When constructing a microgrid, there are a couple of investments that would need to be made. No microgrid looks the same, but the key components of a microgrid system include space for construction, an island inverter, a control unit, an energy storage unit (i.e. battery), and the source of (renewable) energy. To provide numbers for how much construction may cost, let’s consider two microgrid systems. Located in Washington, D.C. is the public housing property of Maycroft Apartments. For comparison, the newly proposed Bushkill and North Union Street properties will have a total of 173 units. The Maycroft Apartments has 100 units. This means that when evaluating pricing, we do not expect costs to fall below the costs of the energy project in DC. For the equipment located in the control center (inverter, battery storage, control unit, etc), equipment cost was around $90,000 and installation cost was around $40,000. It is also key to note that the system runs on solar energy and has used the roof as the space to house the solar panels. For solar panel installation, the cost was around $197,000, and is expected to produce 75MWh a year. Overall, $327,000 is what was spent on the microgrid system for the Maycroft Apartment complex. On the other hand exists the Marcus Garvey Apartments solar microgrid located in Brooklyn, New York. This microgrid can work in tandem with the traditional macrogrid to increase the efficiency of energy consumption, or it can work in island mode for up to 12 hours in the case of a power outage. In terms of size, it provides power for 32 buildings with 625 units, which exceeds the amount of power Easton would need for this 2-building proposal. Because the cost of this project totaled $1.3 million, we do not expect the cost of a microgrid powering Bushkill House and N. Union St. apartments to surpass this price point. Thus far, it can be expected for microgrid costs to fall anywhere between $327,000 and $1.3 million – favoring the cheaper price point.
Despite the notable financial benefits of these microgrids, one of the greatest difficulties in establishing microgrids is acquiring the funding necessary for such a project. Public funding for microgrids can come in the form of tax credits, grants, green banks, revolving funds, and power purchase agreements (PPAs) among many other options. In Easton’s case, there are a few existing programs that can aid in financing such a project. First, Easton is in the works of applying for a federal HUD planning grant that could promise $30-50 million towards West Ward redevelopment. Allocating some of those funds toward a microgrid could be one way to fund it. Considering the microgrid price should not exceed $1.3 million, the price of a microgrid in Easton would not take up more than 4.3% of the planning grant.
Additionally, the city could utilize Pennsylvania’s Guaranteed Energy Savings Act (GESA). Passed in 1998, GESA has been providing PA public institutions the enabling legislation needed to cost-effectively streamline all energy-based project development, procurement, implementation, and post-construction services without requiring any capital dollar outlay. Essentially, through financing (up to a 20-year term), generated savings would financially support the project. Additionally, other public-private partnership (P3) contracts could be incorporated into GESA to enhance its economic value as the provider (and not the public institution) sources the investment for implementation. These P3 contracts include “Energy as a Service” (EaaS), “Design-Build-Own-Operate-Maintain” (DBOOM), “Power Purchase Agreement” (PPA), and “Master Service Agreement” (MSA). With careful planning and consideration, the use of GESA in conjunction with other contracts could provide for an economically beneficial, budget-neutral investment.
In addition to GESA, the United States recently passed the Inflation Reduction Act which could also provide capital and incentives toward a microgrid project in Easton. This act invests $369 billion in energy/climate solutions and environmental justice, and could potentially be a source for grants to fund the project. Additionally, there are 2 types of tax credits within the act that can be advantageous. First is the Investment Tax Credit (ITC). With this, a 30% base tax credit is provided for investment in renewable energy projects. This has the potential to be beneficial since the microgrid would generate electricity from a renewable source. Additionally, 10% is added to the base tax credit if the project is implemented in a low-income community. Because of GESA, we propose that the microgrid be placed in the vicinity of or on public housing property. This placement would allow for the utilization of this bonus incentive. In addition to the ITC, there is also a Production Tax Credit (PTC). This would provide an annual credit based on the amount of energy produced and sold by a project over a 10-year period (2.5¢/kWh in 2021 dollars).
A microgrid can provide financial benefits for Easton and its residents, but for the city to capitalize on the available programs and incentives, project costs need to be defined. A rough estimate of project costs has been given based on the analysis of similar projects in the United States. However, an energy assessment needs to be done on the Bushkill House and N. Union St. apartments before moving forward in this process. The assessment would be the first step towards microgrid implementation as it would allow the city to understand where energy improvements are needed, as well as how much energy a microgrid would need to provide. Upon completion, a more detailed economic analysis can be conducted.