Hydrogen Buses Charged by a Solar-Powered Microgrid: Linking Clean Energy and Clean Transit in Montgomery County, Maryland

By Patrick Seroogy

Photo credit: AlphaStruxure

Just north of Washington, D.C., Montgomery County in Maryland is implementing a plan to have a transit depot that will eventually host buses fueled by hydrogen cells. An on-site electrolyzer will produce the hydrogen used as fuel, and a microgrid will use solar generation to power the depot and the electrolyzer. The EMTOC project, which broke ground in June 2024, will host:

• 5.65 megawatts (MW) of direct current (DC) solar generation; 
• 2 MW / 6.88 MWh battery energy storage; 
• 2.25 MW charging capacity;
• 1 MW hydrogen electrolyzer; and
• Software tools (for remotely controlling the microgrid). 

The microgrid will also send 2 MW of energy onto the electric grid through net metering. The microgrid will be interconnected to Pepco, a utility company, and engineered to operate in “island” mode.

This depot, the David F. Bone Equipment Maintenance and Transit Operation Center (EMTOC), will be the “largest renewable energy-powered zero-emission bus depot in the nation and the first on the East Coast to produce green hydrogen on site.” The plan is to have the station accommodate 200 hydrogen fuel cell electric buses (FCEBs) by 2035.

Big picture climate goals and financing

Montgomery County has strong net-zero greenhouse gas (GHG) emission reduction goals. The county has a Zero Emissions Bus (ZEB) Plan to replace its almost-400 buses with a fleet of zero-emissions buses by 2035. With only 14 electric buses, the county has contracted for 100 electric buses in the next 3 years, and has an additional 200 hydrogen buses planned by 2035. This plan aligns with the county’s ambitious Climate Action Plan to reduce GHG emissions by 80% by 2027 and by 100% by 2035.

Maryland’s current goal is to source 50% of its energy from renewables by 2030. Furthermore, 2022 legislation required the state to reduce its GHG emissions by 60% (from 2006 levels) by 2031 and achieve net-zero emissions by 2045.

The buses will use fuel cells, inside of which an electrochemical reaction combines hydrogen and oxygen to produce water, heat, and electricity. Hydrogen fuel cells do not emit GHGs, making them a clean option for powering vehicles and buildings. Conversely, an electrolyzer creates hydrogen by separating it from water. While still working toward widespread commercial use, the cells offer advantages over combustion engines due to their emissions-free operation and higher efficiency level.

Electrification efforts do not come cheap, however, and neither does the supporting infrastructure. The ZEB plan depends “heavily on State and Federal grants,” which Montgomery County “has so far been successful in receiving” after pursuing them aggressively. The state’s “Resilient Maryland” fund granted the EMTOC project $1.6 million; the project’s grants exceed $30 million to date.

The county entered into a public-private partnership with AlphaStruxure, a microgrid provider that will finance, construct, and operate the project. As the company notes, building and operating complex energy infrastructure like a microgrid requires expertise and financial capability. AlphaStruxure is the county’s long-term contractor for multiple depot projects and a joint venture between a private equity firm and a state utility company.

“Energy as a service” (EaaS) is the business model underlying Montgomery County and AlphaStruxure’s agreement. Whereas traditional infrastructure financing involves intensive upfront capital costs, EaaS is a subscription model that does not entail upfront costs.^[1] The county will pay off the EMTOC project’s over time, reflected as an extra charge on residents’ utility bills. Their agreement provides for “performance guarantees” on the microgrid’s construction and operation, offsetting its “financial and operational risks.”

EMTOC and Brookville are not Montgomery County’s first microgrids. Two municipal buildings that completed construction in 2018 each utilize a microgrid.

Legal and regulatory framework

This project is first within the jurisdiction of the Maryland-National Capital Park and Planning Commission (M-NCPPC), an agency with land use and natural resource planning authority in Montgomery County and Prince George’s County. Their respective planning boards co-manage the M-NCPPC and exercise its authority.

