The Grid CLE UST 611: Planning Studio May 14, 2018 Original - - PowerPoint PPT Presentation

The µGrid CLE

UST 611: Planning Studio May 14, 2018

2

Introduction

Original Cleveland µGrid

• Project structure
• Reasons for Study Area

design

Vision and Goals

Goal 1: Provide affordable, reliable and resilient power. Goal 2: Drive economic growth and development. Goal 3: Provide clean power and establish power sustainability. Goal 4: Improve existing infrastructure and implement smart grid technology.

3

Introduction

Demographics

4

Population and Racial Makeup

5

Demographics

62% 29% 0% 3% 1% 3% 0% 2%

Cuyahoga County Racial Makeup, Population 1.25 million

Estimate; Total: - White alone Estimate; Total: - Black or African American alone Estimate; Total: - American Indian and Alaska Native alone Estimate; Total: - Asian alone Estimate; Total: - Native Hawaiian and Other Pacific Islander alone Estimate; Total: - Some

• ther race alone

Estimate; Total: - Two or more races: Estimate; Total: - Two or more races: - Two races including Some other race

39% 49% 0% 2% 0% 3% 3% 1% 3%

City of Cleveland Racial Makeup, Population 385,000

Estimate; Total: - White alone Estimate; Total: - Black or African American alone Estimate; Total: - Asian alone Estimate; Total: - Native Hawaiian and Other Pacific Islander alone Estimate; Total: - Some other race alone Estimate; Total: - Two or more races: Estimate; Total: - Two or more races: - Two races including Some other race Estimate; Total: - Two or more races: - Two races excluding Some other race, and three or more races

Racial Makeup Study Area

6

Demographics

38% 43% 1% 10% 0% 2% 3% 0% 3%

Study Area Racial Makeup, Population 19,719

Estimate; Total: - White alone Estimate; Total: - Black or African American alone Estimate; Total: - American Indian and Alaska Native alone Estimate; Total: - Asian alone Estimate; Total: - Native Hawaiian and Other Pacific Islander alone Estimate; Total: - Some other race alone Estimate; Total: - Two or more races: Estimate; Total: - Two or more races: - Two races including Some other race Estimate; Total: - Two or more races: - Two races excluding Some other race, and three or more races

Age and Gender

7

Demographics

• 6.2
• 5.4
• 5.7
• 6
• 6.4
• 6.6
• 6.3
• 5.5
• 6
• 6.5
• 7.4
• 7.6
• 6.6
• 5.1
• 4
• 3.2
• 2.7
• 1.8

5.4 5.4 5.7 6 6.4 6.6 6.3 5.5 6 6.5 7.4 7.6 6.6 5.1 4 3.2 2.7 2.5

• 10
• 8
• 6
• 4
• 2

2 4 6 8 10 Under 5 5 to 9 10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 to 39 40 to 44 45 to 49 50 to 54 55 to 59 60 to 64 65 to 69 70 to 74 75 to 79 80 to 84 85 and up

Cuyahoga County Age Distribution

Female Male

• 6.8
• 6.5
• 6.7
• 7.3
• 8.6
• 7.7
• 6.9
• 5.7
• 5.7
• 6.5
• 7.7
• 7.1
• 5.9
• 3.9
• 2.4
• 1.8
• 1.4
• 1.3

6.3 5.9 5.9 6.4 8.6 7.7 6.6 5.5 5.8 6.3 6.9 7.1 5.8 4.4 3.5 2.6 2.1 1.9

• 10
• 5

5 10 Under 5 5 to 9 10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 to 39 40 to 44 45 to 49 50 to 54 55 to 59 60 to 64 65 to 69 70 to 74 75 to 79 80 to 84 85 and up

City of Cleveland Age Distribution

Female Male

Educational Attainment, Income, and Poverty Statistics as of 2015

8

Demographics

• County has highest concentration of those

who have finished high school

• City least well educated
• County and Study area have highest

Concentrations of the very highly educated

• Cuyahoga County Median Household

Income $43,603

• City of Cleveland Median Household

Income $26,179

• Cuyahoga County 18.5% Poverty Rate
• City of Cleveland 19.3 % Poverty Rate
• Study area Census Tracts range from 29%

to 74% Poverty Rate

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% Less than 9th 9th to 12th No Diploma High School Graduate Some college No Degree Associate's degree Bachelor's Degree Graduate or Professional Degree

Educational Attainment by Percentage

Cuyahoga County City of Cleveland Study Area

Market Attributes

Key Attributes of Downtown Cleveland

• Ability to leverage existing infrastructure;
• Current development, solidifying the economic relevance of the area;
• Existing loads available to provide initial financial feasibility; and
• Potential anchor tenants and institutions.

Additional Attribute (to be discussed in the individual study areas)

• Available land for new infrastructure and end users.

10

Market Attributes

Existing Electrical Infrastructure

11

Existing Infrastructure

• Cleveland Public Power (CPP) :

Municipality owned Energy Distributor

• The Illuminating Company (CEI):

First Energy- Private Energy Distributor

• Cleveland Thermal: Hamilton

Power plant providing thermal energy in the form of steam to downtown region

12

Existing Electrical Infrastructure

Existing Infrastructure

• Combined Heat and Power Plant (CHP) – Fully Gas-fired projected to be built.
• CHP Generates Electricity while producing heat in the form of steam
• Fuel Consumption is 84% more efficient than traditional power plants
• Heat is utilized instead of being rejected into the atmosphere

13

Existing Electrical Infrastructure

Benefits of CHP Plant ; Source: Northern Utilities (United Kingdom) (2016). Hamilton Power Plant; Source: Cleveland.com (March 2018)

