community members and partners together to get everyone working together towards a common goal – reducing the region’s reliance on imported diesel. Mathiasson’s work with the NAB energy steering committee has led a number of successful solar-battery projects in NAB communities, including Deering, Buckland, Noatak, and Shungnak-Kobuk. At the conference, Mathiasson observed that the borough’s solar resource was better than Germany’s, despite the long days of darkness in winter. Many credit him with being the pioneer of Tribally-owned independent power producers (IPPs) and successfully bringing many of the first significant solar projects in Alaska to fruition. 

Dave Messier is the infrastructure division director for the Tanana Chiefs Conference, a non-profit tribal consortium of 42 villages that works toward meeting the needs and challenges for more than 10,000 Alaska Natives in interior Alaska. Only nine of these communities have roads and they pay three to five times the national average for electricity. Messier is a project champion who has helped capture $180 million in funding for energy projects since 2009, with 12 projects relying on the IPP model. Most of the communities in the TCC region have limited administrative and technical staff available to apply for grants and implement community scale energy projects. TCC, in partnership with tribes, utilities, private contractors, and other stakeholders, is able to provide the necessary administrative oversight and technical support needed for these projects and the IPP model ensures the primary economic benefits stay with the local community. He also is a strong proponent of investigating new project finance vehicles that have dominated development in the lower 48, noting that federal investment tax credits and ancillary adjustments for local content and low-income recipients can cover up to 70% of the costs of new solar or wind projects.

Tim Kalke is another project champion who heads up a local non-profit called Sustainable Energy for Galena, Alaska (SEGA), which was created 15 years ago by the City of Galena, Galena City School District and the Louden Tribal Council. The original mission for SEGA was to source wood fuel supply for a biomass project in an abandoned U.S. Air Force Base whose ownership has transferred to the city. Over time, SEGA has diversified into residential construction, community energy planning, and is now serving as an IPP to manage and operate a 1.5 MW solar photovoltaic (PV) system paired with 1 MW/1 MWh battery. SEGA is also exploring hydrokinetic power generation opportunities to serve its microgrid.

And then there are utility champions such as Clay Koplin, CEO of Cordova Electric Cooperative, a utility that has continually increased efficiency, lowered costs and most recently installed a cutting edge modular data center with the help of a private sector modular data center provider partner Greensparc. The project could serve as a model for bridging the digital divide throughout Alaska by increasing access to old and new data sources via Internet connectivity for public education, thereby preserving indigenous cultural literacy while at the same time improving operations of isolated power systems themselves with the help of artificial intelligence.

Project champions clearly need partnerships, which can come in all kinds of forms, including collaboration on securing matching funds from both public and private sector players.

3. Will the legislative wins this year move the needle?

The Alaska Legislature last year passed and Governor Dunleavy signed a number of key measures to accelerate the decarbonization of Alaska’s energy system, including legislation to create a “Green Bank” to help finance energy efficiency and other infrastructure upgrades. Past legislative sessions have often ended with little to show after intense back-and-forth negotiations between rivaling energy ecosystem stakeholders. Will this past session signal a time when public policy moves Alaska forward in a more systematic way? The signed bills also enabled carbon capture and sequestration projects and wheeling reforms for the Railbelt Grid, which stretches from Fairbanks in the interior south to Anchorage and then down to Homer on the Kanei peninsula. These reforms could facilitate utilities to more easily share and transport excess renewable energy production from the north to the south and vice versa. (Another new law authorized community solar projects for renters.)

Perhaps a bigger question for lawmakers is what will 2025 bring in terms of legislative action? Alaska lacks a renewable portfolio standard (RPS) and other similar targets and goals that have helped other states create a stable market for clean energy projects. Would an RPS best serve the state if limited to the Railbelt or applied across all of Alaska’s energy providers?  Continued progress in the Alaska Legislature next year could help maximize the value of the federal dollars flowing into the state, especially if those dollars are supplemented strategically.

4. Rural communities need to lean in on new IPP models to move beyond grants and address quirks of the PCE program.

Dependence upon the Power Cost Equalization (PCE) endowment, which was designed to average electricity costs across the state, inadvertently limited many options for affordable and sustainable energy projects available to rural utilities. (The PCE program provides between $30 and $40 million a year to rural Alaska utilities but was created under the assumption that these utilities would only burn diesel to generate electricity.) The conference, however, shed light on new approaches to clean energy projects pioneered in rural Alaska, allowing for solar energy projects to gain traction over the past few years while not reducing the life-line endowment PCE provides.

