The Μgrid CLE

The µGrid CLE

UST 611: Planning Studio May 14, 2018 Original Cleveland µGrid

• Project structure

• Reasons for Study Area

design Introduction

2 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. Introduction Goal 4: Improve existing infrastructure and implement smart grid technology.

3 Demographics

4 Population and Racial Makeup Cuyahoga County Racial Makeup, City of Cleveland Racial Makeup, Population 1.25 million Population 385,000 Estimate; Total: - White alone Estimate; Total: - White alone

Estimate; Total: - Black or Estimate; Total: - Black or African American alone African American alone

0% 3% 1% 2% 1% Estimate; Total: - Asian alone Estimate; Total: - American 0% 0% 3% 2% Indian and Alaska Native 0% 3% 3% 3% alone Estimate; Total: - Asian Estimate; Total: - Native

Hawaiian and Other Pacific Demographics 62% alone 49% Islander alone 29% Estimate; Total: - Native 39% Estimate; Total: - Some other Hawaiian and Other Pacific race alone Islander alone Estimate; Total: - Some Estimate; Total: - Two or more other race alone races:

Estimate; Total: - Two or Estimate; Total: - Two or more more races: races: - Two races including Some other race Estimate; Total: - Two or Estimate; Total: - Two or more more races: - Two races races: - Two races excluding including Some other race Some other race, and three or more races 5 Racial Makeup Study Area Study Area Racial Makeup, Population 19,719

Estimate; Total: - White alone

Estimate; Total: - Black or African 0% American alone 2% 0% 3% 3% Estimate; Total: - American Indian and Alaska Native alone

1% Estimate; Total: - Asian alone

10% Demographics 38% Estimate; Total: - Native Hawaiian and Other Pacific Islander alone

43% 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 6 Age and Gender

City of Cleveland Age Distribution Cuyahoga County Age Distribution

85 and up -1.3 1.9 85 and up -1.8 2.5 80 to 84 -1.4 2.1 80 to 84 -2.7 2.7 75 to 79 -1.8 2.6 75 to 79 -3.2 3.2 70 to 74 -2.4 3.5 70 to 74 -4 4 65 to 69 -3.9 4.4 65 to 69 -5.1 5.1 60 to 64 -5.9 5.8 60 to 64 -6.6 6.6 55 to 59 -7.1 7.1 55 to 59 -7.6 7.6 50 to 54 -7.7 6.9 50 to 54 -7.4 7.4 45 to 49 -6.5 6.3 45 to 49 -6.5 6.5

40 to 44 -5.7 5.8 40 to 44 -6 6 Demographics 35 to 39 -5.7 5.5 35 to 39 -5.5 5.5 30 to 34 -6.9 6.6 30 to 34 -6.3 6.3 25 to 29 -7.7 7.7 25 to 29 -6.6 6.6 20 to 24 -8.6 8.6 20 to 24 -6.4 6.4 15 to 19 -7.3 6.4 15 to 19 -6 6 10 to 14 -6.7 5.9 10 to 14 -5.7 5.7 5 to 9 -6.5 5.9 5 to 9 -5.4 5.4 Under 5 -6.8 6.3 Under 5 -6.2 5.4 -10 -5 0 5 10 -10 -8 -6 -4 -2 0 2 4 6 8 10 Female Male Female Male

7 Educational Attainment, Income, and Poverty Statistics as of 2015 • County has highest concentration of those Educational Attainment by Percentage who have finished high school 35.00% • City least well educated 30.00% • County and Study area have highest Concentrations of the very highly 25.00% educated • Cuyahoga County Median Household 20.00% Income $43,603 15.00% Demographics • City of Cleveland Median Household Income $26,179 10.00% • Cuyahoga County 18.5% Poverty Rate 5.00% • City of Cleveland 19.3 % Poverty Rate • Study area Census Tracts range from 29% 0.00% Less than 9th to 12th High School Some Associate's Bachelor's Graduate or to 74% Poverty Rate 9th No Diploma Graduate college No degree Degree Professional Degree Degree Cuyahoga County City of Cleveland Study Area

8 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. MarketAttributes

Additional Attribute (to be discussed in the individual study areas) • Available land for new infrastructure and end users.