Electrical Infrastructure

• Existing Substation at E11th

and a planned substation at E26th Street

• Assuming building

distribution lines and utilities

• n top of the Existing

Structure

14

Existing Electrical Infrastructure

Current Development Projects

Current Development Projects:

• More than 4 Million sq. ft. of Development in our Study area
• More than 2 Million sq. ft. currently under development (1,680,000 sq. ft. under construction)

Project Name Project Location Status Type Construction Start Date Completion Date Area (sq. ft) nuCLEus 501 High Avenue NA Mixed-Use NA 2020 250,000 The Beacon 515 Euclid Avenue Under Construction Residential 2017 2019 1,400,000 The 925 Building Renovation 925 Euclid Avenue Under Construction Renovation 300,000 John Hartness Brown Building 1001-1101 Euclid Avenue Under Construction Mixed-Use 2018 20,000 Playhouse Square Tower East 17th Street and Euclid Avenue Under Construction Residential 2018 2020 280,000 Ohio Bell Building (750 Huron Road) 750 Huron Road NA Renovation 480,000 Cleveland Lakefront Development East 9th Street Pier, adjacent to Voinovich Park north of the Rock 'n Roll Hall of Fame NA Mixed-Use 2018 1,000,000 Terminal Tower 50 Public Square Under Construction Renovation 2018 2020 577,000 Flats East Bank - Phase III 1055 Old River Road NA Mixed-Use late 2019 Erieview Tower, Galleria 100 Erieview Plaza NA Office 703,000

Current Development Projects

Existing Businesses

Existing Demand Load

• Demand Load: The period
• f time or state in which

electricity demanded is projected to reach a significantly higher level than average power consumption

• Data from:
• Energy Information

Administration

• Cuyahoga County Parcel

Data (Tax/Exempt Use)

18

Existing Businesses

Estimated Peak Demand Load, by Parcel

Data Sources: Energy Information Administration (Commercial, Residential, Industrial Energy Consumption Surveys; Annual 861 Survey, 2017); 2017 Cuyahoga County Tax Use by Parcel.

19

Existing Businesses

Key Existing Businesses

Key Businesses - Downtown

• H5 Colocation Facility
• City and County Government

Offices

• Stadium and Arenas
• And of course Cleveland State

20

Existing Businesses

Image credit: H5 Datacenters

Key Businesses - Industrial

• Ohio Technical College
• Level 3 Communications

21

Existing Businesses

Image credit: Ohio Technical College

Key Businesses - Expanded

• Cuyahoga Community College
• St. Vincent Charity Medical

Center

• Northeast Pre-Release
• United States Postal Service

22

Existing Businesses

Image credit: Cuyahoga Community College, Cleveland.com

Generators

23

• Confirmed residential use was

limited

• Largest number of generators

among telecommunications companies

• Largest number of target

businesses in large retail and manufacturing

24

Generators

Image: Amanda Lovins, WKMG

• 984 Permits
• 107 business were candidates for

relocation

Image: Canaantech Mechanical

Key Findings Database Characteristics

National Survey

National Survey - Participants

• 155 Respondents
• Predominant Industries:
• Manufacturing
• Retail Trade
• Health Care & Social

Assistance

• Information
• Categorization of

Operations:

• Scientific & Technical

Consulting

• Communications
• Computer System

Design Services

26

National Survey

National Survey - Participants

• 41 firms deemed “very

interested” in Microgrid as an energy supplier

• Aggregated by size into

small, medium, and large firms based on size of typical facility

• 6 large firms 265,000 sq. ft.
• 18 medium firms 29,500 sq. ft.
• 17 small firms 2,600 sq. ft.

27

National Survey

National Survey - Results

• Most firms were committed to backup

power in the form of generators primarily, some uninterruptable power supplies

• Interested in renewable energy

sources: Large Firms responded 26% would be a high rate of renewable energy integration, medium and small firms responded an average of 40%

• Small & medium sized firms gave

average costs of 14 cents they’d be willing to pay per kWh for 99.999% reliability

28

National Survey

Local Business Survey

Participant Profile

• Reoccurring zip codes:
• 44106
• 44114
• 44115
• Predominant industries:
• Arts and Entertainment
• Public Administration
• Real Estate & Leasing
• Majority of operations having 1-200 FTE employees per typical facility;

Three respondents of <600 FTE employees per typical facility

• Common respondent roles:
• Facilities Managers
• Directors of Sustainability

30

Local Business Survey

Energy Demand

31

Local Business Survey

2 4 6 8 10 12 14 16 0-9% 10-19% 20-29% 30-39% 40-49% Not sure

Percentage of Operating Costs Dedicated to Electrical Power Source: Cleveland State Capstone UST 611, 2018

13% 14% 18% 23% 32%

“How important is the availability & cost of energy to your company's decision on where to locate or expand?” Source: Cleveland State Capstone UST 611, 2018

Extremely Important Very Important Moderately Important Slightly Important Not at All Important

Energy Demand

32

Local Business Survey

1 2 3 4 5 6 7 8 9 10 <9 cents 10-12 cents 12 or more cents Not sure

Average “All In” Price per kWh of Survey Participants Source: Cleveland State Capstone UST 611, 2018

Generators & Backup Power

33

Local Business Survey

63% 33% 4%

“Does your company have any back-up generation equipment to maintain

• perations in the event of a power

failure?” Source: Cleveland State Capstone UST 611, 2018

Yes No Not Sure

27% 46% 27%

“How confident are you that your current back-up generation system can activate and provide reliable power before the threshold is reached?” Source: Cleveland State Capstone UST 611, 2018

Extremely Confident Very Confident No Backup Generation

Renewable Energy & District Energy

34

Local Business Survey

22% 78%

“Would a high percentage of electricity derived from renewables be a significant factor in your company's location decision?” Source: Cleveland State Capstone UST 611, 2018

Yes No

12% 44% 44%

“Would the availability of district energy help in reducing development costs for new construction or changes in business structure?” Source: Cleveland State Capstone UST 611, 2018

Yes No Not Sure

Local Business Microgrid Perspective

35

Local Business Survey

7% 32% 61%

“How familiar are you with the concept of a microgrid?”

