Ann Arbor’s sustainable energy utility aims to build the electric power grid of the future − alongside the old one

An experiment is underway in Ann Arbor, Michigan, that could change how communities generate and distribute power in the future.

The city, with voters’ strong support, is launching its own sustainable energy utility. This new utility won’t replace DTE Energy, the local investor-owned power company, or even use DTE’s wires.

Instead, Ann Arbor will slowly build out a whole new modern power system, starting with installing rooftop solar and battery storage and reducing energy usage in individual homes and businesses whose owners opt in. The city then plans to expand by connecting homes and neighborhoods into microgrids and by using community solar and networked geothermal to allow broader access to clean energy.

If it works as planned, a sustainable energy utility like this could quickly build the clean energy grid of the future by shedding outdated infrastructure while creating a reliable, clean and resilient model.

I am an environmental policy analyst at the University of Michigan and an Ann Arbor resident who has long engaged in local energy work. I believe that the lessons from Ann Arbor’s energy experiment will have major implications as more communities strive to control their own energy future.

An explosion of interest in local power

Communities frustrated with investor-owned utilities’ high rates and sometimes unreliable and polluting power are increasingly trying to shift to public ownership and delivery of energy services, much like municipal water systems.

So far, Nebraska is the only state with fully public power. A ballot initiative in Maine that would have required all power to be publicly owned and distributed failed amid heavy industry opposition. But campaigns to localize control of energy are flourishing.

However, creating new public utilities that take over all power delivery is difficult legally, politically and financially.

Hence, the idea for Ann Arbor’s sustainable energy utility, or SEU, which can function alongside the investor-owned utility. Subscribers to the SEU still have service from DTE if they need more power, and they can sell excess generation back to the grid. But they would generate and use their own power first while also reducing energy consumption through conservation and efficiency measures. Voters in November 2024 approved the creation of this sustainable energy utility in Ann Arbor with nearly 80% of the vote.

What is a sustainable energy utility?

An SEU has three distinguishing features.

First, an SEU can function at almost any scale. A city like Ann Arbor can provide energy and services directly to homes and businesses that opt in and build out new distribution lines with each microgrid or community solar project. Only the residents who opt in pay for the service, allowing it to expand as more homes join.

Moreover, customers do not need to leave their incumbent investor-owned utility to also use the SEU. Perhaps that’s why DTE so far has not publicly opposed Ann Arbor’s startup. Instead, the company said after the vote that it would invest US$215 million in infrastructure improvements in the city over the next five years.

Second, an SEU is created for the express purpose of providing clean energy, whether through renewable energy generation or reducing power demand.

For example, Ann Arbor’s SEU plans to begin by providing solar installations with battery backup. In addition, it will provide energy efficiency and conservation services such as weatherization, upgraded lighting and more efficient appliances.

It later plans to create microgrids, which connect groups of homes and buildings, allowing them to share solar power and storage among themselves. In addition, community solar projects would allow residents to buy electricity from nearby homes, businesses or public areas that generate excess solar power. And the city is planning networked geothermal power for a low-income community.

All of these options would be difficult if not impossible under the current utility structure. That’s because they run counter to a business model based on centralized power distribution and maximizing short-term profit.

Third, SEUs provide small-scale, decentralized, more resilient infrastructure. One common problem with investor-owned utilities is that their largest profit margins come from building new power sources rather than maintaining and repairing existing wires, poles and other infrastructure that keep power flowing. This is one key reason why public utilities, which are directly responsible to voters and taxpayers, have a better track record of keeping the power flowing.

Reliability is particularly important and challenging as the impacts of climate change accelerate, with more frequent catastrophic weather events straining energy infrastructure.

When power goes out in a centralized system, everyone is left in the dark if they don’t have generators or battery backup. But increased solar power with battery storage and microgrids can allow groups of buildings to return to power quickly.

Local communities will step up again

My colleague Andrew Buchsbaum and I recently worked with a team of graduate students to compare the potential performance of various types of power governance systems.

We found that an SEU had the highest potential to lower prices, increase reliability, lower pollution and benefit underserved communities compared with fully jettisoning the private utility in favor of only public power, increasing the number of municipal public utilities, or tightening regulation on existing utilities.

Ann Arbor’s experiment to launch the first full-scale SEU will test this.

It also comes at a critical time. During the first Trump administration, as the federal government prioritized fossil fuels, cities and states stepped up their expansion of clean energy. The second Trump administration is again promoting polluting power sources while pulling back support for renewable energy development.

Yet, wind, solar and energy efficiency are the cheapest sources of electricity. Given the increasing urgency to reduce climate pollution and the clear financial and reliability benefits of clean energy, I expect the trend of increasing focus on clean energy at the local level to not just continue but accelerate.