May 26, 2020 By Elisa Wood
Xcel Energy has reached a settlement agreement with consumer, regulatory, environmental and labor interests which, if approved by state regulators, allows the utility to move ahead with a $23.4 microgrid project.
Peaked rooftop of Denver International Airport, the site of one of Xcel’s seven proposed microgrids. Photo by Arina P Habich/Shutterstock.com
The project, which will provide 6 MW/15 MWh of microgrid capacity, includes installations at a school, airport and other community sites.
The settlement would allow Public Service Company of Colorado, an Xcel subsidiary, to seek cost recovery for the microgrids through rates charged to all customers. It also calls for the utility to create emergency response plans related to battery safety and meet construction and operations reporting requirements.
Western Resource Advocates (WRA), a non-profit conservation organization that signed onto the settlement, said it pushed for the reporting out of concern about potential emissions related to backup generators.
Charging batteries to reduce emissions
“Battery storage projects have great potential to reduce emissions, if they are powered by clean energy and dispatched at a time when emissions associated with electricity from the grid are relatively higher than usual,” said Aaron Kressig, WRA transportation electrification manager, in written testimony filed with the commission.
“However, simply installing batteries does not necessarily ensure that these grid and environmental benefits are realized. How the battery is charged and how it is dispatched is critically important in determining the level of benefit it provides,” Kressig said.
WRA’s primary concern was that the utility would use fossil fuel backup generators to charge the batteries. The sites all incorporate solar energy, but three of the seven sites also have fossil fuel backup generators with a fourth considering a backup unit.
“However, the company clarified in discovery that ‘it is unlikely that any of the battery systems will be charged with diesel generation,’ Kressig said.
Kressig also noted that the utility plans to dispatch the batteries to reduce peak load on the grid, an activity that can decrease overall emissions by averting use of peaking plants.
“These peaking plants are typically fossil-fuel powered and cause the emissions intensity of electricity during peak periods to be higher than the emission intensity during other times,” Kressig said
The WRA sees development of the microgrids as in the public interest. “Microgrids offer great potential to reduce the impact of power outages for the facilities they support,” he said. “This is particularly important for facilities where access to electricity is essential and/or the threat of power outages is higher than elsewhere.”
How to Finance Microgrids with Opportunity Zones
May 26, 2020 By Lisa Cohn
To finance microgrids in the COVID-19 era, industry members have to grapple with how the work environment has been transformed, how the industry has changed and other challenges.
“How we finance microgrids can position us for success to overcome future challenges,” says Tom Hawes, director of business development, non-wires alternatives, S&C Electric, who will speak June 3 at the free Microgrid Knowledge Virtual Conference. “We need to finance microgrids in a manner that makes sense to clients and has a positive impact on society and the environment.”
In the United States, federal opportunity zones offer an option. The final regulations for the opportunity zones were released in December.
The federal government created opportunity zones to promote economic development in low-income communities. The zones allow companies that invest to defer capital gains taxes.
Under the program, businesses invest in zones that have low-income census tracts. The tracts are determined based on statistics from the U.S. Census.
Eligible opportunity zones
Eligible tracts for the zones are identified based on economic indicators of family income and poverty. States are only able to establish zones in 25% of their low-income communities.
However, Puerto Rico is exempt from this rule and offers opportunities for microgrid companies. Instead of the 25% rule, 835 of Puerto Rico’s 945 low-income tracts qualify as opportunity zones.
Qualifying businesses can come from a range of industries, from bakeries to hotels to real estate companies. That’s one big advantage of the program.
Those who invest in opportunity zones can defer capital gains until the end of 2026. In addition, 10% of gains will be excluded if the investment is held for a certain amount of time.
To qualify for the Opportunity Zones program, investors must establish a Qualified Opportunity Zone Fund that holds Qualified Opportunity Zone property. This is a special partnership created for qualifying projects. The federal government has established some basic requirements about qualified funds.
It’s easy for microgrids to qualify. New, tangible property — including equipment such as generating assets and personal property — is required.
With the COVID-19 crisis, there may be more taxpayers looking for tax shelters due to transactions they have made recently. Under the program, taxpayers have 180 days to invest a gain from an outside transaction into an opportunity zone fund. This opens a door for microgrids.