Very familiar Slightly Familiar Not familiar at all

8% 22% 22% 35% 13%

What is your impression of a microgrid's potential usefulness to your firm?

Extremely Useful Very Useful Moderately Useful Slightly Useful Not at all Udeful

Local Business Microgrid Perspective

36

Local Business Survey

36% 32% 18% 5% 9%

“How important is operator reputation when selecting the entity that manages a microgrid?” Source: Cleveland State Capstone UST 611, 2018

Extremely Important Very Important Moderately Important Slightly Important Not at all Important

2 4 6 8 10 Would not consider 8 cents 10 cents 15 cents 16 cents Other Amount

“What rates would you pay to guarantee 99.999% Reliability?” Source: Cleveland State Capstone UST 611, 2018

Residential Survey

Demographics

• Total surveys: 232
• Target zip codes:
• 44113 - 35
• 44114 - 46
• 44115 - 39
• 44103 - 21
• 33 different zip codes total

38

Residential Survey

40% 47% 4% 9%

Residential Energy Use Survey Participants, Race Source: Cleveland State Capstone UST 611, 2018

White Black or African American Asian Other

54% 46%

Residential Energy Use Survey Participants, Sex Source: Cleveland State Capstone UST 611, 2018

Male Female

Cost of Electricity

39

Residential Survey

$85 $82 $80 $114 $61 $132 20 40 60 80 100 120 140 Single Family Home (n=103) Multi-Family Home or Duplex (n=26) Townhome (n=3) Condo (n=17) Apartment (n=71) Other (n=12)

Average Monthly Electric Bill by House Type Source: Cleveland State Capstone UST 611, 2018

Reliable Electricity

40

Residential Survey

57% 55% 55% 43% 45% 45%

0% 10% 20% 30% 40% 50% 60% 70% Single Family Home (n=103) Apartment (n=71) Other (n=58)

"Are you willing to pay more for reliable electricity?" Source: Cleveland State Capstone UST 611, 2018

Yes % No %

31% 38% 19% 5% 7%

"How important to you is the use of renewable energy resources?" Source: Cleveland State University, 2018

Extremely Important Very Important Moderatly Important Slightly Important Not Important

Source: Cleveland State Capstone UST 611, 2018. Source: Cleveland State Capstone UST 611, 2018.

Residential Microgrid Perspective

41

Residential Survey

31% 40% 15% 8% 6%

"How likely are you to support an investment for a microgrid as tool to attract and retain businesses and jobs?" Source: Cleveland State University, 2018

Extremely Important Very Important Moderatly Important Slightly Important Not Important

• Overall positive response to

learning about the microgrid

• Residents support

economic development initiatives in the downtown area

• Residents value reliable

electricity

• 56% willing to pay more
• 32% willing to pay $10 or

more a month

Source: Cleveland State Capstone UST 611, 2018.

Comparative Analysis

Survey Comparison

• Local firms have high invested costs in generators and uninterruptable power supplies
• potentially making it difficult to attract existing businesses
• The concept of a microgrid is supported by both firms and residents as a tool for

economic development

• Large local or national firms that currently pay low rates with high sunk costs

(retrospective costs), will be difficult to attract to the microgrid

• Despite local business survey, the residential and national survey indicate interest in

renewable energy sources amongst public and private sectors

• Cleveland’s low energy rates make it more likely to attract national firms than local

firms

• Microgrid’s operator reputation was important to businesses at local and national

level, so attracting early customers may prove challenging

43

Comparative Analysis

Insurance

Introduction

45

Insurance

• With the increasing complexity of

technology, reliance on a resilient power supply has become increasingly necessary.

• There are over 5,800 power plants with 144

million customers. Electric power is supplied through over 450,000 miles of high-voltage transmission lines coming out

• f 8 regional networks.
• The average power plant is over 30 years
• ld.
• Approximately 70% of transmission lines

and transformers are over 25 years old.

Utility Service Interruption Coverage

46

Insurance

• Coverage for loss due to lack of incoming

electricity caused by damage from a covered cause (such as a fire or windstorm) to property away from the insured's premises—usually the utility generating station.

• Also referred to as "off-premises power

coverage."

• Not provided in a standard property insurance

policy; available by endorsement.

• Endorsements vary widely as to what utility

services are included, whether both direct damage and time element loss are covered, and whether transmission lines are covered.

What’s the Damage?

47

Insurance Areas of cost during power outages:

• Wasted wage/salary costs (and actual work

losses)

• Lost revenue
• Remedial costs (E.g. resulting overtime,

repairs, recovering lost data, etc.)

• Damages/penalties
• 2016 average cost of $740,357 per unplanned
• utage
• Thirty percent of the $18 billion in insured

losses from Hurricane Sandy were attributed to business interruptions -- ~$5.4 billion.

Biggest Losers

48

Insurance

• The average cost of a single data

center outage in 2016 was about $730,000

• Southwest Airlines – three-day
• utage; $177 million
• Delta Airlines – three-day outage;

$150 million

Cost of Utility Service Interruption Insurance

49

Insurance

• Average Cost of Business Insurance per $1,000,000

in revenues averages $7,322.

• Business Interruption insurance equates for 1/3 of

these costs.

• Interruption Insurance adds $2,197 of premium to a

business policy.

• For a company with $50M in revenues, the savings

would be $109,850.

