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Sunday, 02 March 2014 22:54

Cloudy days ahead for renewable energy industry?

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Michigan’s energy sector is at a crossroads.

While a chorus of experts and energy firms advocate for higher state mandates and the development of more renewable energy projects, many industry professionals face a period of uncertainty.

The reason: Despite growing bipartisan support for policies encouraging more renewable energy in the state, lawmakers have not shown much urgency in acting, said Liesl Clark, principal at 5 Lakes Energy LLC, a Lansing-based policy consulting firm.

That situation has many energy companies pondering their futures within Michigan’s highly regulated energy market, she said.

“They’ll be moving elsewhere or definitely not expanding if they don’t see support,” Clark said. “Ultimately, we are moving to a place where we are going to use more renewables. The opportunity, in my mind, is for Michigan to be at the front end of that.”

Companies such as Chart House Energy LLC in Muskegon face an uphill battle in challenging what they see as the state’s long-term energy imbalance.

“The bottom line is that there are many other states that are in better shape in terms of their grid and renewable (energy portfolio),” said Rob Rafson, president and founder of the Chart House. “Michigan has a problem. It has a trade imbalance relative to power. We bring in $1.7 billion in coal and we don’t produce a single lump. That means we’re bleeding $1.7 billion a year for nothing.”

For years, Gov. Rick Snyder, the Michigan Public Service Commission and industry groups have struggled with how the state should move forward in setting energy policy. While the MPSC recently produced a number of reports on the opportunities that a more aggressive energy policy could provide, legislators aren’t expected to take significant steps any time soon, Clark said.

Although Snyder is in favor of more renewable energy development, having recently proposed increasing the RPS to 20 percent by 2025, he could find it hard to navigate the political environment in an election year to set policies that would encourage further deployment in the sector, Clark said. She cites as an example the existing 10-percent renewable portfolio standard that was enacted in 2008 as part of a complex deal that required bipartisan compromise to pass the legislature.

“It’s a very complicated legislative landscape when you look at what’s happening in Lansing,” Clark said. “Term limits … are a very large constraint for the state of Michigan right now. Because of term limits, we just have a shorter memory, so it’s harder to build understanding around a complicated topic like energy in order to have a good policy effect.”

The legislature is currently hung up on the issue of customer choice and how to handle it, she said. Even with pressure from a lot of large industrial players to open the state’s energy market to more competition, legislators have been slow to act, and that doesn’t bode well for progress on renewables, Clark said.

“The governor is definitely conflicted about it,” she said. “So, frankly, the issues of renewables and efficiency can get stuck up in other issues like customer choice. I don’t anticipate we’ll see much movement this year.”

A lack of movement by the legislature just means more uncertainty for the renewable energy companies and translates into sluggish development at best, said Chart House’s Rafson.

The only way the state can fix its energy problems is by getting the legislature to set long-term goals and give renewable energy companies the certainty they need to plan and make investments, he said.

“It’s hard for the industry to continue building on these 10-year time windows,” Rafson said, referring to Gov. Snyder’s recent RPS proposal. “It’s easy to adjust every five to 10 years, but we should be looking at 20-plus-year windows.”

After decades of cheap energy — and given the current influx of cheap natural gas into the market, most legislators have been quick to kick the can down the road on the question of where the state gets its energy, said Mike Linsea, founder and project manager at Solar Winds Power Systems LLC of Shelbyville in Allegan County.

“Energy use has crept up on us and now it’s gotten to a point where we are using so much electrical power that now we’re paying more attention to the cost,” he said.

In his view, the real battle is brewing over decentralized energy.

“(The utilities) want you playing at the plugs,” he said, noting utilities want to keep customers on their grid. “At the corporate offices at the top, that’s the argument they’re having — how to keep customers there.”

Linsea and Rafson believe the large utilities are five to 10 years ahead of most lobbying groups who are advocating for more competition or for additional renewable energy mandates. The reason: They want to maintain their regulated monopolies, and they see developments like distributed energy as a threat to their business model.

As businesses demand reliable power for their operations, industry groups could start to push for more distributed energy generation in the coming years, said Rafson, whose company is based at Grand Valley State University’s Michigan Alternative and Renewable Energy Center (MAREC). Coupled with rapidly emerging battery storage technology, distributed renewable generation is getting to a point where it’s becoming not only financially viable, but also significant to grid management, he said.

“(With solar) expanding well faster than additional demand being put on the system, that means we’re starting to take more of a chunk out of traditional power capacity,” he said.

It’s also promising that banks are finally showing more interest in funding private renewable developments, Rafson added.

“I think that there are some social and economic pressures to lend, but I think there is also some reduced risk as the economy improves,” he said. “They’re easing up but still have very tight tolerances on lending.”

The main caveat, at least in Rafson’s experience: Banks are demanding onerous terms for those loans.

“The lending right now is part of the puzzle in terms of how this works,” he said.

One small bright spot in the case of more distributed energy systems can be found in a package of bills being worked on in the state House, said Clark of 5 Lakes Energy. The bills aim to address the state’s cap on net metering and policy changes that could enable more microgrids, Clark said.

“I don’t know if it will see the light of day any time soon though,” she said.

Read 16513 times Last modified on Sunday, 02 March 2014 19:40

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