IPPs in the lower 48 generate profits for private shareholders. Not so in Alaska. IPPs developed by non-profit entities such as Tribes or local governments also help small rural utilities enjoy the benefits of renewables in reducing diesel fuel consumption without jeopardizing the PCE endowment under a variety of configurations and provide revenues that can provide community benefits.

Additional great examples of what is possible with the IPP model are several projects highlighted by Katya Karankevich with the Alaska Native Tribal Health Consortium (ANTHC). an organization that has already completed energy-related projects in 184 of the state’s 209 remote communities. ANTHC is helping the remaining three dozen or so “first service” communities with free technical assistance to install water and sewer services in the most affordable way possible. (These first service communities currently still lack plumbed water and sewer systems.) Without creative complementary infrastructure augmentations, these upgrades would raise utility rates for those who can least afford it. However, by incorporating solar PV and battery energy systems from IPPs created by tribes and/or municipalities, these new costs can be mitigated.

Here are some examples of savings generated by renewables developed with IPPs for microgrids that she highlighted that could serve as models for “first service” rural communities in Alaska:

• A 160-kW solar PV array and 210 kWh battery will earn the tribe in Ouzinkie $40,000 annually, shrink outage rates and reduce water bills by third due to the distribution of these IPP earnings back to residents.
• A 1-MW wind turbine coupled with a battery (enabled by $12 million in funding from the federal EPA) will generate $437,000 in annual net revenue, delivering approximately $1,650 to each of the residential households in Toksook Bay.
• A similar 1-MW wind turbine and battery funded by the same size grant from the federal EPA will generate $394,000 in net revenue for Chevak. This IPP revenue equates to $2,818 for each of the villages’ 140 residential households.
• The Department of Energy, Old Harbor Native Corporation and the Denali Commission have provided $12 million for the Old Harbor hydroelectric dam, which would generate $230,000 in annual net revenue, reduce diesel fuel consumption by 95% and pay a dividend estimated to be $1,875 per resident. In this example, a native corporation provided matching funds to move the project forward.

Other projects referenced by Karankevich include an expansion of wind capacity in Kotzebue, which hopes to leverage a tribally-owned IPP to generate $900,000 in revenue annually that could fund both a water/sewer thaw-out program and social programs for low-income tribal members. An as of yet unfunded 1-MW and battery project for Hooper Bay is estimated to generate $558,000 in net revenue under the tribal IPP model, providing an estimated $3,824 for each of the community’s 146 residential households.

5. If it can work in Alaska, it can work anywhere.

Many folks shared stories about technologies that failed in Alaska, often due to extreme cold temperatures but sometimes due to logistical challenges, novel experiments and devices offered up by firms that ultimately failed to sustain themselves. As I stated in my own opening presentation at the conference, Alaska looks a lot more like the rest of the world than the rest of the U.S. What I mean by this is that remote indigenous peoples in Africa, Asia Pacific, Latin America, Europe and other parts of North America often lack access to affordable and sustainable energy systems. They often also have been historically dependent upon expensive and dirty diesel generators. Rural Alaska offers several models that could prove useful worldwide, even in places where extreme heat is the challenge instead of extreme cold. The tribal IPP model is particularly innovative. Could this structure be integrated into other foreign governance systems?

From logistical challenges due to lack of roads to the need for appropriately-scaled technologies that can be managed by local labor, Alaska remains a testing ground for new innovative technologies. Its microgrid portfolio has more diverse resources – wind, solar, geothermal, biomass and multiple forms of hydro technologies – than any other place in the world. All have found a place in the broad Alaska landscape. Unlike other parts of the U.S., Alaska utilities fully embrace microgrids – because they are the only viable option for electricity in rural Alaska. It is rural Alaska pushing the envelope on new forms of load management, frequency regulation and creative thermal energy strategies and other nuanced solutions. In contrast, the transmission connected Railbelt Grid utilities have been laggards on market reforms, dynamic pricing and load management techniques such as demand response that are now commonly deployed in transmission systems around the world.

Perhaps rural Alaskan utilities can inspire their Railbelt counterparts. And in the process, they can realize a resilient, sustainable and affordable energy system that can inspire and inform the rest of the world.