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Wednesday, 16 May 2012 22:21

Bipartisan groups push more aggressive energy policy

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WEST MICHIGAN — The economic benefits of alternative energy has united at least some bipartisan political groups to push for a stricter Michigan renewable energy mandate.

Without any overarching energy plan, Gov. Rick Snyder remains on the sidelines, but his energy czar Valerie Brader said Snyder plans a "special message" to address energy planning later this year.

To date, rather than single out the energy industry, Gov. Snyder has been focused on helping all sectors of business; the state tax reforms and efforts in economic gardening are examples of that, she said.

But an increasingly bipartisan group believes the stage is set for Michigan to distinguish itself as a hub for alternative energy manufacturing and design and separate itself from the pack of states scrambling to be part of the industry.

While the state's current Renewable Portfolio Standard (RPS) has helped drive the creation of the industry, many people believe the mandate serves as only a first step in the state's industrial base realizing its full potential. Proponents of an increased RPS believe if the state were to adopt a statewide energy policy, entrepreneurs and energy-based businesses would be more inclined to invest in Michigan.

Still, others see little use for the discussion, preferring the state to let the market decide the issue.

Brader said the governor is against undercutting local government control by imposing a statewide zoning ordinance many have called for to help streamline the energy development process. For now, the administration is most concerned with cost and reliability of power, she said.

"We need to look at broader solutions," she said. "Part of the challenge is detangling all the things that affect the pricing of power."

One of the bigger issues on their radar screen is that the state gets about 60 percent of its energy from coal, Brader said. If the EPA enacts pollution control regulations that affect the cost-competitiveness of coal, the state could be at a disadvantage, she said.

One way to ensure the state is less reliant on coal is to mandate the utilities use more alternative energy, which is exactly what a coalition of Democratic and Republican interests are backing.

The Sterling Corporation, a Republican consulting firm and lobby group, was joined by the Democratic firm Byrum & Fisk Advocacy Communications in supporting a ballot initiative to increase the renewable energy mandate to 25 percent by 2025. The current RPS mandates 10 percent of electricity come from renewable sources by 2015.

Brader said the governor has not taken a public position on the proposal at this time.

"Our perspective on the initiative is that it will create business and economic development and jobs that can't be outsourced (from) Michigan," said Mark Pischea, a partner at Sterling Corp. "I think the governor is concerned, but part of the issue is he can't just wave a magic wand and say this is our energy policy. There is heavy lobbying on both sides of the issue."

Haris Alibasic, director of the office of energy and sustainability for the City of Grand Rapids, said local governments also play an important role in informing the upper level administration policy decisions.

"If local governments have a plan, they can confidently endorse projects," he said. "Ultimately, I'd love to see something that will address a more sustainable energy future."

Alibasic said money spent on energy projects usually remains in the community. He said he believes a new aggressive energy policy could help attract business to the state and the West Michigan region. The city, for its part, has consistently communicated its position on energy efficiency to legislators, he said. Local governments need to take a leading role to encourage the state to become more proactive on these goals.

The city has a goal of getting all of its energy from renewable sources by 2020.

"Oftentimes we forget that to move things forward, compromises need to be made. RPS was an example of that," Alibasic said. "As we see more success of solar and wind and (more) manufacturing of renewable energy components, the discussion will open up."

Pischea and others point to the utilities as the biggest roadblock to getting more projects off the ground and producing energy.

"The business community is doing its job," Pischea said. "They are being entrepreneurial and creative and finding ways to compete."

With Michigan's diverse manufacturing and engineering talent pool and the current RPS, Pischea said he sees an opportunity for the state to be leader in the energy manufacturing sector.

"All (businesses) need is some kind of infrastructure and policy to take to investors," he said. "If the ballot initiative passes, the sector will boom."

Jeff Metts, president of Dowding Industries and owner of Eaton Rapids-based Astraeus Wind Energy, said there is a lot of opportunity for manufacturers in the alternative energy arena, but the industry just needs some up-front, short-term subsidies to get it to its feet.

"Right now the risk-reward profile is too great. First you have to go out and produce energy and create jobs and make a profit," he said. "You have to be successful before you get anything."

Metts said because of the RPS and Astraeus' wind energy technology, his company's foundry can compete with the Chinese.

"We can now machine a piece of metal for turbines that took 35 hours in (just) six hours," he said.

Despite some successes, Metts said the alternative energy market is still very risky because of the large investments involved in the projects and the continuing fight for the industry to gain traction. An alternative energy project can go belly-up in no time, he said.

"I feel like the politicians are asking, 'How do I get votes?' and not, 'How do I advance my state?' All the ingredients are really strong here. Are we going to get it done here? I don't know," he said.

Meanwhile, the state's electric utilities counter that they need market certainty to be able to make the long-term capital investments required for power generation facilities. They're also quick to claim that increasing the RPS places more of a burden on the state's ratepayers.

"Our position is, let's meet the 10 percent standard and fit that in with the rest of our portfolio first. Then we can have the discussion about increases," said Jeff Holyfield, spokesman for Consumers Energy. "I don't think anybody would say (RPS) is perfect, but it's doing what it was designed to do."

Holyfield said the state should try to avoid getting into the same situation as Germany and Spain – two countries that had heavily subsidized solar initiatives that were eventually reversed because they weren't cost-competitive.

In today's wholesale electric market, natural gas-fired power is essentially setting the benchmark, Holyfield said. Natural gas's increasing use is partially attributable to a warmer winter hurting demand and to fracking opening up previously untapped supplies and keeping inventory high.

Holyfield said because of the current low price of natural gas, Consumers has a few options depending on the final form of new environmental regulations and market fluctuation. He said, Consumers announced plans in December to mothball seven of its smaller, coal-fired facilities by 2015. Until then the utility has some decisions to make. Holyfield said installing more air quality control equipment to further reduce emissions to meet federal and state environmental regulations and continue to operate the units is one way to go. Another is converting the units to use natural gas instead of coal. Decommissioning the units or using combination of those options, depending on customer needs and the market are also options.

For the utility, which is required by law to ensure electric capacity, the incentive to invest in alternative energies is highly diminished, while market conditions inform the trend to convert facilities to natural gas-fired generating units.

Holyfield said Consumers is spending $1.6 billion at its five major coal-fired facilities for environmental equipment to further reduce emissions from those units. On the renewables side, Consumers' Lake Winds project broke ground last year. The project will add about 100 megawatts of renewable energy to the grid. Once the project comes online, Consumers' will be generating about eight percent of its energy from renewable sources, up from 5 percent currently.

"Rather than raising the RPS, we'll be better off if we invested more in energy efficiency programs," Holyfield said. "There is going to be a growing place for wind and other renewables in our portfolio, but what we keep hearing over and over is, 'I want reliability.' You can do a lot with wind and efficiency, but at the end of the day, the operating power needs to be there."

Read 1158 times Last modified on Thursday, 30 August 2012 23:28

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