Electricity Use in Rural and Islanded Communities: A Workshop Supporting the Quadrennial Energy Review’s Public Outreach

The National Academy of Sciences’ (NAS) Board on Energy and Environmental Systems held a workshop that focused on identifying challenges and opportunities for increasing efficiency, reducing emissions and costs, and improving resiliency. Also discussed was the implementation of innovative clean energy strategies in rural and islanded communities.

Introduction to QER

Karen Wayland of the Department of Energy began the workshop with background on why this integrated study of the electric system was held. The Quadrennial Energy Review (QER) Task Force was instructed by the White House to produce a report offering recommendations for executive or legislative actions to address energy challenges facing the nation. The process was set with the objective of involving robust engagement of federal agencies and outside stakeholders to enable the federal government to translate policy goals into a set of analytically-based, integrated actions for proposed investments over a four year planning horizon.

Unlike other Federal Quadrennial Review processes where analysis is done every four years, the QER is being conducted through installments to allow for granular analysis of key energy sub-sectors. This structure will provide policy makers both deep and broad policy analysis of the complex and inter-dependent elements that comprise the Nation’s energy system.

QER 1.1 focused on transmission, storage, and distribution (TS&D) infrastructure, which is the “connective tissue” of energy systems, as well as the limiting factor in transforming energy systems. There were 63 recommendations that came out of QER 1.1 and the planned release of the final report is between November 2016 and January 2017.

The current review – QER 1.2 – is focused on analyzing the evolution of the electric power system as a whole. Its objective is to develop a set of findings and policy recommendations to help guide the modernization of the nation’s electric grid and ensure its continued reliability, safety, security, affordability, and environmental performance through 2040. This involves studying several issues: integrating new technologies, changing market conditions, grid operations, financing and valuing, and the changing role of the customer.

The stakeholder engagement outreach strategy consists of 5-6 stakeholder meetings around the country, technical workshops, a comment period which ends July 1, 2016, and 3-5 DC briefings to introduce QER 1.2 and to present the completed review.

Introduction to workshop Structure and Planning Committee

John Holmes, NAS, stated that this workshop was held to look at the challenges and opportunities for lowering electrical end-use, reducing electricity related GHG emissions, and improving electrical resiliency in rural communities and isolated locations, as well as large users that can operate as micro grids. The objective of the workshop is to assist the QER Task Force’s public outreach effort by focusing on communities that have unique challenges, “edge of grid”, and the distribution network.

The major themes of the conference were:

Attributes of electricity use and distribution systems associated with rural and islanded residents;
Challenges and opportunities for increasing efficiency, reducing emissions and costs, and improving resiliency in such locations; and
Innovative clean energy strategies being undertaken in such locations.

Characteristics of Electricity Use in Rural Communities

Christopher McLean, USDA – Rural Utility Service (RUS), spoke about the characteristics of electricity use in rural communities, identifying salient differences from other communities.

According to McLean, RUS is an incentive lender, not a lender of last resort. They are using low interest rates as an incentive to investors in order to bring electric infrastructure to rural areas.

RUS is a policy planning and financing agency, which finances generation and transmission distribution – the whole tool kit from the very beginning to the end user. In the last appropriations bill, $8 million was appropriated to RUS to leverage into another energy efficiency program. They have authority to lend to non-profit lenders.

RUS also has a small grant program, the High Energy Cost Grant Program, where they are able to use some of the most profound, life-changing types of investment in some of the most rural areas. The High Energy Cost Grant Program evaluates applications for the $10 million they currently have available for funding. Alaska and Hawaii tend to do very well for these programs. Historically, over 90% of their business has been with rural electric cooperatives. When the customers are the owners, it relieves the worry about generating dividends for investors.

Population limits are generally 20,000 or less, but there are exceptions to that limitation. While there is flexibility when it comes to population size limitations, they are more stringent when it comes to the feasibility and reliability of the customer’s credit.