• Potential Savings on Utility Service Interruption

Insurance with Microgrid

• Saving approximately 30% off business insurance

premium.

Valuing Resilience and Reliability

Resilience and Reliability

• Reliability – measurement of frequency and duration of power
• utages.
• Resilience – ability (of a grid) to withstand rare and extreme events.
• Expected reliability of existing grid
• Prior report – estimated based upon CEI outage data
• 99.63%
• µGrid will provide both reliability and resilience – Tiered Structure
• Tier 1: 5-Nine Reliability (99.999%)
• Tier 2: Limited 5-Nine Reliability
• Tier 3: Reliability of the Existing Grid (with additional brownout

protection)

51

Valuing Resilience and Reliability

What types of firms will seek resilient power?

Two measures were used to identify ideal potential customers for the µGrid:

• Economic Development Target Firms – Value of Lost Load

(VOLL)

• Existing Firms – Highest Lost Hourly Revenues (in the event
• f a power outage)
• Also VOLL

52

Valuing Resilience and Reliability

Economic Development Target Firms – Value of Loss Load (VOLL)

53

Valuing Resilience and Reliability

• Value of Loss Load: Costs

associated with damage and mitigation due to outages over actual electricity consumption (kWh)

• Highest VOLL by 3- and 4-digit

NAICS businesses

• Profiles were developed from

ReferenceUSA NAICS data and from survey data

• Tier Structure (used for pricing)
• Tier 1: High VOLL >

$50/kWh

• Tier 2: High VOLL < $50
• Tier 3: All other

business/residential parcels

Existing Firms – Highest Lost Hourly Revenues (in the event of a power outage)

• Locating lines to service

high revenue businesses

• Obtained data from

ReferenceUSA

• Spatially joined coordinate

data to parcel data

• Used for locating potential

lines

54

Valuing Resilience and Reliability

$1,000 $2,500 $250, 000+

Firms with Highest Average Hourly Production (aggregated by parcel)

Data Source: ReferenceUSA, Business and Consumer Research.

Existing Firms – Potential Tier Model – Based

• n VOLL by NAICS
• VOLL projected by

NAICS Code (data from ReferenceUSA)

• Used in Feasibility

Analysis to determing revenue/cost data

55

Valuing Resilience and Reliability

Existing Firms by Potential Tier (based on NAICS Code)

Data Source: ReferenceUSA, Business and Consumer Research.

Tier

Regulatory Structure

The µGrid Business Structure

• No single entity encompasses the µGrid – rather the µGrid is comprised of

several public and private entities:

• The City of Cleveland & Cleveland Public Power
• Cuyahoga County
• A third-party private entity (the “Operator”)
• Participating entities are contractually bound to create the µGrid system, and

achieve its underlying purpose.

• There are two options for structuring the µGrid system
• The Regulatory Safe model
• The Tax Efficient model

57

Regulatory Structure

Option 1: The Regulatory Safe Model

58

Regulatory Structure

Power Generation and Wholesale Distributors CPP Customers

µGrid Operator

Management Agreement Power Purchase Agreement Service Contract City of Cleveland & Cuyahoga County $ Private Equity and Private Lender $

Option 2: The Tax Efficient Model

59

Regulatory Structure

Power Generation and Wholesale Distributors CPP Customers

µGrid Operator

Long-Term Lease Power Purchase Agreement Service Contract Management Agreement City of Cleveland & Cuyahoga County $ Private Equity and Private Lender $

Financial Feasibility Model

60

61

Financial Feasibility Model

Cleveland Public Power (Regulatory Safe)

Revenues Customer Billing (less) Costs Source: Cleveland Thermal (CHP) Source: Renewables Source: Wholesale Market Distribution Cost (less) Expenses

• Mgmt. & Service Contract (with Operator)

Administrative Expenses Insurance Annual Repair Fund General Corporate Expenses Net Operating Income (NOI) (less) Debt Service (County Loans) (add) Economic Development Grant Total Cash Flows

Cleveland Public Power (Tax Efficient)

Revenues Customer Billing (less) Costs Source: Cleveland Thermal (CHP) Source: Renewables Source: Wholesale Market Distribution Cost (less) Expenses Microgrid Lease (with Operator)

• Mgmt. & Service Contract (with Operator)

Administrative Expenses General Corporate Expenses Net Operating Income (NOI) Total Cash Flows

62

Financial Feasibility Model

µGrid Operator (Regulatory Safe)

Revenues

• Mgmt. & Service Contract (from CPP)

(less) Costs µGrid Controller - Equity (less) Expenses Administrative Expenses Insurance Annual Repair Fund General Corporate Expenses Net Operating Income (NOI) (less) Debt Service (Private Loan) (less) Depreciation (Controls) (less) Interest (Private Loan) (less) Total Taxes Owed Total Cash Flows

µGrid Operator (Tax Efficient)

Revenues Microgrid Lease (from CPP)

• Mgmt. & Service Contract (from CPP)

(less) Costs µGrid Controller - Equity (less) Expenses Administrative Expenses Insurance Annual Repair Fund General Corporate Expenses Net Operating Income (NOI) (less) Debt Service (Private Loan and County Loans) (add) Economic Development Grant (less) Depreciation (Controls and Distribution) (less) Interest (less) Total Taxes Owed Total Cash Flows

Additional Financial Model Assumptions

63

Financial Feasibility Model

Factor Assumptions

Taxes Federal Income Tax * 21.0% Municipal Income Tax 2.5% Inflation Factors Annual Cost Inflation 2.0% Revenue Inflation Factor 2.0% 10-Year Contracts - One time price adjustment to market 8.0% Tiered Pricing Model (per kWh) Tier 1 Pricing $ .130 Tier 2 Pricing $ .115 Tier 3 Pricing $ .090 Purchased Power Costs (per kWh) CHP (Cleveland Thermal) $ .040 Wind $ .110 Solar $ .060 Wholesale $ .055 Distribution Cost (per kWh) $ .025

