Michigan utilities want to end renewable energy mandate

Michigan utilities want to end state mandates on investment in renewable energy technologies, arguing that they will do so on their own. The Consumers Energy coal and natural gas complex pictured above was opened in 1940 in Hampton Township, north of Saginaw.

LANSING — Since Michigan’s energy law was adopted in 2008, billions of dollars have been spent in the state’s emerging renewable energy industry — building infrastructure, adding jobs and lowering costs.

With the help of the state’s two largest utilities, which are required under state law to generate electricity from renewable sources, nearly $3 billion has been invested on wind, solar, biomass and other clean power sources across the state.

Now, the utilities want state lawmakers to end the standards that contributed to those results — mandates that governed the amount of electricity they produce from renewable sources.

Detroit’s DTE Energy Co. and Jackson-based Consumers Energy say they don’t need mandates to expand their investment in solar and wind power. Rather, they believe new rules from the federal Environmental Protection Agency requiring utilities to reduce their carbon emissions by 32 percent by 2030 will ensure further investments in alternative energy.

Their position has changed in seven years: Both companies supported including renewable standards when the Legislature approved the first energy law.

“There are some who believe that we won’t do it unless we’re forced to do it. I don’t agree,” said Irene Dimitry, DTE’s business planning and development vice president. “It’s the right thing to do.”

Not everyone is convinced the utilities will follow through. Groups from the Sierra Club to some large industrial corporations — led by Benton Harbor-based appliance maker Whirlpool Corp. — say Senate bills that would eliminate Michigan’s renewable energy standard and a companion mandate requiring programs to reduce energy use would cause the utilities to scale back their efforts in pursuit of higher profits.

“Investor-owned energy companies have little incentive to sell less energy and reap less profit,” the Sierra Club’s Michigan chapter said in recent Senate testimony, “but as regulated monopolies they can and should be required to help their customers reduce energy waste.”

Gov. Rick Snyder also has advocated for upping Michigan’s renewable targets — up to as much as 24 percent of a utility’s electric portfolio by 2025, he said in March. And, he added, Michigan should aim for a combined renewable and efficiency target of 30 percent to 40 percent within a decade, based on costs.

But the governor has stopped short of saying that should be mandated.

An active debate

The Senate’s Energy and Technology Committee has held hearings this summer and fall on a two-bill package that would update the 2008 law. Included in the bills is a provision to repeal a mandate that utilities generate a portion of their electricity from renewable sources.

Utilities were required to produce 10 percent of their electricity from renewable sources by 2015. DTE and Consumers both say they have met that target.

Revisions to the Senate bills, sponsored by Republican Sens. Mike Nofs, of Battle Creek, and John Proos, of St. Joseph, could be introduced next month based on testimony gathered at the hearings, said Greg Moore, Nofs’ legislative director and energy policy adviser.

Nofs has received $122,995 in political contributions from people and groups connected with electric utilities, according to the nonpartisan National Institute on Money in State Politics. More than $98,000 of that amount has come since 2010, the year Nofs was tapped as chairman of the Energy and Technology Committee. Proos has received $71,170 from the electric utility sector, with most of that coming since 2014.

The legislation as drafted would replace the mandates with a process known as integrated resource planning, which would be used to set rates. DTE and Consumers say the IRP process is more flexible and transparent and allows utilities to consider all energy sources to find the best value for customers, rather than building their electric portfolios around renewable targets.

This scenario is playing out in states across the country, where lawmakers are attempting to roll back, if not repeal, renewable standards. Mandates have been targeted in states from Colorado to Kansas to Ohio.

Proponents of eliminating the standards say they were necessary when the renewable industry was in infancy, but the solar and wind markets now are large enough that they don’t need incentives.

“It’s time for that industry to sink or swim on its own,” Moore said. “What is the most cost-effective resource for our ratepayers? Not having the Legislature pick winners or losers based on the hot technology
of the day.”

Less costly

The emphasis on renewables has had noticeable effects on the industry, particularly on price. The cost of installation has fallen as the market has gained traction across the state.