Their loan portfolio is currently about $46 billion with 600 borrowers. Over the program’s history, over $126 billion has been invested into the rural electrification program.

Meera Kohler, President and CEO of Alaska Village Electric Cooperative (AVEC), asked a question about whether RUS was considering lending money for fossil fuel generation. She asked if that applied to just coal, or if it applied to diesel as well. McLean responded that yes, RUS loans are available for that type of generation. There was a time when the OBM restricted fossil fuel investments to only baseload generation. Eventually, this translated into new investments, and subsequently into coal power. They are making significant investments into improving existing infrastructure or fuel switching, which could involve using diesel. They are “open for business,” especially when it comes to modernization.

Critical Electricity Uses for Islanded Communities

Meera Kohler spoke about the projects in rural Alaska AVEC has been involved in since 1968, providing electric service to 56 different communities. She highlighted one main difference between Alaska and Hawaii – the bulk of Hawaii’s electricity is for air-conditioning load, while in Alaska, the biggest electricity expenditure is its heating load.

She brought up a statistic from an earlier presentation, which cited the average cost of electricity in Alaska to be quite modest, but that is in the rail belt of Alaska. Electricity cost in the rural areas is much higher, but not a figure you pick up very often because it is such a small population. To get a better perspective, these rural communities are more easily accessed by air than by road, and one of the communities powered by AVEC systems in accessible by a single roadway.

AVEC’s system is set up to serve 30,000 people in rural areas, which requires 48 power plants, 170 diesel generators, 46 tank farms, and 8.5 million gallons of diesel. AVEC is Alaska’s largest wind holder, with 34 wind turbines located in 11 villages which serve 15 villages with the help of interties that have been built. They also own two tug and barge sets which reduces the cost of transporting the diesel. To serve 30,000 people in these rural areas, Electricity costs in total $0.49/kWh, the bulk of this cost is fuel – $0.28/ kWh.

There is virtually no load in the summer; the significant load comes during the winter when lighting and heat are needed the most.

Building costs are also higher in rural Alaska – about three times more than other regions mostly because of logistics – it is small scale, and a lot of redundancies need to be built in. Typically there will be three generators in a community, each of which is capable is supporting the entire community on its own.

She then detailed some of the other processes involved. Getting a FERC license has been an eight year process. These are some of the main challenges with providing electricity in rural Alaska – capital costs that are typically five times what they are in the lower 48. There is a perception that these projects in Alaska are entirely grant-funded, which is not the case.

There are major projects under way, and a lot of conversion of wind energy to heat. Some communities have integrated a high portion of wind into their electrical systems. For example, In Gambell, wind power makes up 23% of their system, and in Cehvak, 35% of their electricity system comes from wind. The challenge that comes with wind is that manufacturers are generally not interested in making the smaller wind turbines that these communities need, the large turbines bring much more money.

Kohler stated that Alaska’s Arctic sustainability depends on connecting communities – medium DC voltage is needed to connect villages. They also need energy storage solutions because electricity heat is wasteful. Furthermore, they are in need of a “grid-bridging” solution that has a capacitor system for 10-15 seconds. Lastly, they need technical training and support so they have the ability to work the systems on their own.

An audience member asked Kohler what she sees as necessary in getting generators dispatching optimally. She said she would like to get sophisticated control systems, which allows for generators to become controlled remotely. There are three primary manufacturers that are used to get a high range of efficiency thanks to redundancy. Control systems are of paramount importance, but these systems cost $1 million.

A big issue is suppliers not understanding rural needs, which are very different from those in urban areas. Given her experience, one of the most successful strategies in rural areas is customer segmentation and providing unique offerings.

Incorporating Efficiency – Survey Implemented Strategies for Improving End-Use Efficiency

Neal Elliot, American Council for an Energy-Efficient Economy (ACEE), gave a presentation on incorporating Energy Efficiency (EE) programs into rural electricity offerings. Rural communities have a mix of investor-owned and cooperative utilities that have different regulatory oversight bodies.