10 Existing Electrical Infrastructure

11 Existing Infrastructure • Cleveland Public Power (CPP) : Municipality owned Energy

Distributor Existing Electrical InfrastructureElectrical Existing

• 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 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 InfrastructureElectrical Existing • Heat is utilized instead of being rejected into the atmosphere

Hamilton Power Plant; Source: Cleveland.com (March 2018) Benefits of CHP Plant ; Source: Northern Utilities (United Kingdom) (2016). 13 Electrical Infrastructure • Existing Substation at E11th and a planned substation at

E26th Street Existing Electrical InfrastructureElectrical Existing

• Assuming building distribution lines and utilities on top of the Existing Structure

14 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)

Construction Completion Project Name Project Location Status Type Area (sq. ft) Start Date Date

nuCLEus 501 High Avenue NA Mixed-Use NA 2020 250,000 Under The Beacon 515 Euclid Avenue Residential 2017 2019 1,400,000 Construction

The 925 Building Under CurrentDevelopment Projects 925 Euclid Avenue Renovation 300,000 Renovation Construction John Hartness Brown 1001-1101 Euclid Under Mixed-Use 2018 20,000 Building Avenue Construction East 17th Street and Under Playhouse Square Tower Residential 2018 2020 280,000 Euclid Avenue Construction Ohio Bell Building (750 750 Huron Road NA Renovation 480,000 Huron Road) East 9th Street Pier, Cleveland Lakefront adjacent to Voinovich NA Mixed-Use 2018 1,000,000 Development Park north of the Rock 'n Roll Hall of Fame Under Terminal Tower 50 Public Square Renovation 2018 2020 577,000 Construction Flats East Bank - Phase III 1055 Old River Road NA Mixed-Use late 2019

Erieview Tower, Galleria 100 Erieview Plaza NA Office 703,000 Existing Businesses Existing Demand Load • Demand Load: The period Estimated Peak Demand Load, by Parcel of time or state in which electricity demanded is projected to reach a significantly higher level than average power consumption Existing Businesses • Data from: • Energy Information Administration • Cuyahoga County Parcel Data (Tax/Exempt Use)

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

Key Existing Businesses Existing Existing Businesses

19 Key Businesses - Downtown

• H5 Colocation Facility • City and County Government Offices

• Stadium and Arenas Existing Existing Businesses • And of course Cleveland State

Image credit: H5 Datacenters

20 Key Businesses - Industrial

• Ohio Technical College

• Level 3 Communications Existing Existing Businesses

Image credit: Ohio Technical College

21 Key Businesses - Expanded • Cuyahoga Community College • St. Vincent Charity Medical Center • Northeast Pre-Release

• United States Postal Service Existing Businesses

Image credit: Cuyahoga Community College, Cleveland.com

22 Generators

23 Database Characteristics Key Findings • 984 Permits • Confirmed residential use was • 107 business were candidates for limited relocation • Largest number of generators among telecommunications companies • Largest number of target businesses in large retail and

manufacturing Generators

Image: Canaantech Mechanical Image: Amanda Lovins, WKMG 24 National Survey National Survey - Participants

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

• Information National National Survey • Categorization of Operations: • Scientific & Technical Consulting • Communications • Computer System Design Services

26 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 National Survey 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 - 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 National Survey 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 Local Business Survey Participant Profile

• Reoccurring zip codes: • 44106 • 44114 • 44115

• Predominant industries: Local Business Local Survey • 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 Energy Demand

Percentage of Operating Costs “How important is the availability & Dedicated to Electrical Power cost of energy to your company's Source: Cleveland State decision on where to locate or Capstone UST 611, 2018 expand?” 16 Source: Cleveland State Capstone UST 611, 2018

14 Business Local Survey

12 13%

Extremely Important 10

32% Very Important 8 14%

6 Moderately Important

4 Slightly Important 23% 18% 2 Not at All Important 0 0-9% 10-19% 20-29% 30-39% 40-49% Not sure 31 Energy Demand

Average “All In” Price per kWh of Survey Participants Source: Cleveland State Capstone UST 611, 2018 10

8 Local Business Local Survey 7

0 <9 cents 10-12 cents 12 or more cents Not sure

32 Generators & Backup Power

“Does your company have any back-up “How confident are you that your generation equipment to maintain current back-up generation system can operations in the event of a power activate and provide reliable power failure?” before the threshold is reached?” Source: Cleveland State Capstone UST Source: Cleveland State Capstone UST