*20-year Depreciation for Distribution System; 10-year Depreciation for Controller, as applicable to entities

Debt Assumptions

64

Financial Feasibility Model

County Bond A LTV 80% Term (Years) 30 Rate 5% County Bond B LTV 10% Term (Years - 10 Years Interest Only) 20 Rate 3% Bank Loan - µGrid Controller LTV 75% Term (Years) 10 Rate 6% City of Cleveland Economic Development Loan LTV 10% Term (Years) 15 Rate 3%

Financial Feasibility Model

Distribution Infrastructure Construction Hard Costs

* Variable costs per actual line/phase configurations by Study Area (Expanded shown)

10.0, 24% 3.0, 7% 3.0, 7% 5.0, 12% 2.3, 6% 17.7, 42% 1.0, 2%

Substation * Battery System Ring Bus PJM Connection Line * Hamilton Connection Line ($800 / ln. ft.) * Microgrid Distribution ($400 / ln. ft.) *

• Misc. Property Acquisition Costs

Distribution Infra Hard Costs $42.0 Million

Financial Feasibility Model

Distribution Infrastructure Construction Soft Costs

* Variable costs per actual line/phase configurations by Study Area (Expanded shown)

8.4, 25% 4.2, 13% 2.1, 6% 6.3, 19% 0.6, 2% 1.3, 4% 1.7, 5% 0.4, 1% 8.4, 25%

Distribution System Soft Costs Labor Licensing Fees OEM Service Contract Control System Maintenace Permitting Legal Engineering Bonding/Insurance Construction Contingency

Distribution Infra Soft Costs $33.4 Million Distribution System – Total Costs $75.3 Million

Financial Feasibility Model

Control System Construction Costs

0.50, 12% 0.30, 7% 0.10, 3% 0.40, 10% 0.04, 1% 0.08, 2% 0.10, 3% 0.03, 1% 0.50, 12% 2.00, 49%

Labor Licensing Fees OEM Serive Contract Control System Maintenace Permitting Legal Engineering Bonding/Insurance Construction Contingency Total Control System Soft Costs

Control System Hard Cost Control System and Field Devices $2.5 Million Control System Soft Costs Total Control System Costs $4.5 Million

* Variable costs per actual line/phase configurations by Study Area (Expanded shown)

Economic and Fiscal Impact Model

Determining Market Demand

69

Economic and Fiscal Impact Model

• National Survey Results were used to determine market penetration, and likely

interested firms for potential economic development gains

• Market penetration rate at 20%.
• Firms with high regard for energy resiliency and reliability have high sunk costs in

generators, uninterruptable power supplies etc.

• Determined that most firms likely to move to the Cleveland Microgrid would be new

firms

• Growth was calculated by expected job growth from BLS 10 year projections and divided

by average number of employees per firm

• Industries (NAICS Codes) of respondents fell into 6 major growth categories: Computer

Systems Designs and related services, Data Processing and Hosting, Finance and Insurance, Legal Services, Retail Trade, and Management, Scientific and Technical Consulting Services

Determining Market Demand (cont.)

70

Economic and Fiscal Impact Model

• Expectations were roughly 30 competitive micro grids over the course of the next 10 years,

Cleveland’s share calculated at 3%

• Existing Firms willingness to move calculated at .002% given National Survey results
• Firms were broken up into small, medium, and large companies based on average size

profiles from National Survey

• Share of likely small, medium, and large firms was used to calculate possible firms for

economic development

• Total 146 firms in various industries determined as possible firms for economic

development, study areas matched this demand with existing supply, both existing and developable land

Projected Demand

71

Economic and Fiscal Impact Model

Industries Large Firms Medium Firms Small Firms Total Computer systems design and related services 10 29 27 66 Data processing, hosting, and related services 3 9 8 20 Finance and insurance 2 6 6 15 Legal services 2 6 6 13 Management, scientific, and technical consulting services 2 7 6 15 Retail trade 2 7 7 17 Total 21 64 60 146

Energy Generation

Energy Generation

• Variety of Generation Resources for additional resiliency and hedge against fuel prices
• Primary source CHP at Cleveland Thermal
• Modest amount of Solar PV resources and Wind Energy (10% of the final output)
• Ability to leverage customer generation for stability during island mode

73

Energy Generation

Estimated Annual Microgrid Generation Makeup (Souce: Author, 2018)

Energy Generation

• CHP Capability in Cleveland Thermal is the principal constrain for µGrid load
• Full Resiliency supported by 13MW of Cleveland Thermal- lowest steam generation requirement
• Additional 8MW Capacity available
• Can be ramped up to 50MW (per EPA) every 5 years by adding more baseload or steam generators

74

Energy Generation

Estimated Annual Microgrid Generation Makeup (Souce: Author, 2018)

Renewable Energy

Goals of Grid Connection

76

Renewable Energy

• 10% of µGrid energy generation from renewable sources
• Sustainability:
• Diversify sources of energy to make the grid more resilient
• All renewable energy locations will be private firms who sell their

energy to the grid

Overall System Function

• Integration of

renewables to the grid:

• Net metering
• Battery storage
• Direct connection
• 5 acres of solar PV

panels typically equals 1 Megawatt

• f generation

77

Renewable Energy

µGrid

Image provided by Dovetail Solar & Wind

Renewable Energy

Solar PV Generation

Wind Turbine Generation

Renewable Energy

• Costs
• General Electric (GE) 2MW

model purchased new is $2.8 million

• GE estimates payback

period for each 2MW model is 5-8 months

• Ohio Department of Natural

Resources – Threatened Species

• Peregrine Falcon
• Indiana Brown Bat
• LEED Co. Offshore Wind

Turbines

80

Renewable Energy

Potential Renewable Sites

• Solar Qualifications:
• Roof size
• Roof type
• Location
• Age
• Wind Qualifications:
• Property ownership
• Zoning
• Threatened species
• Proximity to institutions