There are a number of challenges facing rural EE programs. Lower customer density increases program costs, but EE programs are still the cheapest energy resource. There is also a higher proportion of low and moderate income residential customers, and more small businesses. With limited access to natural gas, they have a greater reliance on electricity for energy. Lastly, the rural IT infrastructure is limited, which may limit the ability to roll out new system measures and integrate distributed resources.

A successful rural EE program requires the following:

Savings targets, as well as the monitoring and reporting of savings;
Target programs to meet unique rural needs—segment customers and tailored offerings
Partnerships with local suppliers and traders in market channels;
Leveraging unique rural infrastructure such as USDA RD & extension, local banks, and community organizations;
Incorporating available efficiency measures, such as using prescriptive measures for smaller customers and custom measures for larger customers; and
Taking advantage of unique measures available, such as area lighting and conservation voltage regulation.

To meet the needs of rural low and moderate income customers, EE measures need to be complemented with housing repair measures, which increases program costs. Alternative strategies on bill financing and repayment are also needed, as homeowner’s access to capital is limited.

There are many advantages of EE programs – They reduce electricity needs, which reduces the size and cost of distributed energy systems, and remote load can be served by distributed renewables without a need for connection. Additionally, the distributed renewables can increase utility reliability and power quality.

Elliot then made recommendations. First, more information needs to be collected on rural electricity use and the unique needs of rural communities in order to develop measures that are specific to rural markets and customers; EE options for mobile homes should be explored; rural energy affordability should be studied; and the interagency support of rural low-and-moderate income individuals should be expanded.

Increasing Resilience/ Reliability – methods to improve electricity system resilience and reliability

Henri Dale, H. Dale LLC, gave a presentation on Alaska Rail Belt Electric Systems. He stated the rail belt is comprised of 3 regions: interior, south central, and the Kenai Peninsula. The regions, and associated load centers, are separated by a single long transmission line which is transient stability limited. The line runs through remote areas of Alaska, not all sections are accessible by road, and the line is not connected to other grids.

Alaska is fortunate to have many energy resources, but that does not necessarily mean fuel sources in one region are available in another. Fuel transportation options are limited due to the lack of economies of scale and the stringent regulatory environment.

To mitigate these issues, the Railbelt maximizes economies of scale from lower per-unit fixed cost but this leads to the regional interties operating at their limits. It also uses a battery energy storage system (BESS) which has various modes of operation.

There are many components used to construct the Railbelt systems that are common throughout the nation. Islanded systems are different because of their small economies of scale, limited options, and low inertia.

This demonstrates how one size does not fit all, and national regulations and polices may be ineffective, misdirected, or inordinately expensive. Furthermore, technological innovations related to storage and smart relaying and communications have been significantly helpful.

Dale then gave some recommendations. Remote and islanded systems are different, and energy policy should to reflect this. Also, it is important for policymakers to acknowledge that there is usually a much higher per capita “cost to comply” compared to larger utilities.

This is particularly evident in Alaska where there are a significant number of federal governmental agencies. For example, when it comes to obtaining hunting permits, federal regulations are not based on a species’ abundance. Another example is air quality regulations meant to improve ambient air quality do not take into account the levels of ambience before administering the regulation. Dale recommended that RUS lending practices should be used as a tool to drive policy.

Reviewing Technology Alternatives to Diesel Generation

Marc Mueller-Stoffels, University of Alaska, Alaska Center for Energy and Power (ACEP), said the first thing that you need to discuss when you are talking about electricity generation in rural areas is diesel generation.

There are over 250 remote islanded power systems in Alaska. They cannot buy power anywhere, they have to self-generate it. ACEP’s mission is to develop practical cost-effective solutions for Alaska. They also work with rural communities in Australia and islanded communities on the Pacific Rim, as well as with other Arctic nations.