In June 2024, the Montgomery County Planning Board reviewed and approved the EMTOC microgrid under this authority in Md. Code L.U. § 20-301. This law provides that no public body shall construct or alter any public building or structure, or a publicly or privately owned utility (among others), without the M-NCPPC’s approval.

The code captures the EMTOC microgrid because the bus depot is a public building. The nature of the project is upgrading a bus depot to equip it with microgrid and distributed generation assets, so the bus depot’s physical alteration plainly implicates the M-NCPPC’s authority.

Microgrids

This project has one unclear legal issue, which is its status as a microgrid. The M-NCPPC can regulate the land on which the microgrid is situated, but those are not usually an issue of land use. Microgrids are small scale (distributed) electric systems and represent a novel regulatory issue that both state governments and the federal government are considering.

The microgrid issue primarily implicates the Maryland Public Service Commission’s (MPSC’s) jurisdiction. The MPSC regulates public utilities, electrical service, power plants, and associated ratemaking. As the M-NCPPC notes, the EMTOC microgrid is consistent with Montgomery County’s climate plan and is “part of a broader effort to install solar energy and resilient energy systems on all County facilities and properties where it is technically and economically feasible.”

Despite their value for promoting energy resilience, and a 2014 state energy agency report analyzing barriers to their deployment, Maryland has no specific regulatory framework for microgrids.^[2] Microgrids have nonetheless been defined already, e.g., in state grant funding criteria.^[3] Here, the EMTOC’s project approval defined them as: “[L]ocal energy systems with sources of generation, storage, and advanced automation and control … able to function independently from the grid and provide energy cost certainty and optimization, enhanced resilience and reliability, and accelerated emissions reductions.”

Microgrids meeting a certain threshold for generating capacity constitute “generating stations” (i.e., power plants). Maryland law, Md. Code P.U.A. § 7-207, requires stations meeting that threshold to obtain a certificate of public convenience and necessity (CPCN) from the MPSC to operate. However, the definition of “generating stations” exclude those that produce 2 or less MW of alternating current (AC) power and have equipment preventing outflow of electricity to the grid during outages. The law provides similar rules for co-located or adjacent solar systems whose cumulative capacity can generate up to 14 MW of AC and still be excluded from MPSC regulation.

The EMTOC does not exceed this threshold: it has more than 2 MW of generating capacity, but in direct current (DC) power. Its output to the electric grid will be the stipulated 2 MW, which does not trigger an approved exemption under Md. Code P.U.A. § 7-207.1. This is still the case considering that it must first be converted to AC, the type mentioned in the law. The broader electric grid uses AC rather than DC power, but the output will still not rise above 2 MW.

            Another provision, Md. Code P.U.A. § 7-207(4)(ii)(C), exempts MPSC regulation unless the station sells electricity wholesale under an agreement with the Pennsylvania-New Jersey-Maryland (PJM) Interconnection. PJM is a regional transmission organization that organizes the regional movement of wholesale electricity and operates the regional grid. It is unclear whether this provision applies to the EMTOC: the 2 MW will be exported to Pepco’s grid and Pepco has an agreement with PJM for wholesale sale of electricity, but it does not seem like the EMTOC project involves any such wholesale agreement with PJM.

            One catch is that AlphaStruxure may be subject to the MPSC’s ratemaking jurisdiction. The construction of a generating station requires a CPCN regardless of who builds it.^[4] Similarly, operating a microgrid probably constitutes providing electric service, making its operator an “electric company” subject to applicable ratemaking requirements.^[5] This can spell trouble for independent microgrid developers who must compete with monopolistic utilities in the market for generation.^[6]

However, the EMTOC microgrid enjoys institutional advantages (compared to a third party microgrid) because Montgomery County, a governmental entity, initiated it and has the agreement and backing of established utility companies with existing franchises. This likely means that the project faces fewer problems than a third-party microgrid. Furthermore, the MPSC does not appear to be interested in actively regulating microgrids.^[7]

Conclusion

The EMTOC solar-powered microgrid and FCEBs are a positive step forward for Montgomery County’s ambitious climate and clean energy goals. The county has aggressively pursued state and federal Department of Energy funding, made possible in large part by the 2022 Inflation Reduction Act’s monumental investment in clean energy technology and manufacturing.