611, 2018 611, 2018 Local Business Local Survey 4%

Extremely Confident Yes

27% 27% 33% No Very Confident

63%

Not Sure 46% No Backup Generation

33 Renewable Energy & District Energy

“Would a high percentage of “Would the availability of district electricity derived from renewables be energy help in reducing development a significant factor in your company's costs for new construction or changes in location decision?” business structure?” Source: Cleveland State Capstone UST Source: Cleveland State Capstone UST

611, 2018 611, 2018 Local Business Local Survey

12%

22% Yes

44% Yes No

44% No 78%

Not Sure

34 Local Business Microgrid Perspective What is your impression of a “How familiar are you with microgrid's potential usefulness to

the concept of a microgrid?” your firm? Local Business Local Survey Extremely Useful

Very familiar 7% 13% 8% Very Useful

32% Slightly Familiar 22% Moderately Useful 61% 35% Not familiar at all Slightly Useful 22%

Not at all Udeful

35 Local Business Microgrid Perspective

“How important is operator reputation “What rates would you pay to when selecting the entity that manages guarantee 99.999% Reliability?” a microgrid?” Source: Cleveland State Capstone UST Source: Cleveland State Capstone UST 611, 2018 611, 2018

Other Amount Local Business Local Survey Extremely Important 16 cents 9% 5% Very Important 15 cents

36% Moderately Important 18% 10 cents

Slightly Important 8 cents 32%

Not at all Important Would not consider

0 2 4 6 8 10 36 Residential Survey Residential Energy Use Survey Participants, Sex Demographics Source: Cleveland State Capstone UST 611, 2018

• Total surveys: 232 46% Male Female 54% • Target zip codes: • 44113 - 35 • 44114 - 46

• 44115 - 39 Residential Survey Residential Energy Use Survey Participants, Race • 44103 - 21 Source: Cleveland State Capstone UST 611, 2018

• 33 different zip codes total 9% 4% White

Black or African American 40%

Asian 47%

Other

38 Cost of Electricity

Average Monthly Electric Bill by House Type Source: Cleveland State Capstone UST 611, 2018 140

$132 120

$114

100 Residential Survey 80 $85 $82 $80

60 $61

0 Single Family Home (n=103) Multi-Family Home or Duplex Townhome (n=3) Condo (n=17) Apartment (n=71) Other (n=12) (n=26)

39 Reliable Electricity

"Are you willing to pay more for "How important to you is the use of reliable electricity?" renewable energy resources?" Source: Cleveland State Capstone UST Source: Cleveland State University, 611, 2018 2018 70% Yes % No % 60%

57% Extremely Important 55% 55% 7%

50% 5% Residential Survey

45% 45% Very Important 40% 43% 31%

19% 30% Moderatly Important

20% 38% Slightly Important

10% Not Important

0% Single Family Home Apartment (n=71) Other (n=58) (n=103)

Source: Cleveland State Capstone UST 611, 2018. Source: Cleveland State Capstone UST 611, 2018. 40 Residential Microgrid Perspective

• Overall positive response to "How likely are you to support an investment for a microgrid as tool to learning about the microgrid attract and retain businesses and jobs?" • Residents support Source: Cleveland State University, 2018 economic development

initiatives in the 6% Extremely Important Residential Survey downtown area 8% Very Important • Residents value reliable 31% 15% electricity Moderatly Important

• 56% willing to pay more Slightly Important • 32% willing to pay $10 or 40% more a month Not Important

Source: Cleveland State Capstone UST 611, 2018. 41 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 Comparative Analysis (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 Insurance Introduction

• 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

of 8 regional networks. Insurance • The average power plant is over 30 years old. • Approximately 70% of transmission lines and transformers are over 25 years old.

45 Utility Service Interruption Coverage

• 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. Insurance • 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.

46 What’s the Damage?

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 outage Insurance • Thirty percent of the $18 billion in insured losses from Hurricane Sandy were attributed to business interruptions -- ~$5.4 billion.

47 Biggest Losers

• The average cost of a single data center outage in 2016 was about $730,000 • Southwest Airlines – three-day outage; $177 million • Delta Airlines – three-day outage;

$150 million Insurance

48 Cost of Utility Service Interruption 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 Insurance with Microgrid • Saving approximately 30% off business insurance premium.

49 Valuing Resilience and Reliability Resilience and Reliability

• Reliability – measurement of frequency and duration of power

outages. Valuing Resilience Reliability and • 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 What types of firms will seek resilient power?

