| Introduction | Project Summary | Study Areas | Reports, Presentations and Downloads | The Project Team |
A microgrid is an Energy Island – able to disconnect from the main electrical grid at any time, and generate and distribute independently by combining generation sources, such as generators, solar or wind energy and intelligent control systems. Microgrid systems are usually used by colleges, offices, or hospital campuses for improved reliability, resilience and cost savings. They are also common on military bases and commercial/industrial use.
Our team of 13 Planning graduate students at Cleveland State University set out to understand the feasibility of a downtown, urban microgrid with the assistance of energy experts, researchers, businesses and community leaders of the City of Cleveland. We believe our work supports a microgrid as a catalyst for economic enhancement, growth, and revitalization in Cleveland, by attracting investment in jobs, infrastructure, and renewable, clean energy. The scale of the microgrid proposed by this study would be one of the first of its kind, encompassing a large, urban area that includes Cleveland’s central business district, a light industrial district, and a campus/institutional district. Through these spatial boundaries, we were able to study and document various development projects, both underway and planned for this area that can possibly support the Microgrid. We divided our study area to understand the individual strengths and weaknesses of its individual components, forming: the central Downtown Study Area, the east Industrial Study Area , and the southern Expanded Study Area.
This information was gathered to gain a better understanding of the electrical costs for businesses, building types, and to identify available real estate for expansion of any infrastructure. The methods of electricity delivery by way of a Microgrid needed to be considered as a way to make such a project feasible. “Island Mode” is a situation where the main electrical grid is disrupted, for example a blackout, brownout, or other disruptive event, and the Microgrid would be activated within at least five minutes of the disruption and would provide the electricity until the main electrical grid is restored to normal. This “energy island” would be separate from the main grid. Part of this study is to determine if it is economically conducive to develop an energy island, or to connect the Microgrid with the existing main electrical grid as a means of supplemental electricity. This is dependent on economic conditions and costs for the development of a Microgrid, as well as which scenario would be the most feasible option in terms of costs shared by businesses and firms, governments, utility companies, and other customers that would potentially pay for more reliable electricity.
The team of 13 student planners at Cleveland State University dove into the research with assistance from researchers, businesses and stakeholders in the Cleveland community. The product that we have constructed is a key for the economic enhancing and stability of energy for the City of Cleveland. The desire for a report like ours is very high due to the new cyber security issues, and protection over millions of dollars that could be lost for particular business during a blackout or brownout. Also the project seeks to draw more people and businesses to the Cleveland area due to economic development and sustainable renewable energy construction. These benefits can be found within all of the options that are proposed.
Our target market and the stakeholders of this project are looking to support the city network, energy reliability and economic stability. This will be determined through tiers of importance and how much each group will be paying to receive this reliability. These target markets, such as data centers, have become one of this projects target users. Data Centers provide great economic development with the appropriate energy source. The Microgrid will also encourage local businesses to relocate into the Microgrid. Our main focus in developing the Microgrid is economic development and business support.
Due to the costs associated with establishing a Microgrid, and the consideration of the Value of Lost Load or “VOLL,” as well as other expenses incurred by businesses and firms located within each study sub-area, it was important that three Tiers of customers be assigned based on Economic Development NAICS codes, and associated factors of each firm and sector, and their respective use of electricity and potential losses from a power disruption. The tiers were categorized as such from firms willing to pay a premium for reliable, uninterruptible electricity (Tier 1), mid-level reliability that would provide a higher-step above main grid-level dependability (Tier 2), to the level of electricity that would be no different than the electricity already provided from the existing main grid (Tier 3). The target market industries result from the commercial survey that was distributed by 20/ 30 group. Overall we can conclude that the target market can be narrowed down to Large, Medium and Small companies.
The future of μGrid was supported by Cuyahoga County with $100,000 to see one of the study areas through. The project team that will be bring the results together is comprised of Cleveland State University, Cuyahoga County , Case Western Reserve University, the City of Cleveland, Cleveland Thermal, Green Strategies, and Incose.
With the support of the city the new infrastructure will be built and the indicated businesses and future business will support the long-term expenses. Eventually the μGrid will sustain itself once it becomes a main source of energy for the study area. The business plan for the Microgrid is focused on the money flow and support of the system by agreements between the uGrid operator, CPP, Generators and the customers.
Our Results
The Fiscal Impact model estimates the potential future costs and revenues to the City of Cleveland and Cuyahoga County, associated with the μGrid’s economic impact, for each Study Area. The cost end of the model accounts for the county and municipal bonds that are issued by the City and County to finance the construction of the μGrid. The benefits end of the model considers the increase in local taxes, as well as the payments obtained by the City and County for lending funds to the μGrid itself.
