Cuyahoga County, Ohio, picks private partner for microgrid energy play
6 min read
Cuyahoga County, Ohio’s plans for a first-of-its-kind public utility operating a system of microgrids has advanced with the selection of a private partner to operate the utility and shepherd the development and financing of its build-out.
Three commercial microgrid districts are the first on the drawing board with an anticipated price tag of between $40 million and $60 million, said Cuyahoga County Department of Sustainability Director Mike Foley.
The county council laid the groundwork for the projects by approving the formation of a county-owned electric utility in 2021 as a means to build out the commercial microgrid system as it seeks to transform the county’s legacy of heavy manufacturing into a high-tech, climate-friendly economy.
A microgrid uses local and secondary power sources that can generate electricity, heating and cooling and distribute energy and manage energy consumption separately from the larger energy grid, insulating it from severe weather and cybersecurity threats while also promoting green energy use.
The county wants to attract advanced manufacturers with a promise of affordable and reliable energy that isn’t interrupted when severe weather or other events impact the regional grid.
Other local governments are watching how the first-of-its-kind project unfolds.
“It’s a big step,” Foley said of the choice of private partner announced Friday. “Financially, we are structuring this so that the developer and operator will be the ones with the financial risks.” The county, with Cleveland at its core, carries ratings in the double-A category.
The county moved forward with a request for information process last summer receiving nearly 40 responses setting the stage for the request for qualifications launched in October. The county, which is working with consultants Go Sustainable Energy and Cleveland State’s Energy Policy Center, chose Compass Energy Platform from the four firms that responded.
The Cuyahoga County government is “focused on two main policy goals: spur economic development and achieve its Climate Change Action Plan,” the RFQ says.
Compass will work with the county to help build the customer base and serve as the lead contact for the nut-and-bolts operations of the utility and proposed microgrid districts.
Compass will establish the technical standards for developers and manage the billing of customers and communications with regional and national grid operators.
The firm will fund start-up and operational expenses and with individual project developers will finance the construction of microgrid projects, recouping the investment from tariffs and/or power purchase agreements with end users. The microgrid will offer a combination of sustainable self-generating power along with purchased energy.
Compass brings experience on sustainable energy, microgrid development, and a private capital partner to the table that can provide financing if needed, Foley said.
“As the county’s utility partner, we look forward to establishing the utility and to defining its initial microgrid projects,” Compass Chief Executive Officer Rick Bolton said. “We anticipate that the county Microgrid Utility will serve as a model for other communities in their efforts to adapt to climate change.”
The county team will begin negotiating a contract with Compass next week with the possibility of establishing a temporary six-month pact that leads to a longer-term deal. The aim is by the second half of the year to have a framework in place that would lead to a competitive selection process that could involve pre-qualifying developers of several specific microgrid projects on the drawing board, Foley said.
The actual operational launch of a district is not expected until 2024.
The county expects private investment to fund the districts but Foley is not ruling out the future use of bond issuance as part of a financing package, though he stressed the county would structure any financing so that it would not be on the hook for any liability.
The county has franchise agreements in place with the cities that would serve as home to proposed microgrids including Euclid, Cleveland Heights, Brooklyn, and Brook Park. Previously approved state legislation paved the way for the microgrid efforts but local jurisdictions must sign off.
No county or state funds would go to the development but federal dollars are being sought and some headway has been made. U.S. Sen. Sherrod Brown, D-Ohio, secured a $1.5 million earmark in what’s the second allotment made over the last two federal budget cycles with the overall total at $1.8 million.
The first earmark for $300,000 to design a microgrid district in the Aerozone, an “innovation district”that includes the NASA Glenn Research Center and the Cleveland Hopkins International Airport. The latest earmark will be used to assist with infrastructure build out for a microgrid district in Euclid around an industrial corridor South of Interstate 90 along E. 222nd St.
The county also is working on a request for funds though the Grid Innovation Program, a $1.8 billion federal grant program included in the 2021 infrastructure package to fund innovative ideas and projects related to grid resiliency and renewable generation. Foley anticipates naming two of the three districts in the request.
While the initial drive of the microgrid system is to serve commercial users, the aim could expand.
“We want some community benefit,” Foley said. That could involve including a school or fire department within the confines of a district grid that would benefit from uninterrupted power in the event of a regional grid failure.
While there’s no plans on the drawing board to include residential users, Foley said some ideas are percolating with one example being a community solar power supply.
“They are ideas. We are not there yet,” Foley said. “We are focused on these three districts and we want to get these first three districts right.”
The projects will be pursued under a new leader. New County Executive Chris Ronayne was sworn over the weekend, replacing Armond Budish who did not seek re-election.
Foley said Ronayne supports the project and wants to see it move forward. Ronayne administration representatives couldn’t immediately be reached.
Microgrids are becoming increasingly popular as local governments look for ways to provide reliable energy and reach clean energy goals. Significant microgrid projects have been established by the Port of Long Beach, California; Montgomery County, Maryland; the University of California, Berkeley; and the Pittsburgh International Airport, which is the first major U.S. airport to rely entirely on a microgrid that uses natural gas and solar energy.
Cuyahoga County’s project is one of the most ambitious in the U.S. and differs from the others because it features a new public utility that will mean local energy generation and backup. It will cater to businesses like advanced manufacturers that require highly reliable and resilient electricity supplies.
Microgrids are also gaining popularity as governments look to manage climate-related extreme weather events. As a self-contained electrical network that can connect and disconnect from a larger electric grid, a microgrid is often able to keep power running to critical government facilities, towns and businesses amid widescale outages.
The plan is not without risks, both on the power side and for the overall credit of the county, which has long been considered the economic engine of northeast Ohio, touting strong financials and governance.
“The risk of a project like this is contractual ambiguity in the contract language, which could lead to the county taking over cost overruns and the county having to foot the bill for more things than it initially thought it would,” which could end up forcing the county to tap its general fund, Ashlee Gabrysch, Fitch Ratings’ Cuyahoga County analyst, told The Bond Buyer last summer.
“A project like this, if done thoughtfully and with risks and rewards allocated in a balanced manner, could spur economic growth, could increase the county’s competitiveness and also enhance their climate resilience and sustainability,” she said.
While microgrids are rising in popularity, they still carry uncertainties. They can be effective at providing reliable and resilient energy as well as integrating low-carbon energy resources and giving utility customers more control over their power usage but they are complex to design and costly to construct, experts say.