^ ^

Wind Turbine sites Quality roof sites R

• of sites requiring repair

The µGrid Study Areas

The µGrid Study Areas

The µGrid Study Areas

Downtown Study Area

84

Downtown Study Area – Boundaries

Strengths:

• Large Anchors ex. CSU &

BlueBridge

• Abundance of existing

leasable office space

• CHP water and steam

infrastructure

• Many proposed residential

redevelopment projects Challenges:

• Lack of greenfields and
• verall not much open

developable land

• Small lot sizes don’t match

with industry demands of microgrid users

85

Downtown Study Area – Boundaries

• 34,169 linear feet
• $14M to build

Distribution lines

The Downtown Study Area – Proposed Distribution Lines Existing Leasable Space & Vacant Land

• 20.5% vacancy rate in Downtown Class A & B office space

Economic Impacts

86

Downtown Study Area – Economic and Fiscal Impact

Industry Sector Firms Jobs (Year 10) Earnings ($M) (Year 10) Output ($M) Computer systems design & related services 32 1400 $163 $448 Data processing, hosting, and related services 17 73 $7 $245 Finance and insurance 11 360 $40 $236 Legal services 12 470 $56 $258 Management, scientific, and technical consulting services 12 585 $77 $104 Retail trade 13 430 $20 $20 Total 97 3318 $363 $1,311 Total Available Area (Sq. Ft.) Small Firms (#) Medium Firms (#) Large Firms (#) 2,803,300 48 45 4

Economic Impacts: Construction

87

Downtown Study Area – Economic and Fiscal Impact

Economic Impact of µGrid Economic Impact of Industry Growth Costs ($M) $38 $314 Jobs (#) 69 1389 Earnings ($M) $3 $118 New Construction & Renovation (Sq. Ft.)

• 2,803,300

Fiscal Impacts

88

Downtown Study Area – Economic and Fiscal Impact

City of Cleveland Cuyahoga County PV Benefits ($M) (Year 10) $7 $2 PV Costs ($M) (Year 10) $0.2 $2 PV Benefits ($M) $212 $71 PV Costs ($M) $4 $37 NPV Benefits ($M) $207 $34 Benefit:Cost Ratio 48:1 2:1

Regulatory Safe Model

89

Downtown Study Area – Financial Feasibility

$- $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000 $45,000,000 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24 Year 25 Year 26 Year 27 Year 28 Year 29 Year 30 Revenue Total Costs $- $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24 Year 25 Year 26 Year 27 Year 28 Year 29 Year 30 NOI Debt Service

Cleveland Public Power

Net Cash Flows $16M NPV of Cash Flows $3M IRR 14%

Regulatory Safe Model

90

Downtown Study Area – Financial Feasibility

µGrid Operator

$- $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24 Year 25 Year 26 Year 27 Year 28 Year 29 Year 30 NOI Debt Service $- $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Revenue Total Costs

Net Cash Flows $26M NPV of Cash Flows $5M IRR 12%

Tax Efficient Model

91

Downtown Study Area – Financial Feasibility

Cleveland Public Power

$- $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000 $45,000,000 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24 Year 25 Year 26 Year 27 Year 28 Year 29 Year 30 Revenue Total Costs $(400,000) $(300,000) $(200,000) $(100,000) $- $100,000 $200,000 $300,000 $400,000 $500,000 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24 Year 25 Year 26 Year 27 Year 28 Year 29 Year 30 NOI Debt Service

Net Cash Flows $0.6M NPV of Cash Flows $0.6M IRR 41%

Tax Efficient Model

92

Downtown Study Area – Financial Feasibility

µGrid Operator

$- $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Revenue Total Costs $- $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 $4,500,000 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24 Year 25 Year 26 Year 27 Year 28 Year 29 Year 30 NOI Debt Service

Net Cash Flows $16M NPV of Cash Flows $(0.1M) IRR

• 0.2%

Industrial Study Area

94

Industrial Study Area – Boundaries

I-90 I-90 Carnegie

• E. 55th
• E. 18th
• St. Clair

Strengths:

• Abundant vacant sites.
• Favorable zoning.
• Primary Study area for Solar and Wind

Turbine Challenges:

• Small existing customer base
• Many of the vacant parcels throughout

the Study Area are isolated or fragmented.

The Industrial Study Area

95

Industrial Study Area – Boundaries

Phase I:

• Focused on maximizing access to

existing businesses and developable sites.

• Phase I length: 26,186 linear feet
• Distribution infrastructure cost:

approximately $10M. Phase II:

• Focused on maximizing access to

vacant buildings.

• Phase II length: 18,012 linear feet
• Distribution infrastructure cost:

approximately $7M.

The Industrial Study Area – All Proposed Distribution Lines

96

Industrial Study Area – Developable Sites

The Industrial Study Area – Developable Sites

• The Industrial Study Area Team

identified 12 developable sites.

• Developable sites provide

approximately 2,281,455 sq. ft. of developable space.

