Editor’s note: This story has been updated to further clarify the Illinois Commerce Commission’s position on the proposal.
Less than a year after state funding for microgrids was rejected by the Illinois legislature, the utility ComEd is turning to ratepayers.
In a filing before the Illinois Commerce Commission, the ComEd is asking for permission to charge its 3.8 million customers for the cost of building a $25 million microgrid in Chicago that will serve 1,060 customers and institutions including a police headquarters and nursing homes.
The request has highlighted fundamental questions about the role microgrids might play within traditional urban grids, their benefits and limitations and who should pay for them.
The debate also underscores how utilities are trying to adapt to a changing energy landscape, and in the process potentially challenging or expanding their legally proscribed roles — especially in deregulated energy states — in ways some call questionable.
ComEd wants to treat the microgrid it seeks to build in the Bronzeville neighborhood like it would any other infrastructure for electricity delivery, recouping the costs from ratepayers across its territory and earning a rate of return in the process.
ComEd says the microgrid would provide resiliency against outages caused by extreme weather, cyber-attacks or other factors in the largely low-income, African American neighborhood on Chicago’s South Side. ComEd also says the microgrid would be an important research opportunity, especially since it would connect to an adjacent existing microgrid at the Illinois Institute of Technology.
Critics, including the Illinois Attorney General and clean energy groups, say that ComEd is exaggerating the benefits to local residents, and that residents across the region should not have to pay for whatever local benefits do result.
They question the value of the research potential and say the price tag is inflated. And critics are concerned about ComEd’s plans for renewable plus natural gas and diesel generation attached to the microgrid.
They also say that generation on the microgrid could violate or chip away at a bedrock of Illinois’ deregulated energy marketplace — the idea that utilities cannot own generation but rather buy power on the market.
Clean energy advocates and energy experts typically agree that microgrids are an important innovation with much potential, especially in areas prone to massive weather-related outages. But the Illinois Commerce Commission proceeding has showcased the views of multiple experts and organizations who support microgrids in general but oppose various aspects of ComEd’s plan.
“None of the parties in this case seem to think this is a good idea except for ComEd,” said Rob Kelter, senior attorney for the Environmental Law & Policy Center.
To see the Illinois Commerce Commission docket on this proceeding, find case 17-0331 on the commission’s website.
A ComEd spokesperson did not respond to specific criticisms raised by testimony filed in the case, but provided a statement that said the microgrid plan builds on the smart meter initiative that ComEd is rolling out across its territory and said in part: “Our customers – and the nation’s third largest economic region – should expect us to be developing and testing the technologies that will play a role in an energy system that will look much different than it does today.”
Early drafts of the sweeping Illinois energy bill passed last November included funding for six or more microgrids in Illinois, most of them to be built by ComEd. The bill that ultimately passed after much negotiation didn’t include any microgrid funding. But ComEd promised to move forward with the Bronzeville microgrid project.
The microgrid would normally be connected to ComEd’s larger grid, and would disconnect or “island” when there are larger outages on the system.
The filing before the commerce commission deals with the proposed phase 2 of the Bronzeville microgrid. Phase 1, which will serve about 490 customers with about 2.5 MW worth of demand, is funded by $5 million in two grants from the U.S. Department of Energy, for developing a microgrid controller and integrating solar and batteries into the project. That phase is already underway and scheduled for completion in 2018.
Phase 2, which is dependent on commerce commission approval, would involve adding about 4.5 MW of generation, including diesel and natural gas-fired power, to serve about 570 more residents.
In testimony filed before the commission for the Environmental Defense Fund and Citizens Utility Board, energy consultant Andrew Barbeau noted that the Phase 1 plans and the DOE grants emphasized the potential for battery and solar power on a microgrid. But the phase 2 proposal “instead seems to focus heavily on fuel-dependent diesel and natural gas generators and existing distributed automation technology.”
Barbeau wrote that solar and battery integration “is interesting and important to this Commission and the broader stakeholder community. The focus on fossil standby generation and existing grid technology, frankly, is not.”
In testimony before the commission, ComEd officials and experts argue that the microgrid will benefit all ratepayers because things can be learned from the microgrid that can be used for the larger grid and potentially for other microgrids.
And as ComEd smart grid and technology vice president Joe Svachula said in his testimony, “The Project will not only deliver benefits to the customers it directly serves, but during a major system disruption, it will also provide an ‘oasis’ of functioning critical infrastructure where residents of neighboring communities can also obtain food and supplies.”
But critics question how much would really be learned from the Bronzeville microgrid and note that in a disaster causing massive outages, residents from around the sprawling city would likely have a hard time making it to Bronzeville. Meanwhile the stores, businesses and public buildings in Bronzeville would have a hard time accommodating a big influx of people anyway.
“The so-called ‘indirect benefits’ [to customers outside Bronzeville] are vague at best, and to the extent that any exist at all, are minuscule in comparison with the direct benefits in terms of resiliency and reliability that would be offered to those few customers actually connected to the microgrid,” wrote Lee Selwyn, president of a Boston energy consulting company, in his expert testimony filed on behalf of the Attorney General.
