Lansing should raise energy efficiency and renewable energy standards

Martin Kushler, Ph.D. is a senior fellow with the American Council for an Energy-Efficient Economy.

 

Families and businesses know it all too well: Michigan has the highest electricity costs in the Midwest. High electricity bills hamper investment and job creation, and mean families are spending more of their hard-earned money just to keep the lights on. Michigan’s energy policy is at a crossroads this year.

In a state where our energy market is nearly fully regulated, it’s the responsibility of legislators to hold utilities accountable for keeping utility costs low. Michigan legislators have a real opportunity to rein in rising costs and protect ratepayers by increasing our renewable energy and energy efficiency standards.

John Sarver is president of the Great Lakes Renewable Energy Association.

 

One of the reasons that our electricity costs are high is that current law provides incentives for utilities to invest in capital and build large plants. They’re guaranteed generous profits on these investments ‒ and simply pass along the costs to ratepayers. As Michigan’s old, inefficient coal-burning power plants close down over the coming years, we must replace them with a combination of renewable energy, natural gas and an aggressive effort to reduce energy waste. This “all-of-the above” approach will reduce costs while creating jobs and protect our air, land and water.

Current law incentivizes utilities to build new costly power plants. It was only after state legislation was passed creating standards in 2008 that Michigan utilities implemented any energy efficiency programs and began acquiring wind and solar energy. If Michigan truly wants to diversify our energy portfolio, reduce electricity costs and pass an “all-of-the-above” energy strategy, the legislature must increase our energy efficiency and renewable energy standards.

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Reducing energy waste

Gov. Rick Snyder is a champion of energy efficiency, or “reducing energy waste”, calling for 15 percent savings by 2025. Michigan’s current energy efficiency standard has saved ratepayers billions of dollars, and investments in energy efficiency will continue to pay dividends into the future. All ratepayers win when we avoid having to build expensive new plants due to decreased demand for electricity.

Prior to having an energy efficiency standard, utilities failed to offer programs that help ratepayers reduce energy waste. Why? Because utilities profit more by selling more electricity. Energy efficiency simply goes against the business model of utilities, which is why the legislature must hold them accountable and ensure families and businesses have access to programs that can help them save money. Protecting and expanding the energy efficiency standard is crucial to keeping utility costs low for Michigan ratepayers.

Ensuring an “all-of-the-above” energy policy

Michigan’s current renewable energy standard has made significant progress in diversifying our energy portfolio. Since the law was passed in 2008, the cost of renewable energy has declined dramatically. Wind contracts are coming in at a fraction of the costs from several years ago making wind a low cost energy option. Advances in technology have reduced costs of solar energy by 50 percent in recent years.

What’s best about renewable energy is that these new, low rates are often locked into 20-30 year contracts ‒ guaranteeing low-cost electricity for ratepayers for decades. This type of guarantee is non-existent when it comes to natural gas.

Michigan is now home to more than 240 companies that are manufacturing, installing and servicing renewable energy systems like wind and solar, which means we’re creating Michigan jobs and spending less money importing coal from other states.
By increasing the renewable energy standard, the Michigan Legislature can ensure utilities use more clean, competitively-priced renewable energy. That means savings passed along to customers, not guaranteed profits to shareholders.

Lansing must lead

Energy policy doesn’t take place in a free market. Michigan’s utilities enjoy monopoly status and rely on the legislature for guidance. They make guaranteed profits on large capital investments and make money by selling electricity. Before we allow the utilities to build as many profit-generating plants as they’d like, we must ensure a diverse mix of energy sources that protect ratepayers ‒ not shareholders.

Policymakers must hold utility companies accountable with clear policy standards for reducing energy waste and for using more cost-saving renewable energy to rein in rising electricity costs for families and businesses across our state.