Two measures were used to identify ideal potential customers

for the µGrid: Valuing Resilience Reliability and • Economic Development Target Firms – Value of Lost Load (VOLL) • Existing Firms – Highest Lost Hourly Revenues (in the event of a power outage) • Also VOLL

52 Economic Development Target Firms – Value of Loss Load (VOLL) • Value of Loss Load: Costs associated with damage and

mitigation due to outages over Valuing Resilience Reliability and 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

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

Firms with Highest Average Hourly • Locating lines to service Production high revenue businesses (aggregated by parcel) Valuing Resilience Reliability and • Obtained data from $1,000 $2,500 $250, 000+ ReferenceUSA • Spatially joined coordinate data to parcel data • Used for locating potential lines

Data Source: ReferenceUSA, Business and Consumer Research. 54 Existing Firms – Potential Tier Model – Based on VOLL by NAICS Existing Firms by Potential Tier • VOLL projected by (based on NAICS Code)

NAICS Code (data Valuing Resilience Reliability and from Tier ReferenceUSA) • Used in Feasibility Analysis to determing revenue/cost data

Data Source: ReferenceUSA, Business and Consumer Research. 55 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”) Regulatory Structure • 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 Option 1: The Regulatory Safe Model

Power Generation and City of Cleveland & Private Equity and Wholesale Distributors Cuyahoga County Private Lender

Power Purchase $ Agreement $ Management Regulatory Structure Agreement CPP µGrid Operator

Service Contract

Customers

58 Option 2: The Tax Efficient Model

Power Generation and City of Cleveland & Wholesale Distributors Cuyahoga County

Power Purchase $ Agreement

Long-Term Regulatory Structure Lease CPP µGrid Operator Management Agreement Service $ Contract Private Equity and Private Lender Customers

59 Financial Feasibility Model

60 Cleveland Public Power (Regulatory Safe) Cleveland Public Power (Tax Efficient) Revenues Revenues Customer Billing Customer Billing

(less) Costs (less) Costs Source: Cleveland Thermal (CHP) Source: Cleveland Thermal (CHP) Source: Renewables Source: Renewables Source: Wholesale Market Source: Wholesale Market Distribution Cost Distribution Cost (less) Expenses Financial Feasibility Model (less) Expenses Mgmt. & Service Contract (with Operator) Microgrid Lease (with Operator) Administrative Expenses Mgmt. & Service Contract (with Operator) Insurance Administrative Expenses Annual Repair Fund General Corporate Expenses General Corporate Expenses Net Operating Income (NOI) Net Operating Income (NOI)

(less) Debt Service (County Loans)

(add) Economic Development Grant

Total Cash Flows Total Cash Flows 61 µGrid Operator (Regulatory Safe) µGrid Operator (Tax Efficient) Revenues Revenues Microgrid Lease (from CPP) Mgmt. & Service Contract (from CPP) Mgmt. & Service Contract (from CPP) (less) Costs (less) Costs µGrid Controller - Equity µGrid Controller - Equity

(less) Expenses (less) Expenses Financial Feasibility Model Administrative Expenses Administrative Expenses Insurance Insurance Annual Repair Fund Annual Repair Fund General Corporate Expenses General Corporate Expenses

Net Operating Income (NOI) Net Operating Income (NOI) (less) Debt Service (Private Loan and County Loans) (less) Debt Service (Private Loan) (add) Economic Development Grant

(less) Depreciation (Controls) (less) Depreciation (Controls and Distribution) (less) Interest (Private Loan) (less) Interest (less) Total Taxes Owed (less) Total Taxes Owed

Total Cash Flows Total Cash Flows 62 Additional Financial Model Assumptions Factor Assumptions Taxes Federal Income Tax * 21.0% Municipal Income Tax 2.5%

Inflation Factors

Annual Cost Inflation 2.0% Financial Feasibility Model 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 63 *20-year Depreciation for Distribution System; 10-year Depreciation for Controller, as applicable to entities Debt Assumptions County Bond A LTV 80% Term (Years) 30 Rate 5% County Bond B LTV 10% Financial Feasibility Model Term (Years - 10 Years Interest Only) 20 Rate 3% City of Cleveland Economic Development Loan LTV 10% Term (Years) 15 Rate 3% Bank Loan - µGrid Controller LTV 75% Term (Years) 10 Rate 6%

