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Sunday, 27 October 2013 22:00

MPSC reports continue to define discussion on state’s energy future

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While Michigan’s energy stakeholders don’t always agree with one another, they will at least have a common framework for understanding the state’s energy situation next month.

That’s when the Michigan Public Service Commission expects to wrap up its four energy reports that it created from its own research and from a series of energy forums held around the state earlier this year.

Now that draft reports are circulating on renewable energy, energy efficiency, electric choice and “additional areas” — a catchall for topics ranging from rate setting to reliability — a possible playbook for the state’s policy decisions is starting to take shape, according to industry sources.

“The overall picture being represented is we have the opportunity to do a lot more on the energy front than we have so far,” said Douglas Jester, principal at strategy and policy consulting firm 5 Lakes Energy LLC. “These reports are giving us a reasonably current and reliable basis so that when we start having a debate, it will be with a set of facts that we are close to agreeing on.”

The reports are intended to help inform legislators in making sound energy policy, even if they don’t serve to create alignment among the various sides of the issues, Jester said.

In his special message on energy in November 2012, Gov. Rick Snyder said his administration wanted to take 2013 to really dive into the state’s energy sector and engage stakeholders. That led to a series of energy forums earlier this year and the rollout starting in September of the four energy-focused reports.

To many in the clean and renewable energy sector, the administration’s move just postponed action on a more aggressive energy policy for the state, but the utilities and other interests supported taking the time to research the energy issues Michigan will face in the future.

The reports are sparking feedback from a number of camps that recognize Michigan’s energy customers face issues like distribution reliability in some parts of the state. The utilities commented in the Additional Areas report that distribution reliability is adequate, even if infrastructure is aging.

While billions are spent on transmission infrastructure by companies like ITC Holdings Corp., local distribution infrastructure improvements have lagged somewhat, said Dan Scripps, president of the Michigan Energy Innovation Business Council.

“We’re glad (reliability) is being raised,” he said. “The report says the state has been OK in terms of outage rates, but that’s not universally true. If you talk to some folks around the state, there are those that have some regular and sustained outages. Where it happens, there’s been underinvestment in distribution over the years.”

Beyond outages, Scripps said the underinvestment in distribution infrastructure slows the ability to roll out new advanced energy technologies and business models. Some ideas include developing demand response models, peak load shaving, looking at the resiliency of grids and adding micro grids, he said.

In addition to grid improvements, Jester of 5 Lakes Energy said the reports concluded that renewable generation does not have any adverse effects on reliability. Additionally, many renewable energy supporters would also like to further the discussion of developing renewable energy paired with natural gas.

The utilities claim that because Michigan has relatively few natural gas-fired generation sources, the state hasn’t been able to benefit from lower natural gas prices as much as other comparable states, according to the report. Consumers Energy however recently issued a certificate of necessity for a new 700 megawatt natural gas-fired power plant in Genesee County.

“We think the focus on natural gas is good from an advanced energy perspective because they have a lot of synergies that make them both strong,” Scripps said. “Connecting and tying wind and gas together is often the cheapest because wind (generation) costs continue to come down and that is also a fixed cost that hedges against the volatility of natural gas prices.”

While the development of more advanced energy solutions is needed, the state needs to be careful and avoid driving an unfavorable solution when it comes to developing policy around generation, said Steve Transeth, policy director for the Michigan Jobs & Energy Coalition.

“We don’t want to put all our eggs in one basket and forget about any of these emerging technologies,” he said. “In the next five to 10 years, we’re going to see a major change in our (energy) delivery system. It’s going to be a whole different animal.”

As businesses find ways to bring the cost of renewable energy development down, changes in rate structuring could also play a role. Local generation and net metering along with more users starting to generate their own power will transform how the major utilitiesoperate, Transeth said.

But while the advanced energy sector continues to develop, the existing sources of energy will continue to drive Michigan’s energy discussion, he said.

“Natural gas will help bridge us to where we’re going,” Transeth said.

Beyond investments in new generation infrastructure, an emphasis on efficiency is expected. The MPSC released a report last year showing annual savings of roughly $500 million that transcended all classes of ratepayers, Scripps said. All the investments in energy efficiency only help take pressure off the grid and the capacity for generation, he added.

“The governor is a strong supporter of energy efficiency, and I expect that emphasis to continue,” Scripps said. “Investments in infrastructure and generation are costly, so if we can take the wear and tear off the grid and extend its life, that will lower the scale of investment needed. I anticipate the utilities to be aggressive on incentives for efficiency.”

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