The Island Energy Challenge

Petroleum is the problem

Islands face extreme challenges from an energy security perspective. Pipelines supplying inexpensive and plentiful natural gas are not an option for them.  Only very large islands, such as Taiwan, can use coal or nuclear. These factors have left most of them completely dependent on liquid fuels derived from petroleum, mostly diesel.  With only a few weeks of on-island storage, a supply interruption that delays the oil supply barge becomes an economic and security nightmare. The biggest security nightmare is a rising sea level due to climate change.

Islands have always paid a premium for energy, but with the recent increase in world oil prices, that premium has reached a tipping point.  Unlike transportation energy, which costs islands only a small premium for fuel delivery, the cost premium for diesel-fueled electricity is three to four times the cost in the rest of the world.  This is both a challenge and an opportunity.

Renewable power is the solution

The cost per kilowatt-hour of power from solar photovoltaics is now less than that from diesel

Renewable power is now both technically feasible and economically compelling on diesel grids. There are many new technologies, so analysis and design optimization is crucial. In 2011, the cost of photovoltaic power reached parity with diesel power.  Every island in a tropical or temperate location now has the opportunity to use their solar resource to cost effectively reduce their diesel consumption.Even islands that have other renewable resources can benefit from hybrid solutions. The small number of islands that are blessed with a hydro resource have somewhat insulated themselves from the problem, but once the hydro resource is fully developed all additional energy requirements have come from petroleum.  In recent years, islands with a good wind or geothermal resource have gained another alternative.  These resources are very site-specific and require expensive resource assessment, so they require even more analysis.

Three challenges

1. Technical complexity: Solar (and wind) are variable resources. To provide reliable power, they must be part of a system with other more controllable and flexible resources.  Fortunately, diesel generators are the most flexible of conventional generation technologies, so they complement renewable power systems well. Hybridizing a diesel power system to accommodate the variability of solar power is a technical challenge with many potential solutions.  Storage is one of the potential solutions to the variability of renewable power.  Despite ongoing progress improving electric storage technologies, this is still an expensive solution, but properly optimized, small amounts of storage can enable large contributions from renewable power.
2. Market access: In the same way that islands are hard to access for delivery of energy supplies, they are also hard to access for vendors of new technologies.  Every other technological development has arrived in these locations long after they had become common in less remote areas.  Now, with the revolution in communication technology vendors have an efficient way to access and service remote customers.
3. Financing: Financing remains a challenge.  Despite its low operating cost, renewable power is a capital-intensive technology.  Most islands are too small and not sufficiently credit-worthy to attract the project financing resources used by larger power projects.

Overcoming the challenges

The National Renewable Energy Laboratory of the U.S. Department of Energy created the HOMER® hybrid optimization software to overcome the technical complexity of cost-effectively combining renewable and traditional power sources.  NREL’s licensee, HOMER Energy, provides low cost ways for vendors and solution providers to access this market through the 64,000 users who have downloaded HOMER from the internet to analyze hybrid renewable microgrid solutions.  HOMER Energy is working with international agencies to create training and certification programs to qualify island projects for credit enhancement and finance mechanisms, such as loan guarantees and aggregation into securitized finance vehicles.