ComEd’s expert testimony included former Homeland Security and Chicago Police Department official Michael G. Masters, now vice president of a security company in New York. Masters testified about the threat that cyber-attacks and weather pose to grids around the country, noting that ice storms in particular have caused mass outages in Illinois.
But other experts note that hurricanes and super-storms like those that have wiped out power in Puerto Rico, Florida and New England in recent years don’t happen in Chicago, and outages in ComEd’s service territory are actually relatively rare and short-lived.
“The whole reliability argument needs to be put in right context,” said Senior Assistant Attorney General Susan Satter. “In Illinois we don’t have hurricanes. Massive outages on the transmission level are really rare and most distribution level outages require repair whether they are within a microgrid or not.”
The Environmental Law & Policy Center filed expert testimony by Dean Moretton, who has done cost benefit analyses on microgrids including in Alaska, Connecticut and Indiana.
Moretton cited statistics showing that in the Bronzeville area, outages are even less frequent and of shorter duration than the citywide and nationwide averages.
In other words, the argument for increased resiliency from a microgrid seems to fall flat when residents don’t really have a problem with outages. Bronzeville residents surveyed by Midwest Energy News last year overwhelmingly said they are not concerned about blackouts.
“Hypothetically, if interruption improvement were the only possible benefit from this microgrid, it would take several hundred years for this project to break even,” Moretton said in his testimony.
ComEd has said it selected the Bronzeville location for its flagship microgrid in part because of institutions located there that provide “critical public services.” The company cites Chicago police headquarters, several nursing homes and high schools, a library, and a college of optometry among such institutions. Others countered that the police and medical facilities already have their own sources of backup generation, and questioned whether things like the optometry college should really be considered critical.
Who owns generation?
If the commerce commission grants ComEd’s proposal, it would be able to bill customers for the cost of creating generation attached to the microgrid, including solar as well as gas and diesel, wind or whatever other sources are integrated into the microgrid. In testimony ComEd says it might lease these distributed energy resources from third parties that actually own the equipment. But if that isn’t possible, ComEd wants the option to own the generation itself.
Since Illinois’ deregulation law in the 1990s, utilities like ComEd have not been allowed to own generation, because they are supposed to buy power (through the Illinois Power Agency) on the open market at costs most beneficial to customers. So clean energy and consumer advocates, as well as the Illinois Attorney General, have argued that the microgrid proposal would inappropriately allow ComEd to own generation.
“We think generation is generation, if it’s used for backup purposes or somehow is needed to balance the grid, it’s still generation,” said Kelter. “It should still be required to go through some type of competitive bidding process.”
ComEd essentially argues that the generation it wants to build connected to the microgrid should be viewed as part of the energy delivery system, not as generation.
Svachula testified that ComEd’s proposal would also facilitate independent distributed energy development, because it would be easier to integrate solar owned by individual customers into the microgrid than it is to connect it to the regular grid.
Satter countered that rather than investing millions in the microgrid, ComEd should focus on better integrating privately-owned distributed energy resources into its grid across its entire territory.
“What ComEd really needs to do is focus on how to integrate third party distributed generation and facilitate interconnection,” she said. “If I have rooftop solar, that needs to be integrated into the grid. Does that require them to do a microgrid? No.”
She added that, “You should not be able to treat generation as a regular utility expense.”
ComEd has noted that the microgrid would only cost each customer about a penny a month. But testimony filed with the commission also argued that the $25 million ComEd plans to spend on the microgrid beyond the DOE grants is too expensive. And Satter noted that divided among the customers who will actually be served, the microgrid will cost approximately $418 a month per customer, an amount she considers exorbitant.
Moretton’s testimony compared the Bronzeville business plan to other microgrids including at Princeton University and the one at the Illinois Institute of Technology. He wrote that those microgrids of similar proportions cost much less.
Testimony from Illinois Commerce Commission staff experts, who typically offer testimony to help the commission make its decisions, showed that they support ComEd’s phase 1 plans but disagree with some of ComEd’s key arguments around phase 2.
Commission electrical engineer Greg Rockrohr testified that the phase 2 proposal does not currently meet the bar for being a “prudent” investment that should be billed to all ratepayers. He added that if a key piece of new equipment, the microgrid master controller, proves successful in phase 1, the utility could come back to the commission making a case again for phase 2.
ComEd’s testimony argues that generation it seeks to own on the microgrid should be considered a “distribution cost” and recouped from all customers, since distributed generation (like solar panels) can help a grid function well. Commerce commission economist David Rearden’s testimony says that he does not agree with this position. He testifies that the cost of any generation ComEd owns on the microgrid should not be billed to all customers, and he notes that individual customers who currently have solar panels connected to the grid don’t get credit from the utility for helping with distribution.
“The expert testimony from engineers who know far more than I do suggests that reliability isn’t a problem here,” said Kelter. “And the microgrid ComEd is proposing is way more expensive than anything that might be needed for any type of emergency service.”