            Despite the uncertain regulatory space of microgrids, Montgomery County enjoys institutional advantages and fewer impediments than a third-party microgrid would likely face. Portending a bright future, the project is viable in other Maryland counties  due to their similar climate goals and interest in developing transportation, e.g., the “Purple Line” train, part of which will run in Montgomery County.

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^[1] Ankit Shrivastava & Kinnon McDonald, Green Financing and Tax Incentives for the Commercial Real Estate Industry, 39 Practical Real Estate Law. 3, 5 (2023).

^[2] In the matter of the Merger of Exelon Corporation and PepCo Holdings, Inc., Case No. 9361, Order No. 88836, at 27 (Md. P.S.C. Sep. 17, 2018) (“[W]e have yet to establish a State-wide regulatory framework… to govern the ownership and regulation of battery energy storage and other microgrid DER assets, including generation facilities. Whereas we deny th[is microgrid] Proposal for cost recovery and other reasons, we do not take up the legal issue concerning [a public utility’s] ownership of battery storage and, potentially, the [distributed generation] components at this time”) (“Pepco Microgrid Order”). As a matter of first impression, the MPSC considered and denied another proposal for two public purpose microgrids, similarly sidestepping the legal issue, two years prior in 2016. Id. at 16 n. 86 (citing In re Baltimore Gas and Electric Company’s Request for Approval of its Public Purpose Microgrid Proposal, Case No. 9416, Order No. 87669, at 1-2, 18 (Md. P.S.C. July 19, 2016)).

^[3] See, e.g., Md. Code. S.G. § 9-2014(4) (similar to EMTOC’s definition except for extra clean energy component); see also Pepco Microgrid Order at 6 (details components of Pepco’s proposal).

^[4] See Board of Cty. Comm’rs of Washington Cty. v. Perennial Solar, LLC, 196 A. 3d 933, 941 (Md. Ct. App. Nov. 15, 2018) (noting that while a solar developer is not a “public service company,” which “the [M]PSC shall regulate and supervise [as] within its jurisdiction,” “the jurisdiction is [not] limited to public service companies only[,]” so it includes the developer as a “person,” defined broadly, building a qualifying generating station) (emphasis in original); Md. Code P.U.A. § 7-207(b)(1)(i) (a “person” may not build a generating station without a CPCN).

^[5] Md. Code P.U.A. §§ 1-101(h)(1) (an “electric company” is “a person who physically transmits or distributes electricity in the State to a retail electric customer”), 1-101(z)(1) (the definition of “public service company” includes an electric company); Md. Code P.U.A. § 4-102(b) (the MPSC has “the power to set a just and reasonable rate of a public service company”).

^[6] 2014 Microgrids Report at 45-46 (a third party microgrid providing electric service faces competitive barriers to entry in Maryland because it must be granted a franchise to operate, which existing EDCs already have, and is subject to ratemaking requirements). EDCs must be granted franchises (licenses) by municipalities to operate in their territories. Town of Easton v. Md. Pub. Serv. Comm’n, 838 A.3d 1225, 1231 (Md. 2003). See also M.D. Code P.U.A. § 7-508(a) (1999) (requiring vertically integrated utilities to divest generation assets).

^[7] See Pepco Microgrid Order, supra note 2, at 27 (no regulatory framework for microgrid ownership). In noting that Montgomery County successfully developed the two aforementioned public purpose microgrids, the MPSC did not comment on their legality. See id. at 22 n. 105 (“Montgomery County has funded two campus-style microgrids through public-private partnership. … [T]he County will purchase energy under a power purchase agreement during the microgrid’s service life.”).