• Microgrid
  • Energy Storage
  • Net Zero Energy Consumption
  • Policy Regulation

Alaska Leads Microgrid Adoption in the US

Dec 03, 2021

Guidehouse Insights

As congress turns to pass a second infrastructure bill to supplement the bipartisan legislation just signed into law by President Biden, microgrid advocates will be happy to know the Microgrids Act will be part of this second package. Passed by the House of Representatives on November 19, the legislation would provide a 30% tax credit for microgrids ranging in size from 4 kW to 50 MW through 2025. Although federal tax credits for distributed energy resources such as solar PV and energy storage help make clean energy microgrids more cost-effective, state governments have traditionally been in the driver’s seat for microgrid support. For example, California and New York have developed aggressive state-level programs, as analyzed by the Smart Energy Power Alliance

Alaska’s Approach to Supporting Microgrids

Despite being the national leader on microgrids, Alaska is often overlooked as policymakers focus on issues thwarting microgrid adoption such as utility rate-basing challenges, interconnection delays, and the perception of needing additional subsidies to make projects viable. Alaska’s microgrid landscape features many characteristics of other leading global markets, including the Asia Pacific region, which shows the largest future potential growth of any region in the world. 

According to data from Guidehouse Insights’ Microgrid Deployment Tracker published last quarter, Alaska holds a commanding 28% market share in the US. At 15%, California comes in at a distant second place. What is so amazing about Alaska is that it has not depended upon common public policies that other states lean on to accelerate microgrid growth. For the most part, the state has not directly funded microgrids specifically, though it has supported renewable energy projects that often integrate into existing remote power networks. 

Cumulative Microgrid Capacity Market Shares, Top 10 States: 3Q 2021

Cumulative Microgrid Capacity Market Shares, Top 10 States: 3Q 2021

(Source: Guidehouse Insights)

The reason Alaska is first in microgrids is because of economic necessity and reduction of reliance on diesel fuels. Alaska microgrid systems are typically owned and operated by utilities, with some in continual operation for close to a century. They 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. Take the case of Cordova, setting for an Electrify Alaska! event last month and a microgrid innovation hotbed

Lessons Learned for World Markets 

A range of socioeconomic, institutional, public policy, and technical characteristics have encouraged experimentation and new microgrid solutions, most notably a highly decentralized and deregulated energy market served largely by public utilities. This has resulted in many Alaskan communities taking a holistic approach to energy management, frequently addressing thermal energy loads along with electricity. The know-how derived from Alaska’s experience is relevant to other markets, especially emerging economies where existing grid infrastructure is weak or nonexistent. This has led to the creation of the Alaska Microgrid Group, a consortium of utilities, academics, and solutions providers seeking to export their expertise to the global microgrid market, of which 41% are similarly configured remote microgrids. 

As the world takes dramatic steps to get to net-zero carbon emissions, the lessons learned in Alaska are more relevant than ever. At the recent COP26 conference, much of the focus was on industrial economy applications such as large-scale hydrogen. Equally important, if not more so, are smaller scale microgrid solutions that displace expensive and polluting diesel with renewable energy fuels. Alaska features among the most diverse resource mixes for microgrids including geothermal and hydrokinetic technology trials. Alaska can now share lessons learned while learning from other states and countries.