64 Financial Feasibility Model Microgrid Distribution ($400 / ln. ft.) / ln. ($400 Distribution Microgrid * Costs Acquisition Property Misc. Substation * Substation System Battery Bus Ring * Line Connection PJM / ln. ($800 Line Connection Hamilton ft.) * $42.0 Million 7% , 3.0 7% , 3.0 24% , 10.0 12% , 5.0

2% , 1.0 6% , 2.3 Hard Costs Hard

42% ,

17.7 * Variable costs per actual line/phase configurations by Study Area (Expandedshown) Area per costs Study actual line/phase by configurations * Variable

Distribution Infra Hard Costs Hard Infra Distribution Distribution Infrastructure Construction Infrastructure Distribution Financial Feasibility Model Licensing Fees Licensing Contract Service OEM Maintenace System Control Permitting Legal Engineering Bonding/Insurance Contingency Construction Distribution System Soft Costs Soft System Distribution Labor 13% , 4.2 $75.3 Million $33.4 Million 6% , 2.1 25% , 8.4

19% Total Costs Total , 6.3

– 25% ,

8.4 Soft Soft Costs

2% ,

1% 0.6 4% , , 5% 0.4 , 1.3

1.7

Distribution System Distribution

Distribution Infra Soft Costs Infra Distribution

* Variable costs per actual line/phase configurations by Study Area (Expanded shown) (Expanded Area Study by configurations line/phaseactual per costs * Variable Distribution Infrastructure Construction Infrastructure Distribution Financial Feasibility Model Licensing Fees Serive ContractOEM Maintenace System Control Permitting Legal Engineering Bonding/Insurance Construction Contingency Control Total Costs Soft System Labor 10% 1% , 2% , , 0.40 0.04 3% 3% 0.08 , , 1% $4.5 Million $2.5 Million 0.10 , 0.10 0.03 7% , 0.30 12% , 0.50 12% , 0.50 Control System and Field Devices System and Field Control 49%

2.00

Total Control System Costs Control Total * Variable costs per actual line/phase configurations by Study Area (Expanded shown) (Expanded Area Study by configurations line/phaseactual per costs Variable *

Control System System Soft Costs Control

Control System Hard Cost System Hard Control Control System Construction Costs Construction System Control Economic and Fiscal Impact Model Determining Market Demand

• National Survey Results were used to determine market penetration, and likely interested firms for potential economic development gains • Market penetration rate at 20%. and Economic Impact Fiscal Model • 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

69 Determining Market Demand (cont.)

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

Cleveland’s share calculated at 3% Economic and and Economic Impact Fiscal Model • 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

70 Projected Demand Large Medium Small Industries Total Firms Firms Firms

Computer systems design and related Economic and and Economic Impact Fiscal Model 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

71 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

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

73 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

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

74 Renewable Energy Goals of Grid Connection • 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 Renewable Energy

76 Overall System Function

• Integration of renewables to the grid: • Net metering • Battery storage

• Direct connection Renewable Energy • 5 acres of solar PV panels typically equals 1 Megawatt µGrid of generation

Solar PV Generation Renewable Energy

Image provided by Dovetail Solar & Wind Wind Turbine Generation • 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 Renewable Energy Resources – Threatened Species • Peregrine Falcon • Indiana Brown Bat • LEED Co. Offshore Wind Turbines Potential Renewable Sites

Wind Turbine sites

• Solar Qualifications: Quality roof sites • Roof size Roof sites requiring repair • Roof type • Location • Age ^

• Wind Qualifications: Renewable Energy • Property ownership ^ • Zoning • Threatened species • Proximity to institutions

80 The µGrid Study Areas

µ The Grid Study Areas

Grid Study Areas Study Grid µ The The Downtown Study Area Strengths: • Large Anchors ex. CSU & BlueBridge • Abundance of existing leasable office space • CHP water and steam infrastructure DowntownStudy Area • Many proposed residential redevelopment projects

Challenges: • Lack of greenfields and overall not much open

developable land – • Small lot sizes don’t match Boundaries with industry demands of microgrid users

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

Distribution lines

DowntownStudy Area

– Boundaries

• 34,169 linear feet • 20.5% vacancy rate in Downtown Class A & B office space • $14M to build

Economic Impacts Downtown Study Area Total Available Area Small Firms Medium Firms Large Firms (Sq. Ft.) (#) (#) (#)