Economic Impacts

97

Industrial Study Area – Economic and Fiscal Impact

Industry Sector Firms Jobs (Year 10) Earnings ($M) (Year 10) Output ($M) Computer systems design & related services 30 450 $52 $420 Data processing, hosting, and related services 17 69 $7 $245 Finance and insurance 12 420 $46 $258 Legal services 13 645 $77 $279 Management, scientific, and technical consulting services 15 930 $122 $130 Retail trade 7 70 $3 $11 Total 94 2584 $308 $1,342 Total Available Area (Sq. Ft.) Small Firms (#) Medium Firms (#) Large Firms (#) 1,865,500 60 31 3

Economic Impacts: Construction

98

Industrial Study Area – Economic and Fiscal Impact

Economic Impact of µGrid Economic Impact of Industry Growth Costs ($M) $74 $225 Jobs (#) 91 997 Earnings ($M) $5 $84 New Construction & Renovation (Sq. Ft.)

• 1,865,500

Fiscal Impacts

99

Industrial Study Area – Economic and Fiscal Impact

City of Cleveland Cuyahoga County PV Benefits ($M) (Year 10) $6 $4 PV Costs ($M) (Year 10) $0.5 $4 PV Benefits ($M) $188 $155 PV Costs ($M) $8 $78 NPV Benefits ($M) $180 $78 Benefit:Cost Ratio 23:1 2:1

Regulatory Safe Model

100

Industrial Study Area – Financial Feasibility

Cleveland Public Power

$- $5,000,000.00 $10,000,000.00 $15,000,000.00 $20,000,000.00 $25,000,000.00 $30,000,000.00 $35,000,000.00 $40,000,000.00 $45,000,000.00 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24 Year 25 Year 26 Year 27 Year 28 Year 29 Year 30 Revenue Total Costs $- $500,000.00 $1,000,000.00 $1,500,000.00 $2,000,000.00 $2,500,000.00 $3,000,000.00 $3,500,000.00 $4,000,000.00 $4,500,000.00 $5,000,000.00 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24 Year 25 Year 26 Year 27 Year 28 Year 29 Year 30 NOI Debt Service

Net Cash Flows $(42M) NPV of Cash Flows $(17M) IRR N/A (Negative NPV)

Regulatory Safe Model

101

Industrial Study Area – Financial Feasibility

µGrid Operator

$- $500,000.00 $1,000,000.00 $1,500,000.00 $2,000,000.00 $2,500,000.00 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Revenue Total Costs $- $500,000.00 $1,000,000.00 $1,500,000.00 $2,000,000.00 $2,500,000.00 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24 Year 25 Year 26 Year 27 Year 28 Year 29 Year 30 NOI Debt Service

Net Cash Flows $26M NPV of Cash Flows $5M IRR 13%

Tax Efficient Model

102

Industrial Study Area – Financial Feasibility

Cleveland Public Power

$- $5,000,000.00 $10,000,000.00 $15,000,000.00 $20,000,000.00 $25,000,000.00 $30,000,000.00 $35,000,000.00 $40,000,000.00 $45,000,000.00 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24 Year 25 Year 26 Year 27 Year 28 Year 29 Year 30 Revenue Total Costs

Net Cash Flows $0.6M NPV of Cash Flows $0.6M IRR 35%

$(400,000.00) $(200,000.00) $- $200,000.00 $400,000.00 $600,000.00 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24 Year 25 Year 26 Year 27 Year 28 Year 29 Year 30 NOI Debt Service

Tax Efficient Model

103

Industrial Study Area – Financial Feasibility

µGrid Operator

$- $1,000,000.00 $2,000,000.00 $3,000,000.00 $4,000,000.00 $5,000,000.00 $6,000,000.00 $7,000,000.00 $8,000,000.00 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Revenue Total Costs $- $1,000,000.00 $2,000,000.00 $3,000,000.00 $4,000,000.00 $5,000,000.00 $6,000,000.00 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24 Year 25 Year 26 Year 27 Year 28 Year 29 Year 30 NOI Debt Service

Net Cash Flows $(45M) NPV of Cash Flows $(22M) IRR N/A (Negative NPV)

Expanded Study Area

105

Expanded Study Area – Boundaries

Strengths:

• Strong institutional presence
• Serves an underserved

community Challenges:

• Interstate Crossings
• Limited developable area

The Expanded Study Area

106

Expanded Study Area – Developable Sites

• Large vacant sites are

concentrated in the western section.

• New development in the

southern section is restricted to the southern peninsula.

• Vacancies are scattered in

the eastern section.

The Expanded Study Area – Vacant Sites

107

Expanded Study Area – Developable Sites

• The eastern section has

the largest square footage of sites for sale.

• The largest

concentration of individual sites are Superior in the eastern region and the northern end of E. 55th.

The Expanded Study Area – Available Buildings

108

Expanded Study Area – Developable Sites

• Phase 1 captures existing

anchors with limited development sites.

• Phase 2 brings in

institutional users and has strong development sites.

• Phase 3 allows for

development of renewables and the introduction of heavy industry.

• Phase 4 provides new

anchor tenants and a large amount of developable space.

The Expanded Study Area – All Proposed Distribution Lines

Economic Impacts

109

Expanded Study Area – Economic and Fiscal Impact

Industry Sector Firms Jobs (Year 10) Earnings ($M) (Year 10) Output ($M) Computer systems design & related services 60 2910 $339 $840 Data processing, hosting, and related services 20 90 $9 $288 Finance and insurance 14 870 $95 $301 Legal services 14 870 $104 $300 Management, scientific, and technical consulting services 15 930 $122 $129 Retail trade 11 310 $15 $17 Total 134 5980 $684 $1,876 Total Available Area (Sq. Ft.) Small Firms (#) Medium Firms (#) Large Firms (#) 2,282,000 13 61 60

Economic Impacts: Construction

110

Expanded Study Area – Economic and Fiscal Impact

Economic Impact of µGrid Economic Impact of Industry Growth Costs ($M) $88 $255 Jobs (#) 91 1130 Earnings ($M) $5 $96 New Construction & Renovation (Sq. Ft.)

