Who should pay for microgrids? Why some utilities say “everyone”


By Kevin Ebi, Smart Cities Council

From renewable energy to resiliency, there’s no question microgrids can help. Hospitals and other critical services were up and running after Superstorm Sandy thanks to the resiliency of microgrids. But who should pay for them? Utilities in Arizona, Pennsylvania and Washington are trying to get everyone to pay.

It’s a tricky proposition. Two microgrid projects in Arizona are mainly for the benefit of a data center and a military base. But they can also spring into action to provide the community with power during peak periods, which is why Arizona Public Service is asking state regulators to pass some of the project costs on to all ratepayers.

It’s an approach Baltimore Gas and Electric tried too, but regulators there turned down the request saying, in part, that there wasn’t enough benefit for all.

Data center project benefits all
Arizona Public Service, the state’s largest utility, is asking for $5.6 million worth of microgrid project costs to be passed onto the public. It’s involved in two projects: one designed to provide back-up power for a data center and another for a military base.

But the utility says there’s a much bigger benefit for the public as a whole: the projects support the move toward more renewable energy.

In the case of the data center microgrid, it can fire up and be running at full power in just 20 seconds, giving the utility flexibility to use it as a source of auxiliary power for the full grid when, for whatever reason, renewable sources come up short.

Regulators are considering the request.

Trouble for Baltimore’s request
Baltimore Gas and Electric asked Maryland regulators to pass on costs for two microgrid pilot projects. Under its proposal, the typical residential customer would pay about 4 cents per month.

The projects were intended to serve commercial districts in two counties and the utility said the public benefited because the microgrids would power critical businesses and public buildings that could provide emergency shelter. Regulators rejected the request, in part because they weren’t convinced there was enough benefit to the public to warrant a widespread assessment.

But the challenges also extended beyond that point. Regulators also weren’t convinced the project was even legal in the first place. Some laws block utilities from generating their own power out of fear that owning both the generation and the distribution prevents competition that would lower rates. Commonwealth Edison, facing a similar hurdle in Chicago, is struggling to get state lawmakers to remove that obstacle.


Kevin Ebi is editor of the Smart Cities Council’s publications. The Council is awarding Readiness Challenge Grants to five U.S. cities to help them use technology to become more innovative, inclusive and investment-ready. Learn how to apply.

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