Electronic and structural properties of AlGaN/GaN heterostructures grown by molecular beam epitaxy on semi-insulating 4H-SiC substrates with and without an initial AlN nucleation layer are studied. Differences in microstructure were examined using scanning capacitance microscopy, which reveals negatively charged dislocations through capacitance variations, conductive atomic force microscopy, used to quantify the density of dislocation-related reverse-bias leakage paths, and x-ray diffraction (XRD). Samples grown without the AlN buffer exhibited features consistent with the commonly observed coalesced island structure, with negatively charged features, commonly associated with dislocations, occurring at the domain boundaries. Samples grown with an AlN buffer layer showed a more random distribution of negatively charged features, much broader symmetric XRD peak widths, and about 1 order of magnitude greater density of localized reverse-bias leakage paths. This difference in microstructure is expected to have significant influence on carrier mobilities and optical efficiencies, and may suggest improved nucleation schemes for device-quality nitride material. (C) 2003 American Vacuum Society.