He emphasized the importance of data – they have put together a particular program for data acquisition management, which has been key to kick off some better research. They don’t push one particular technology, but they do support hydrokinetic technology development in Alaska with a full program and test site. Emerging technologies are the key to systems designs, which are based off of observations and conceptual modeling.

The point he stressed the most in the presentation was that the demand response should be the first thing looked at, there is a lot of value in it, saving a lot of money where energy storage does not necessarily. Demand response provides an opportunity for customers to play a role in the operation of the electric grid by reducing or shifting their electricity usage during peak periods in response to time-based rates or other forms of financial incentives. Demand response programs can lower the cost of electricity in wholesale markets, and in turn, leaf to lower retail rates.

There are limits on diesel generation. The general understanding is there is a minimal optimal load level, and when you go below this level you are not injecting all the diesel and are making a mix of fuel oil and lubricant instead. Another problem is that once you go into these low loading regimes, you get diminishing returns from the renewable source.

Some of the services that diesels provide include “forming the grid” by providing voltage and frequency reference. Diesels also provide inertia, which means it can ride through minor disturbances. It provides spinning reserve capacity which backstops drops in renewable power and increases in demand.

Diesel clears transient faults and drives sufficient current to trip breakers. One thing that is often ignored when looking at the economics is that diesel only makes electricity from about a third of the contents that is pumped through it. The rest is waste heat which can be pulled out and used somewhere else – a pure economic benefit.

What is more challenging is how to add intermittent renewable energy. Looking at how much power penetration is actually happening in these systems – even with very little controls, you can get up to 56% penetration, but you still do not get much energy out of it. As you get more sophisticated with controls, usually you do some demand response or some curtailment with renewable resources to stay within the operational level.

If you increase your system sophistication further with managed loads, you can get up to 300% power penetration, but you are still only getting to about 50% energy penetration. If you add storage then you can get to 100% renewable energy.

When you look at the costs of energy storage compared that to the cost of diesel fuel, especially with the cost of diesel fuel going down, then energy storage may look like a less attractive option, but energy storage has added benefits. Divergent loads, generally located in the powerhouses, can be turned on or off.

A study that considered a system with various control options and an operational envelope of diesel power plants supported the empirical findings and illustrated that diesel sizing matters. Looking ahead, this can save you a lot of fuel.

Energy storage applications reduce fuel utilization by delaying diesel starts, loading diesel optimally, and enabling them to be turned off at times. They can also stabilize the grid, which improves power quality by creating the ability for short term storage.

Energy storage options for Nome, with the objective of avoiding or delaying diesel starts by providing spinning reserve capacity with storage, would require a wind-diesel system with wind power diversion to boilers at times. The wind power would need to go to boilers for stability.

With the primary objective of fuel savings, medium to high winds contributing to energy storage savings systems would save 430 to 1150 gallons of diesel per week. It would also result in a slight increase in fuel use for stand-by operation. There is also the potential value added of diesel demand smoothing.

Obviously, adding energy storage increases the complexity of the system. When relying on diesel alone, the generated power goes directly from the powerhouse to the customers. With energy storage, there needs to be coordination between the diesel powerhouse, energy storage, wind and solar photovoltaic (PV) power, the diversion load, and secondary load controller before the electricity reaches the customers.

Even with system advancements, improved optimal control is still needed. ACEP is striving for a cheaper, more reliable electricity system that utilizes the least amount of diesel possible, manages demand equitably, and has maintenance schedules.

In the future there will be a convergence of thermal heat and power systems, which may provide maximum benefits at the lowest cost. It would minimize energy storage needs, making the system competitive with residential fuel costs. What is missing is good data sets on heat utilization, optimal control of distributed resources, and functional interfaces between various subsystem controls.

Also planned for the future is supply-driven energy systems. This will converge with the “Internet of Things”, and will require highly detailed data sets on energy use as well as the establishment of a functioning energy marketplace for islanded systems.