Most remote communities in Canada and around the world rely on diesel power for their electricity. Remote diesel power is emissions intensive, expensive to service, noisy, unreliable, costly and risky to transport. Governments, communities, utilities and industry want to displace diesel generation with renewable energy. Renewable electric generation is intermittent and cannot meet electrical demand without energy storage or combination with another generation source. This work examines the cost optimization of renewable energy integration with existing diesel infrastructure in remote communities.

Given the variety of geographical locations of remote communities and their proximity to different renewable resources, there is value in developing and understanding a variety of alternative electric supply systems. This work focuses on integrating micro-hydro and wave energy because the case study community is near excellent wave energy and hydro energy resources.

Most remote communities in Canada receive electrical services from regional utilities. These utilities have moved towards net-metering programs and power purchase agreements (PPAs) with the goal of integrating renewable energy into isolated diesel systems. This approach has the benefit of outsourcing a difficult technical challenge and controlling costs. Such PPA programs are designed to be cost neutral, without raising community electric rates. Rates offered under PPAs are based on avoided diesel fuel cost. Thus far, these rates have encouraged little renewable energy investment.

This work provides an alternative method for calculating allowable costs for renewable energy integration that could facilitate crafting new utility policy, including setting optimal incentives for PPA contracts with Independent Power Producers. A detailed computer-based model of a case study community electric system was used to calculate allowable Levelized Cost of Electricity (LCOE) using the following inputs:​ electric demand, local renewable resources, generator models and existing costs. Hydro-diesel, wave-diesel and wave-hydro-diesel energy inputs with different capacities were modeled to provide greater insight into the value of renewable energy resources to mitigate diesel use.

The hydro-diesel systems performance had little variability in operations and costs for selected hydro capacities of 225kW, 275kW and 325kW. The 225kW hydro-diesel system had the best utilization, meeting 65.2% of annual demand and reducing fuel by 65.8%. The variability in the hydro resource will cause year-to-year variability in fuel use reductions ranging from 64-92%. The emissions rate for this system is 293gCO₂/kWh. The allowable costs for 225kW hydro generation are $0.68/kWh and 17,000$/kWinstalled.

For the wave-diesel system, wave capacity ranges from 200kW to 90kW with respective fuel use reductions of 68.4% to 39.6%. The emissions rate is 271 gCO₂/kWh to 518gCO₂/kWh. The range of allowable LCOE values of the wave systems are 0.51-0.60$/kWh and the range of allowable installed costs are 19,800$/kWinstalled to 25,400$/kWinstalled.

For the 200kW wave plus 225kW hydro scenario, the allowable LCOE is 0.67$/kWh where 80% of the wave supply is utilized and 24% of the hydro supply is utilized. For the 90kW wave plus 225kW hydro scenario, the allowable LCOE is 0.66$/kWh where 93% of the wave supply is utilized and 58% of the hydro supply is utilized.