• 2,282,000

Fiscal Impacts

111

Expanded Study Area – Economic and Fiscal Impact

City of Cleveland Cuyahoga County PV Benefits ($M) (Year 10) $13 $4 PV Costs ($M) (Year 10) $0.6 $4 PV Benefits ($M) $390 $128 PV Costs ($M) $10 $94 NPV Benefits ($M) $381 $34 Benefit:Cost Ratio 40:1 1:1

Regulatory Safe Model

112

Expanded Study Area – Financial Feasibility

Cleveland Public Power

$- $10,000,000.00 $20,000,000.00 $30,000,000.00 $40,000,000.00 $50,000,000.00 $60,000,000.00 $70,000,000.00 Revenue Total Costs $- $1,000,000.00 $2,000,000.00 $3,000,000.00 $4,000,000.00 $5,000,000.00 $6,000,000.00 $7,000,000.00 $8,000,000.00 NOI Debt Service

Net Cash Flows $33M NPV of Cash Flows $0.8M IRR 1%

Regulatory Safe Model

113

Expanded Study Area – Financial Feasibility

µGrid Operator

$- $500,000.00 $1,000,000.00 $1,500,000.00 $2,000,000.00 $2,500,000.00 $3,000,000.00 Revenue Total Costs

Net Cash Flows $29M NPV of Cash Flows $5M IRR 11%

$- $500,000.00 $1,000,000.00 $1,500,000.00 $2,000,000.00 $2,500,000.00 NOI Debt Service

Tax Efficient Model

114

Expanded Study Area – Financial Feasibility

Cleveland Public Power

$- $10,000,000.00 $20,000,000.00 $30,000,000.00 $40,000,000.00 $50,000,000.00 $60,000,000.00 $70,000,000.00 Revenue Total Costs $(1,200,000.00) $(1,000,000.00) $(800,000.00) $(600,000.00) $(400,000.00) $(200,000.00) $- $200,000.00 $400,000.00 $600,000.00 NOI Debt Service

Net Cash Flows $(6M) NPV of Cash Flows $(1M) IRR N/A - NPV is negative

Tax Efficient Model

115

Expanded Study Area – Financial Feasibility

µGrid Operator

$- $2,000,000.00 $4,000,000.00 $6,000,000.00 $8,000,000.00 $10,000,000.00 $12,000,000.00 Revenue Total Costs $- $1,000,000.00 $2,000,000.00 $3,000,000.00 $4,000,000.00 $5,000,000.00 $6,000,000.00 $7,000,000.00 $8,000,000.00 $9,000,000.00 NOI Debt Service

Net Cash Flows $8M NPV of Cash Flows $(10M) IRR

• 6%

Conclusion and Next Steps

Comparison of Economic and Fiscal Results

117

Conclusion and Next Steps

Study Area NPV Benefits ($M) Benefit:Cost Ratio Downtown $207 48:1 Industrial $180 23:1 Expanded $381 40:1 Study Area NPV Benefits ($M) Benefit:Cost Ratio Downtown $34 2:1 Industrial $78 2:1 Expanded $34 1:1

Fiscal Impact: City of Cleveland Fiscal Impact: Cuyahoga County

Study Area Jobs (Year 10) Earnings ($M) (Year 10) Output ($M) Downtown 3982 $363 $1,311 Industrial 3101 $308 $1,342 Expanded 7176 $684 $1,876

Economic Impact

Cleveland Public Power µGrid Operator Study Area NPV ($M) IRR NPV ($M) IRR Downtown $3 14% $5 12% Industrial $(17)

• $5

13% Expanded $0.8 1% $5 11%

Comparison of Financial Feasibility Results

118

Conclusion and Next Steps The Tax Efficient Model The Regulatory Safe Model

Cleveland Public Power µGrid Operator Study Area NPV ($M) IRR NPV ($M) IRR Downtown $0.6 41% $(0.1)

• 0.2%

Industrial $0.6 35% $(22)

• Expanded

$(1)

• $(10)
• 6%

Caveats and Limitations

• 1. Assumptions: Although scientific, the models developed are based on a

number of assumptions that are vulnerable to political and economic influences.

• 2. Cooperation: the µGrid’s success is dependent on the cooperative

involvement of all interested public and private parties.

• 3. Proof of concept: Many firms are unwilling to locate to the µGrid unless

the promises of reliability and resiliency can be proven.

• 4. Scaling renewable energy: Scaling the incorporation of renewable energy

into the µGrid is costly.

• 5. Business structure: The µGrid's business structure is largely driven by

Ohio's regulation of retail power distribution.

119

Conclusion and Next Steps

Potential Next Steps

• Reduce Construction Costs to make Expanded Area financially feasible.
• Restructure financing model to better allocate burdens of debt service

between the City of Cleveland and Cuyahoga County.

• Expand the µGrid reach to :
• Agglomeration of refrigeration businesses
• Agglomeration of research, medical, and tech businesses locating along

the Health Tech Corridor.

120

Conclusion and Next Steps

A special thanks to everyone who helped make this presentation possible:

Cleveland State University Research team Andy Thomas, Mark Divis, Mark Henning, and Ali Ahmed Mike Foley of Cuyahoga County John Juhasz Stephen Love of the Cleveland Foundation Roger French, Grant Goodrich, and David Matthiesen of Case Western Reserve Robin Gottschalk of TechInsurance Eric Davison of Cleveland Thermal Ron Zivic at Dovetail Solar Better Together Solar Company SeMia Bray of Emerald Cities Cindy Cicigoi of the 20/30 Group CoStar for providing us with access to its database Heinen’s of Downtown Cleveland and Dave’s Grocery Store for letting us survey outside their locations.

Questions

This Presentation and Final Report can be found at: uGridCLE.com