In a February report, the Michigan Public Service Commission, the state’s energy regulatory agency, said the most recent wind contracts it approved cost in the range of $50 per megawatt hour to build. That was about 10 percent lower than the cheapest contracts approved in 2011 and half as expensive as those from 2009 and 2010.

The standard also spurred nearly $3 billion in investment in renewable energy through 2014, based on an assumption that installation cost $2,000 per kilowatt hour, the MPSC said. It also is estimated to support roughly 8,200 jobs.

“The renewable energy standard is resulting in the development of new renewable capacity and can be credited with over 1,450 megawatt hours of new renewable energy projects becoming commercially operational since the (2008 law) took effect,” according to the MPSC’s report.

The utilities themselves offered similar data: Dimitry said the company’s first wind project cost $115 per megawatt hour, while the price of its most recent had dropped to $50.

Lower prices for installation are one reason why proponents of repeal say it’s time to abolish mandates.

Another reason is aging coal. Consumers plans to retire seven coal-generation units by next year; DTE another two. Valerie Brader, whom Snyder appointed to lead the new Michigan Agency for Energy, testified recently before the Senate energy committee that a total of 25 coal-fired units are expected to come offline by 2020.

“When we think about the pending EPA regulations, the Clean Power Plan, that will put even more pressure on Midwestern coal plants and will drive even more transformation,” said Dan Bishop, a Consumers spokesman. “In our mind, there is little question that inevitably there’s going to be more investment in renewable energy and energy efficiency.”

Duplicating efforts

Utilities say they view the Clean Power Plan as a federal mandate they’ll have to meet, so continuing Michigan’s standards would be duplicative. They want flexibility to consider all electricity generation sources, including renewables and natural gas, and say there are no plans to uproot the wind turbines or solar panels they already have installed.

DTE says it has more wind and solar projects in the works. It recently received bids for a solar project that would generate 5 to 50 megawatt hours of electricity, Dimitry said.

Consumers recently announced plans to buy electricity from a new 100-megawatt wind farm in Huron County.

“We’re buying wind power from seven different facilities. We own two wind parks ourselves,” Bishop said. “There’s been a tremendous amount of work done in this space, and we just see that continuing.”

Since there’s evidence the mandate has worked, “some have said, ‘Why don’t you just keep it in the books?’” said Moore, Nofs’ energy policy adviser. “We don’t want mandates. We don’t believe they are necessary.”

The issue isn’t limited to the large players.

The Michigan Municipal Electric Association, which represents 40 municipally owned electric utilities, said decisions about pursuing energy efficiency and renewable sources are best left to local leaders.

“It would be our preference to be allowed to do so without the burden of rigid state mandates,” Jim Weeks, the association’s executive director, wrote in submitted testimony. “History tells us that a one-size-fits-all approach to energy policy cannot compete with a process that leaves these important decisions in the hands of our local governing bodies.”

Preserve standards

Yet Michigan is among more than two dozen states and Washington, D.C., that have adopted renewable standards, according to a March 2014 report from the Union of Concerned Scientists, a Cambridge, Mass.-based organization that performs science-based analysis of policy issues such as clean energy, global warming and agriculture.

Of those states, 17 require at least 20 percent of a utility’s electric portfolio come from renewable sources, according to the UCS report. Still more, including California and New York, require at least 30 percent.

Michigan could support boosting its standard to 32.5 percent by 2030, UCS analysts estimated. The group modeled various scenarios, including assuming no changes to Michigan’s current standard.

If the renewable requirement was increased to 32.5 percent, retail prices for customers would rise by about 3.5 percent by 2020 before leveling off by 2030, the group predicted, and investment could reach $9.5 billion. UCS analysts also said it’s the best option to diversify utilities’ power portfolios and lessen the reliance on fossil fuels.

Environmental groups also say a shift toward more renewable resources will mean improved health benefits to Michigan residents.

“When the evidence is so clear that renewables and efficiency carry with them significant benefits to the people of Michigan, I believe it is critical to preserve these standards rather than replace them with a less-robust and more-complex mechanism,” Sam Gomberg, UCS’ lead Midwest energy analyst, testified before the Senate committee.

“We know we want to continue developing these resources, so let’s maintain the standards and make sure that happens.”