IEEE Electrification Magazine - March 2014 - 32

system-the parameters of analysis apply to many locations that have similar market characteristics.

Customer Needs and
Applications

Multiple financing
options can be
used or adapted
to design, build,
own, operate, and
transfer microgrids
in exchange for
agreements to
purchase energy
products and services.

a variety of applications offer the
potential for microgrid development, and each offers different
options for project structuring and
financing.
For example, customer groups in
the military, universities, schools,
and hospitals (mUsh) category, and
other customers with a similar scale
and attributes, have special needs
for reliability and security and are
willing to accept longer paybacks
over an extended period. they
include facilities that are considered
critical for community services and,
therefore, merit investment for
stronger energy assurance. such
customers also might be interested
in a range of values and benefits, including local economic
development, as opposed to requiring only a bare financial
calculus to drive their investment decisions. Finally, they
might improve microgrid financing options by providing
access to funding sources and structures inaccessible to
strictly commercial projects.
commercial and industrial customers also offer interesting possibilities for microgrid development, especially
in cases where requirements for high resilience carry a
high-value premium. in one microgrid example discussed
in the Minnesota Microgrids report, the treasure island
resort and casino places a high premium on resilience
because its primary source of revenue, gambling, is
entirely dependent on stable and reliable electricity. such
a customer also values the worry-free, turnkey nature of a
third-party-managed microgrid and, thus, is well prepared
to engage in a long-term contract arrangement for its full
scope of utility services.
a third possible arrangement, although perhaps more
complicated, offers interesting prospects for microgrid
development: the cluster or community microgrid developed through a special economic development or energy
improvement district (eid) structure, perhaps in cooperation with a municipality. such a cluster approach can
combine a range of synergistic values and benefits, and
maximize the utilization of generation resources by diversifying load profiles and criticality attributes. in some
cases, it might be developed around a core asset, such as a
combined heat and power (chp) plant installed to replace
an aging boiler that must be shut down to meet clean air
act regulations. a project of this type could deliver an
attractive energy cost proposition while also capturing
tangible incremental benefits such as tax-advantaged

32

I E E E E l e c t r i f i c ati o n M agaz ine / MARCH 2014

municipal bond financing, renewable energy incentives,
and technology and economic development grants and
loan guarantees.
in one recent example, district
energy st. paul-a public-private partnership that serves 100 buildings in
downtown st. paul, minnesota, with
district heating and cooling services-
commissioned a study to explore the
potential for combining resources
and needs for energy planning in the
green line light rail corridor. the
study included development of a
prefeasibility methodology, which
was intended in part to help other
system planners assess options and
pursue opportunities for eid projects.

DBOOT Project Finance
Approaches

multiple financing options can be used
or adapted to design, build, own, operate, and transfer (dBoot) microgrids
in exchange for agreements to purchase energy products
and services. a financing framework for microgrid projects
will focus on the following issues initially:
xx
What is the best way to fund the early-stage microgrid
designs and ownership and operating structure to
secure project financing and attract third-party
capital?
xx
can lessons from public-private partnerships, bond
financing, and infrastructure banks apply to strategies
for microgrid funding?
xx
how should corporate finance and accounting
practices treat microgrid assets, revenues, and service
agreements? do state or municipal governments have
a role in entering or supporting long-term microgrid
service contracts?
xx
might an investor-owned utility acquire microgrids or
their components as regulated rate-base assets or
unregulated investments? might cooperative or public
power utilities support microgrid projects or contribute infrastructure or services on behalf of their members/customers?
xx
What role might property assessed clean energy
(pace) 2.0 financing play in funding microgrid investments for commercial purposes?
xx
What project structures will facilitate access to capital
and credit enhancement?
xx
What roles will be played by various developers, engineering and construction firms, and vendors of equipment and services?
For the purposes of this analysis, a hypothetical microgrid
project finance company will be a limited partnership (lp) or
limited liability company (llc) established by a developer to
secure debt and equity financing needed to design and own



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https://www.nxtbook.com/nxtbooks/pes/electrification_december2021
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https://www.nxtbook.com/nxtbooks/pes/electrification_june2021
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https://www.nxtbook.com/nxtbooks/pes/electrification_december2020
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