Tick tock. The legislative clock is ticking. Five years ago, Michigan established a 10% by 2015 renewable portfolio standard (RPS), but what lies ahead for the state's energy landscape when the mandate expires? That, as it turns out, is a question Gov. Rick Snyder seems determined to answer.
In November 2012, Snyder issued a special message titled ‘Ensuring Our Future: Energy and the Environment,’ which laid out actions meant to get a jump-start on evaluating Michigan's policies beyond 2015. The governor emphasized a "no regrets," three-pillar approach based on "excellent reliability, an affordable price and a protected environment."
He also tasked the Michigan Public Service Commission (MPSC) and Michigan Energy Office (MEO) with gathering data and issuing reports to help inform decision-makers when the time comes to formulate new legislation. It should be noted, however, that the reports are not to advocate for any particular policy or energy resource, renewable or otherwise. Rather, the governor appears set on getting the whole picture first.
John D. Quackenbush, chairman of the MPSC, commends Snyder for taking preemptive action.
"He's very focused on the long term and doing what's right for the citizens of Michigan," Quackenbush tells NAW. "He didn't want to wait until 2015 to have this debate, and wanted to use the entire year of 2013 to gather information that sets the legislature up to spend time on this in 2014."
Earlier this week, the MPSC and MEO submitted their first final report to the governor. The 115-page document, on renewable energy, takes into account over 1,000 comments received in response to a draft report released earlier this year.
Among other things, the report provides information on the state's current RPS, has a strong emphasis on wind power and, more importantly, says that Michigan is capable of handling a huge boost to its renewable energy target
RPS update
Currently, 29 states and Washington, D.C., have an RPS, and although Michigan's 10% by 2015 mandate may sound low, the report argues that a simple percent-and-year comparison with other states may overlook some important factors.
For example, the report notes that states often define renewables differently and may not require the same out of every local utility. As Quackenbush says, "You have to put it in context."
"In Michigan, we apply the 10 percent mandate to everybody: investor-owned utilities (IOUs), munis, co-ops and even alternative energy suppliers," he explains. "So, it's actually a higher target than some other states that may have a headline number of 15 percent but exempt maybe half of their load because they apply it to only their IOUs or even only their largest IOU. If you make adjustments for that, it's a fair comparison."
Whether or not the 10% number seems small, the RPS has produced some big benefits for Michigan. So far, the report says the mandate has resulted in approximately 1.4 GW of new renewable energy projects either operating or under construction in-state. In addition, related investments from DTE Energy and Consumers Energy – two of the state's largest utilities – have led to about 2,500 jobs, mainly short-term construction work.
The Michigan Jobs and Energy Coalition, a group of local businesses, labor unions and power providers (including Consumers and DTE), reports that the state's utilities are on track to meeting or exceeding the 10% mandate by 2015. DTE Energy, itself, says it has already reached the 9.8% mark with projects completed or under contract.
And the large majority of renewable energy in Michigan comes from wind power. According to the MPSC and MEO report, wind accounts for a whopping 94% of the 1.4 GW of renewable projects online or in the works. Quackenbush says the resource is simply the cheapest option.
"To date, wind costs have dropped significantly from what was envisioned when the original legislation was put in place in 2008," he says. The report finds that wind power prices in the state have dropped from over $100/MWh in 2009 to as low as $50/MWh.
However, although wind's current costs are providing a good advantage, Quackenbush says the resource could ultimately become less attractive if the production tax credit (PTC) dies out. "The PTC is being flowed through to our customers right now, but if it is not renewed, wind wouldn't be as low-cost as it is today," he explains.
Thirty percent?
In addition to evaluating Michigan's current RPS status, the report gauged various scenarios to see if the state could support a larger mandate. Surprisingly, the report finds that, yes, 15% by 2020 and 30% by 2035 targets are achievable.
"[F]rom a theoretical technical perspective, it would be possible to meet increased RPS targets of as much as 30 percent (or perhaps higher) from resources located within the state," the report says. "Michigan is part of two multi-state markets, so from a purely technical perspective, Michigan utilities could build or purchase renewable energy generated in a very large geographic area."
The key phrase is "technical perspective." Quackenbush explains that existing factors, such as land area and transmission, position the state well to triple its renewable energy share.
The report cites the Midcontinent Independent System Operator's (MISO) success with wind power. MISO, which overlooks the grid reliability of Michigan and several other states, has more wind on its system than any other renewable energy. Nonetheless, the operator told the MPSC and MEO that wind has yet to cause any substantial reliability issues due to the resource's intermittency.
"We can still do more in Michigan and not get into significant challenges with the grid," Quackenbush says, adding that current transmission work, such as ITC Holdings' 140-mile Thumb Loop project, is expected to help resolve most constraints.
Non-technical challenges do exist, though, such as siting processes and the possibility of public opposition – the latter of which Michigan has seen before.
Last year, despite high-profile support from the likes of former President Bill Clinton, Michigan voters rejected a ballot measure that would have increased Michigan's RPS to 25% by 2025.
Both DTE Energy and Consumers Energy openly opposed the Prop 3 initiative. Steven Transeth, director of energy policy at the Michigan Jobs and Energy Coalition, says Prop 3 was "poorly written and conceived." The initiative would have required an amendment to the Michigan State Constitution, an idea neither the utilities nor the public cared for.
DTE Energy spokesperson Scott Simons says, "We feel energy policy is best set by the Michigan legislature, which adopted the 10 percent RPS in 2008."
Quackenbush agrees. If a new energy policy is created, it will not be as a ballot measure. "We're trying to do this right, where it belongs: in the legislature. That's what we're moving ahead with."
Transeth says that although the state utilities have no plan on stopping at 10%, they are nevertheless wary of a new mandate. "The problem with mandates is that they can be restrictive and force the application of technologies which are not the best solutions," he comments. "We are in a very dynamic period for energy, and things are changing literally overnight. The setting of goals or targets instead keeps us on track but allows us to be flexible and take advantage of all clean energy options."
When all is said and done, he adds, the utilities will "support whatever decision the legislature and governor decide is best for Michigan."
The renewable energy final report is the first of four that the MPSC and MEO will submit to Gov. Snyder by Thanksgiving. The next three will be an "additional areas" report addressing electricity rates, natural-gas infrastructure issues and electric reliability; an "electric choice" report; and an "energy efficiency" report.
As to what the governor and legislature might do with the resources, Quackenbush says, it is too early to tell. Snyder obviously wants a comprehensive view of the state's energy past and present, before deciding on its future.