The City of Cleveland derives the greatest benefits within the Expanded Study Area. The Expanded Study Area’s net benefits had an NPV of $369 million and a benefit to cost ratio of 173 to 1; or $173 of benefits for every $1 spent. The City of Cleveland also did well in the Downtown Study Area. The NPV of the City of Cleveland’s net benefits in the Downtown Study Area is $202 million and the benefit to cost ratio 143 to 1; or $143 of benefits for every $1 spent.
Cuyahoga County did the best in the Industrial Study Area. The NPV of its benefits was $36 million, and it received $5 in benefits for every $1 spend. The County did much worse than the City under in the Expanded Study Area. The NPV of its benefits was negative, meaning that it is actually costing the County more than it is receiving in benefits to construct the μGrid. In fact, in the Expanded Study Area, for every $1 spent on the μGrid the County is only receiving $0.62 in benefits. The benefits derived from the μGrid by the County is significantly lower than those derived by the City. There are two possible explanations for this discrepancy. First, the County does not administer an income tax, while the City does. Because the μGrid will not raise property values significantly, there is very little tax base upon which the County can derive benefits from the construction of the μGrid. Second, the μGrid’s construction is primarily financed with public debt raised by the County. Therefore, the County is shouldering a greater portion of the costs than the City is. Because the County is incurring a greater portion of the μGrid’s costs, but not enjoying the same degree of benefits as the City, its benefit to cost ratio’s and NPV’s are significantly lower than those of the City.
Our financial feasibility results appear to point to the regulatory safe model in the Downtown Study area as a clear winner, netting positive discounted cash flows for both Cleveland Public Power and for the Microgrid Operator. Key attributes that differentiate the Downtown Study area are its compact nature and its centrality to both a substation and Cleveland Thermal’s planned generation facility. These both equated to shorter lines in the model, not crossing highways, resulting in substantially lower costs. Adding additional generation capacity may further improve this study scenario’s cash flows, though the potential for economic development may be limited by available space. Phasing as well as pre-existing anchor tenants would both likely help both the industrial and expanded areas show earlier positive cash flows, which may be important, as both study areas offer additional commercial space for economic development.
The Expanded Study Area is geographically vast, expensive to onboard to the microgrid, and the cash flow is extremely late in the project. It strategically integrates four phases over a thirty-year period with the goal of creating a stable base for the project from existing customers, and proving reliability of the microgrid over time. The regulatory safe model has a higher rate of return and cash flow than the tax efficient model. The project sees a positive cash flow around Year 23 for the operator, but Cleveland Public Power struggles to generate revenue in the first 30 years. Double capacity for revenue was built into the feasibility assumptions for the Expanded Study Area.
The Industrial Study Area microgrid is designed to have two phases; Phase 1 focused on maximizing access to existing businesses and developable sites and Phase 2 connects vacant buildings for more potential economic development. The regulatory safe model of the Industrial area is comparable to the Expanded; low to negligible net cash flow and rate of return. CPP does not generate any revenue in the first 30 years of the project, but the microgrid Operator generates revenue by Year 5. While this area has favorable zoning, substantial vacancy, and the most potential for integrating renewables; the financial models do not support this project.
A lacking element of the feasibility model that could encourage total cash flow of the project would be integrating the phases of the microgrid design for both the Expanded and Industrial Study Areas. Phases were utilized in these two study areas based on the fiscal impact, market demand & supply, developable sites, and overall timeline. The Downtown area did not integrate phasing due to the compact nature of the section, ability to reach all desired buildings through Corridor Street, dense street grid design, and utilizing the branching structure of utility lines. Phasing as well as pre-existing anchor tenants would both likely help both the Industrial and expanded areas show earlier positive cash flows, which may be important, as both study areas offer additional commercial space for economic development.
In the tax efficient model, clearly, supporting the debt burden of the distribution of infrastructure on a Microgrid lease fee basis was extremely difficult to cash flow, and even at its upper limits, with Cleveland Public Power earning almost nothing in each scenario, was not sufficient to equate to positive cash flow for the operator. While the strength of the tax efficient model is allowing the operator to take advantage of large depreciation and interest deductions, these are not recognized in years of negative cash flow. Carryover of these deductions would likely be possible, but as an investment, over 30 years, this may not necessarily make the case for this model. Reducing debt service expense through subsidy may be one way to improve the viability of this model at inception of the microgrid project, but the true strength of this model may be recognized later, when the microgrid is at a later stage of lifecycle maturity.