Title
Resolution to Approve a Best Source Professional Services Agreement with Lake State Labs LLC for Consulting Services Related to the Creation of a Virtual Power Plant as Part of the Sustainable Energy Utility ($142,200.00)
Memorandum
Staff are seeking approval of a best source Professional Services Agreement (PSA) with Lake State Labs LLC in the amount of $142,200.00 for professional consulting services to advise the Sustainable Energy Utility (SEU) and serve as the project manager on the implementation of the SEU’s first Virtual Power Plant (VPP) in the Bryant neighborhood.
In 2024, the Office of Sustainability and Innovations (OSI) was awarded a $5 million grant from the State of Michigan Department of Labor and Economic Opportunity to support the Wheeler Center Solar Park. On February 5, 2024, City Council passed a resolution accepting this grant funding and approving the grant agreement (R-24-045). In November 2024, the State of Michigan Department of Labor and Economic Opportunity approved an amendment to the grant, allowing the funds to be redirected to the Sustainable Energy Utility (SEU) for the development of a pilot Virtual Power Plant (VPP) in the Bryant neighborhood. The amended grant allocates $1 million for staff and general administration costs, $1 million for contractors, and $3 million for the materials and equipment for the VPP. Council approval of the amendment has also been requested. The original grant completion deadline of September 30, 2025 was extended to October 31, 2026.
A Virtual Power Plant (VPP) is a networked system that uses technology to integrate and coordinate multiple distributed energy resources, such as rooftop solar generation, battery storage (in homes and electric vehicles), and smart appliances, so they function together effectively like a single flexible power plant. Leveraging these aggregated small-scale energy resources, a VPP can balance electricity supply and demand efficiently, reducing grid stress and energy costs. Utilities may pay participating customers in a VPP for the value of the grid services they provide.
VPPs are increasingly recognized as a key investment for modernizing the energy grid, nationally and in Michigan. A recent whitepaper by the think tank Rocky Mountain Institute (RMI) highlights the state’s strong potential for VPP pilot projects and future expansion. Successfully implementing and operating a VPP could provide long-term value to the SEU by generating new revenue streams that help offset ratepayer costs.
Given the strategic importance of this initiative and the limited time available to execute the grant, it is essential to begin implementation promptly. Specialized expertise is required to guide the SEU through the development and deployment of this novel, technical, and ambitious pilot project. Lake State Labs LLC has submitted a proposal and fee schedule to serve as the advisor to the SEU Executive Director and project manager on this effort. They bring significant, specialized experience in this field (see attached “Introduction and Experience” and “Resume” documents), making them well-suited to support this effort.
Given that Lake State Labs LLC has significant experience designing, building, and advising on VPPs across the country, combined with the reality that they have recently relocated back to Ann Arbor and are interested in supporting the growth of the Sustainable Energy Utility, staff recommend approval of a best source PSA with Lake State Labs LLC for VPP Advisory and Project Management Services.
Lake State Labs LLC complies with the requirements of the City’s Non-Discrimination and Living Wage ordinances.
Budget/Fiscal Impact: Funds to finance this contract are included in the $5M grant from the State of Michigan Department of Labor and Economic Opportunity approved in R-24-045 and as outlined in the amended grant agreement before Council this evening.
Staff
Prepared by: Shoshannah Lenski, SEU Executive Director
Reviewed by: Missy Stults, Sustainability and Innovations Director
Reviewed by: Kim Hoenerhoff, Financial Analyst
Reviewed by: Marti Praschan, Chief Financial Officer
Reviewed by: Valerie Jackson, Assistant City Attorney
Approved by: Milton Dohoney Jr., City Administrator
Body
Whereas, The City has received a $5 million grant from the State of Michigan Department of Labor and Economic Opportunity to fund the development of a solar virtual power plant in the Bryant neighborhood;
Whereas, The work to develop the virtual power plant is complex, technical, and novel, which is part of the rationale for why the State agreed to fund the project;
Whereas, The grant agreement with the State of Michigan Department of Labor and Economic Opportunity requires project completion by October 31, 2026;
Whereas, The complexity of the project combined with the grant timeline and the limited staffing capacity of the Sustainable Energy (SEU) means that professional consulting support is required to advise and provide project management services for the SEU’s implementation of its first pilot virtual power plant in the Bryant neighborhood;
Whereas, A survey of virtual power plants completed in January of 2025 by the Lawrence Livermore National Laboratory identified only one example in Michigan, meaning there is insufficient project volume to support a pool of experienced virtual power plant consultants that could regularly attend in-person events or meetings in Ann Arbor without significant travel cost;
Whereas, Lake State Labs LLC is uniquely qualified to support this work, given their experience successfully developing and implementing novel virtual power plants in short timeframes, ability to immediately commit significant time to the project, and location in the region;
Whereas, The City plans to undertake competitive bidding for the equipment and construction of the virtual power plant but needs immediate assistance with designing the system;
Whereas, City staff have requested State grant administrator approval for the City to best source this activity, subject to City Council approval;
Whereas, Lake State Labs LLC is the best source for advising and managing the development of the SEU’s virtual power plant in the Bryant neighborhood; and
Whereas, Lake State Labs LLC complies with the requirements of the City’s Non-Discrimination and Living Wage ordinance;
RESOLVED, That City Council approve a best source Professional Services Agreement with Lake State Labs LLC in the amount of $142,200 for professional consulting services related to the creation of a virtual power plant in the Bryant neighborhood as part of the City’s Sustainable Energy Utility, contingent upon approval from the State grant administrator;
RESOLVED, That any remaining funding in the FY26 expenditure budget related to this Professional Services Agreement with Lake State Labs LLC be carried forward without regard to fiscal year;
RESOLVED, That the Mayor and City Clerk are authorized to sign the agreement after approval as to substance by the City Administrator and approval as to form by the City Attorney; and
RESOLVED, That the City Administrator is authorized to take all appropriate actions to implement this resolution, including signing all necessary documents and sub-agreements.