2,803,300 48 45 4

Jobs (Year Earnings ($M) Industry Sector Firms Output ($M)

10) (Year 10) – Economic and FiscalImpact Computer systems design & related services 32 1400 $163 $448 Data processing, hosting, and related 17 73 $7 $245 services Finance and insurance 11 360 $40 $236

Legal services 12 470 $56 $258 Management, scientific, and technical 12 585 $77 $104 consulting services Retail trade 13 430 $20 $20

Total 97 3318 $363 $1,311

Economic Impacts: Construction Downtown Study Area

Economic Impact of µGrid Economic Impact of Industry Growth

Costs ($M) $38 $314 –

Jobs (#) 69 1389 Economic and FiscalImpact

Earnings ($M) $3 $118

New Construction & - 2,803,300 Renovation (Sq. Ft.)

Fiscal Impacts Downtown Study Area

City of Cleveland Cuyahoga County PV Benefits ($M) (Year 10) $7 $2

PV Costs ($M) (Year 10) $0.2 $2 – Economic and FiscalImpact PV Benefits ($M) $212 $71 PV Costs ($M) $4 $37 NPV Benefits ($M) $207 $34 Benefit:Cost Ratio 48:1 2:1

88 Net Cash Flows $16M Regulatory Safe Model NPV of Cash Flows $3M

IRR 14% DowntownStudy Area Cleveland Public Power

$45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000

$10,000,000 –

$5,000,000 Financial Feasibility $- Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year 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

$3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year 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 NOI Debt Service 89 Net Cash Flows $26M Regulatory Safe Model NPV of Cash Flows $5M

IRR 12% DowntownStudy Area µGrid Operator

$2,500,000

$2,000,000

$1,500,000

$1,000,000

$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 Financial Feasibility Revenue Total Costs

$2,500,000

$2,000,000

$1,500,000

$1,000,000

$500,000

$- Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year 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 NOI Debt Service

90 Net Cash Flows $0.6M NPV of Cash Flows $0.6M Tax Efficient Model IRR 41% Cleveland Public Power DowntownStudy Area

$45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000

$5,000,000 –

$- Financial Financial Feasibility Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year 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 $400,000 $300,000 $200,000 $100,000 $- $(100,000) Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year 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 $(200,000) $(300,000) $(400,000)

NOI Debt Service 91 Net Cash Flows $16M NPV of Cash Flows $(0.1M) Tax Efficient Model IRR -0.2% µGrid Operator DowntownStudy Area

$7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $- –

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 Financial Feasibility

Revenue Total Costs

$4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year 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 NOI Debt Service 92 Industrial Study Area Strengths: The Industrial Study Area • Abundant vacant sites. E. 55th • Favorable zoning. • Primary Study area for Solar and Wind

Turbine Industrial Industrial StudyArea I-90 Challenges: • Small existing customer base • Many of the vacant parcels throughout the Study Area are isolated or

fragmented.

– Boundaries

E. 18th St. Clair I-90

Carnegie

94 The Industrial Study Area Phase I: – All Proposed Distribution Lines • Focused on maximizing access to existing businesses and developable sites. • Phase I length: 26,186 linear feet

• Distribution infrastructure cost: Industrial Industrial StudyArea approximately $10M.

Phase II: • Focused on maximizing access to vacant buildings. • Phase II length: 18,012 linear feet

• Distribution infrastructure cost: – approximately $7M. Boundaries

95 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 Industrial StudyArea

developable space.

– Developable Sites

Economic Impacts Industrial Study Area Total Available Area Small Firms Medium Firms Large Firms (Sq. Ft.) (#) (#) (#)

1,865,500 60 31 3

Jobs (Year Earnings ($M) Industry Sector Firms Output ($M) –

10) (Year 10) Economic and FiscalImpact Computer systems design & related 30 450 $52 $420 services Data processing, hosting, and related 17 69 $7 $245 services Finance and insurance 12 420 $46 $258

Legal services 13 645 $77 $279 Management, scientific, and technical 15 930 $122 $130 consulting services Retail trade 7 70 $3 $11

Total 94 2584 $308 $1,342

Economic Impacts: Construction Industrial Study Area

Economic Impact of µGrid Economic Impact of Industry Growth Costs ($M) $74 $225

Jobs (#) 91 997 – Economic and FiscalImpact Earnings ($M) $5 $84 New Construction & - 1,865,500 Renovation (Sq. Ft.)

