Ann Arbor has set the goal of powering the entire community with 100% renewable energy by the year 2030. In 2022, Ann Arbor City Council commissioned a study to analyze which pathways the city should consider. Specifically, City Council requested:
- Creation of an energy options analysis that provides details about the various pathways the city could take to achieve its clean energy goals;
- Completion of a traditional electric utility municipalization feasibility study; and
- Completion of a two-phase rate analysis for a Sustainable Energy Utility.
The study was completed in fall of 2023 and included:
In addition to the technical report, the city commissioned a public survey to understand what the community desires in an energy system. The survey polled 412 residents and was a statistically valid and representative survey of Ann Arbor residents. The survey had a 95% accuracy rate with a confidence interval of +/- 4.8%.
The survey found that the three most important characteristics the public desires in their energy system are: 1) resilience; 2) reliability; and 3) low-cost renewable energy. The emphasis on resilience, reliability, and cost were found to be the most important regardless of how questions were asked – open ended, rank choice, or force choice. Residents are encouraged to read the survey summary and full summary report, inclusive and verbatim responses.
Staff are currently working with a third-party firm to validate the economic modeling results for the Sustainable Energy Utility (SEU). If the modeling results continue to show viability of the SEU, staff will prepare an operational plan for City Council consideration in mid to late 2024.
Simultaneously, staff are continuing to administer and design new programs to significantly grow the installation of behind the meter solar and energy storage systems throughout the community. Stakeholders interested in learning more are encouraged to check out the City's current programs related to solar and geothermal.
Staff are also investigating the practicalities surrounding a Phase II Municipalization Study (i.e., the full takeover of DTE's assets). At this time, this is a secondary consideration to advancement of a SEU given that municipalization was found, in the Consultant's report, not to be a viable pathway to meeting the City's A2ZERO goals and Council's clean energy priorities.
Answers to frequently asked questions
1. Why did the city commission this report?
When City Council adopted the A2ZERO Plan in June of 2020, they set the goal of powering the entire community with 100% renewable energy by 2030. In an effort to achieve this goal, the City Council commissioned a study, known as the Energy Options Analysis, to study the different energy procurement pathways open to the city, as well as the different utility structures, that could be leveraged to achieve the 100% renewable energy goal (See City Council Resolution).
2. Who produced the report?
The report was produced by a team led by 5Lakes Energy, LLC, with support from SunStore Energy, NewGen Strategies and Solutions, Potomac Law Group, and Exponential Engineering. This team was selected after a competitive request for proposals process due to their knowledge of the energy landscape in Michigan, their previous experience conducting municipalization studies, and their technical computation skills (Renewable Energy Study Request for Proposals for the RFP that was issued for this work).
3. Does the report represent City staff's recommendations?
No. The report and supporting material above are from the consulting team and do not necessarily reflect the recommendations of City staff. More details on staff's recommendations will be coming in early spring 2024.
4. What were the main findings of the report?
The report outlined multiple different pathways the city could deploy to achieve the 100% renewable energy goal. A strong preference for behind the meter solar and storage deployment, paired with large, utility-scale renewable energy initiatives was identified as the most likely option to align with the city's A2ZERO goals and pre-established energy criteria and principles.
The report was agnostic on utility structures but did identify three pathways that could be leveraged to help the city meet its clean energy goals in the long-term. These scenarios were known as DTE+, Sustainable Energy Utility (SEU), and Traditional Municipalization / Municipal Electric Utility (MEU). The consultants did find, however, that traditional municipalization (buying all DTE's infrastructure) would not be possible by 2030.
5. What was not included in the report?
This report did not assess the costs and needed investments to improve the reliability of the electrical system. The report also provides only preliminary price estimates for different energy procurement choices and utility structures. In most cases, a more detailed second study is necessary to more fully understand the likely costs of options the city is strongly considering. The report also did not assess every possible scenario the city could deploy to achieve its 100% renewable energy goal by 2030. Instead, the consultants focused on scenarios likely to be successful.
6. Why wasn't reliability assessed as part of this report?
Reliability is a very important part of our energy system. But assessing ways to improve reliability can only happen once you understand the existing characteristics of your energy system. Put another way, the needs and costs associated with improving reliability are a different type of technical assessment than understanding the value of the existing system. If the City decides to move forward with traditional municipalization, or taking over DTE's assets, a reliability study should be conducted at a future date to understand the costs and timeframes necessary to upgrade the existing infrastructure to meet current as well as future energy reliability needs. An assessment of reliability improvements, however, is not something that would be included in a Phase II Municipalization Study.
7. What is a Phase II Municipalization Study?
There is no industry standard on what is included in a Phase II Municipalization Study. Moreover, very few communities have completed Phase II studies in the last two decades, leaving very little precedent to build from.
For Ann Arbor, a Phase II Municipalization Study would need to provide a detailed valuation of all the electric utility assets (e.g., poles, wires, substations, transformers), the City would need to acquire, including a detailed analysis of stranded costs, and how these costs cascade into rates that customers would pay. This information would be used to engage the public on whether or not to proceed with making an offer to our investor-owned utility to purchase their infrastructure.
A Phase II Municipalization Study would not, however, provide clarity on the "going concern" value the courts would charge for the utility's lost profits. This is a large source of uncertainty with little to no legal precedent to draw upon, meaning estimating this cost, with a high degree of certainty, is not possible. Additionally, a Phase II Municipalization Study will not evaluate the costs or timeline associated with upgrading the reliability of our electrical grid. As mentioned above, a Phase II Municipalization Study would focus on providing a detailed assessment of the value of the electric infrastructure the City would be looking to acquire.
8. What are the energy criteria and principles?
The Energy Criteria and principles are eight characteristics that the city is required to assess when making any energy-related recommendations. They include three core criteria which are requirements for all investments: reducing greenhouse gas emissions, additionality, and enhancing equity and justice; and five principles, which should be maximized, to the fullest extent possible, in energy-related decision-making: enhancing resilience, starting local, moving quickly, scalable, and transferable solutions, and cost-effective solutions. Energy and Criteria Principles
9. How can the public stay informed about this study and next steps?
The city always strives for transparency and is dedicated to sharing information about this project. Updates will be made available on this webpage and included in City newsletters and through Council reporting.
10. What are the next steps?
Staff are currently working with a third-party firm to validate the economic modeling results from the Sustainable Energy Utility (SEU). If the modeling results continue to show viability of the SEU, staff will prepare an operational plan for City Council consideration in mid to late 2024.