Government of the Northwest Territories (NWT) in Canada has made a commitment to reduce Greenhouse Gas Emissions (GHG) through increasing the use of renewable energy and has targeted a reduction of GHG emissions through from electricity generation in off-grid communities by 25%, or 18 kilotonnes, below historical levels by 2030. The Town of Inuvik is the largest NWT’s off-grid community with a population of over 3000 which has historically relied on fossil fuel power for meeting its energy demand. The recently completed Inuvik hybrid power project involves the addition of a single 3.5 MW wind turbine which has a peak capacity covering most of the load demand. A 3.5 MW-2.8 MWh li-ion Battery Energy Storage System (BESS) has been also integrated to ensure reliable power delivery responding to dynamic variations in wind power output. In addition, a 1-MW PV power plant has been integrated in the community power grid as well. The renewable power integration has enabled offsetting the consumption of diesel fuel significantly. This paper describes the challenges associated in design and operation of a hybrid power system in islanded mode with high penetration of renewable power. Issues such as the impact of reduced fault levels on power distribution system protection with inverter-based resources (IBR), impact on supply of power to single-phase loads, operating the energy storage systems in grid following versus grid forming modes, and power system reliability considerations are discussed. These issues are equally important when designing grid-connected microgrids with ability to operate in islanded mode. In addition, the operating results after one full year of operation are discussed as well as future considerations to improve the hybrid power system performance.