Fiscal Impacts Industrial Study Area

City of Cleveland Cuyahoga County PV Benefits ($M) (Year 10) $6 $4

PV Costs ($M) (Year 10) $0.5 $4 – PV Benefits ($M) $188 $155 Economic and FiscalImpact PV Costs ($M) $8 $78 NPV Benefits ($M) $180 $78 Benefit:Cost Ratio 23:1 2:1

99 Net Cash Flows $(42M) NPV of Cash Flows $(17M) Regulatory Safe Model IRR N/A (Negative NPV) Cleveland Public Power Industrial StudyArea

$45,000,000.00 $40,000,000.00 $35,000,000.00 $30,000,000.00 $25,000,000.00 $20,000,000.00 $15,000,000.00 $10,000,000.00

$5,000,000.00 – $- YearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYear Financial Feasibility 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

$5,000,000.00 $4,500,000.00 $4,000,000.00 $3,500,000.00 $3,000,000.00 $2,500,000.00 $2,000,000.00 $1,500,000.00 $1,000,000.00 $500,000.00 $- YearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYear 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 NOI Debt Service

100 Net Cash Flows $26M Regulatory Safe Model NPV of Cash Flows $5M IRR 13% µGrid Operator Study Industrial Area

$2,500,000.00

$2,000,000.00

$1,500,000.00

$1,000,000.00

$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 Financial Feasibility

Revenue Total Costs

$2,500,000.00

$2,000,000.00

$1,500,000.00

$1,000,000.00

$500,000.00

$- YearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYear 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

NOI Debt Service 101 Net Cash Flows $0.6M Tax Efficient Model NPV of Cash Flows $0.6M Cleveland Public Power IRR 35% Industrial Study Area

$45,000,000.00 $40,000,000.00 $35,000,000.00 $30,000,000.00

$25,000,000.00 – $20,000,000.00

$15,000,000.00 Financial Feasibility $10,000,000.00 $5,000,000.00 $- YearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYearYear 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

$600,000.00

$400,000.00

$200,000.00

$- Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year $(200,000.00) 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 $(400,000.00)

NOI Debt Service 102 Net Cash Flows $(45M) Tax Efficient Model NPV of Cash Flows $(22M)

IRR N/A (Negative NPV) Industrial Study Area µGrid Operator

$8,000,000.00 $7,000,000.00 $6,000,000.00 $5,000,000.00 $4,000,000.00 $3,000,000.00

$2,000,000.00 –

$1,000,000.00 Financial Feasibility $- 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

$6,000,000.00

$5,000,000.00

$4,000,000.00

$3,000,000.00

$2,000,000.00

$1,000,000.00

103 Expanded Study Area The Expanded Study Area Strengths: • Strong institutional presence • Serves an underserved community

Challenges: Expanded Expanded StudyArea • Interstate Crossings

• Limited developable area

– Boundaries

105 The Expanded Study Area • Large vacant sites are – Vacant Sites concentrated in the

western section. Expanded Expanded StudyArea • New development in the southern section is restricted to the southern peninsula.

• Vacancies are scattered in

the eastern section. – Developable Sites

106 The Expanded Study Area • The eastern section has – Available Buildings the largest square footage of sites for

sale. Expanded StudyArea

• The largest concentration of individual sites are Superior in the eastern region and the northern

end of E. 55th. – Developable Sites

107 The Expanded Study Area • Phase 1 captures existing – All Proposed Distribution Lines anchors with limited

development sites. Expanded Expanded StudyArea • Phase 2 brings in institutional users and has strong development sites.

• Phase 3 allows for development of

renewables and the – Developable Sites introduction of heavy industry.

• Phase 4 provides new anchor tenants and a large amount of developable space.

108

Economic Impacts Expanded Study Area Total Available Area Small Firms Medium Firms Large Firms (Sq. Ft.) (#) (#) (#)

2,282,000 13 61 60 –

Jobs (Year Earnings ($M) Economic and FiscalImpact Industry Sector Firms Output ($M) 10) (Year 10) Computer systems design & related services 60 2910 $339 $840 Data processing, hosting, and related 20 90 $9 $288 services Finance and insurance 14 870 $95 $301

Legal services 14 870 $104 $300 Management, scientific, and technical 15 930 $122 $129 consulting services Retail trade 11 310 $15 $17

Total 134 5980 $684 $1,876 109

Economic Impacts: Construction Expanded Study Area

Economic Impact of µGrid Economic Impact of Industry Growth Costs ($M) $88 $255

Jobs (#) 91 1130 – Economic and FiscalImpact Earnings ($M) $5 $96 New Construction & - 2,282,000 Renovation (Sq. Ft.)

110

Fiscal Impacts Expanded Study Area

City of Cleveland Cuyahoga County PV Benefits ($M) (Year 10) $13 $4

PV Costs ($M) (Year 10) $0.6 $4 –

PV Benefits ($M) $390 $128 Economic and FiscalImpact PV Costs ($M) $10 $94 NPV Benefits ($M) $381 $34 Benefit:Cost Ratio 40:1 1:1

111 Net Cash Flows $33M NPV of Cash Flows $0.8M Regulatory Safe Model IRR 1% Cleveland Public Power Expanded StudyArea

$70,000,000.00 $60,000,000.00 $50,000,000.00 $40,000,000.00 $30,000,000.00 $20,000,000.00 $10,000,000.00

$- – Financial Financial Feasibility

Revenue Total Costs

$8,000,000.00 $7,000,000.00 $6,000,000.00 $5,000,000.00 $4,000,000.00 $3,000,000.00 $2,000,000.00 $1,000,000.00 $-

NOI Debt Service 112 Net Cash Flows $29M Regulatory Safe Model NPV of Cash Flows $5M

µGrid Operator IRR 11% Expanded StudyArea

$3,000,000.00

$2,500,000.00

$2,000,000.00

$1,500,000.00

$1,000,000.00

$500,000.00

$- – Financial Financial Feasibility

Revenue Total Costs

$2,500,000.00

$2,000,000.00

$1,500,000.00

$1,000,000.00

$500,000.00

NOI Debt Service 113 Net Cash Flows $(6M) Tax Efficient Model NPV of Cash Flows $(1M) IRR N/A - NPV is negative Cleveland Public Power Expanded StudyArea

$70,000,000.00 $60,000,000.00 $50,000,000.00 $40,000,000.00 $30,000,000.00 $20,000,000.00 $10,000,000.00

– Financial Financial Feasibility

Revenue Total Costs

$600,000.00 $400,000.00 $200,000.00 $- $(200,000.00) $(400,000.00) $(600,000.00) $(800,000.00) $(1,000,000.00) $(1,200,000.00) NOI Debt Service

114 Net Cash Flows $8M Tax Efficient Model NPV of Cash Flows $(10M)

µGrid Operator IRR -6% Expanded StudyArea

$12,000,000.00

$10,000,000.00

$8,000,000.00

$6,000,000.00

$4,000,000.00

$2,000,000.00 –

$- Financial Financial Feasibility

Revenue Total Costs

$9,000,000.00 $8,000,000.00 $7,000,000.00 $6,000,000.00 $5,000,000.00 $4,000,000.00 $3,000,000.00 $2,000,000.00 $1,000,000.00 $-

NOI Debt Service 115 Conclusion and Next Steps Comparison of Economic and Fiscal Results Economic Impact Study Area Jobs (Year 10) Earnings ($M) (Year 10) Output ($M) Downtown 3982 $363 $1,311 Industrial 3101 $308 $1,342

Expanded 7176 $684 $1,876 Conclusion and Next and Conclusion Steps Fiscal Impact: City of Cleveland Study Area NPV Benefits ($M) Benefit:Cost Ratio Downtown $207 48:1 Industrial $180 23:1 Expanded $381 40:1 Fiscal Impact: Cuyahoga County Study Area NPV Benefits ($M) Benefit:Cost Ratio Downtown $34 2:1 Industrial $78 2:1

Expanded $34 1:1 117 Comparison of Financial Feasibility Results

The Regulatory Safe Model Cleveland Public Power µGrid Operator Study Area NPV ($M) IRR NPV ($M) IRR

Downtown $3 14% $5 12% Conclusion and Next and Conclusion Steps Industrial $(17) - $5 13% Expanded $0.8 1% $5 11%

The Tax Efficient 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%

118 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. Next and Conclusion Steps 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 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 : Next and Conclusion Steps • Agglomeration of refrigeration businesses • Agglomeration of research, medical, and tech businesses locating along the Health Tech Corridor.

120 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