New reports show Michigan’s 2008 renewable energy mandate has worked as intended, but lawmakers must now decide what to do next when the policy sunsets at the end of this year.
The Michigan Public Service Commission reported in mid-February that the state’s utilities are on pace to meet the 10 percent renewable energy requirement by the end of the year, the costs for doing so have steadily declined and the sector has added nearly $3 billion in investment to the state’s economy.
But now the Legislature will consider whether to increase the renewable energy mandate over time or to do away with it, perhaps in favor of a new “clean-energy standard” that would credit sources like natural gas for lowering greenhouse gas emissions.
By framing it as an issue of “if it isn’t broke, don’t fix it,” clean-energy advocates say the state could easily achieve a higher renewable percentage requirement. However, others — including key lawmakers on the House Energy Committee and at least two statewide business groups — are averse to the idea of further legislative mandates.
Energy policy will be a top item on the Legislature’s agenda this year and, later this month, Gov. Rick Snyder is expected to make a policy announcement on the topic. Snyder has called for more reliance on natural gas, renewables and energy efficiency as part of the state’s policy going forward, but he has not given specifics about an energy plan.
It all comes as the federal government attempts to decrease greenhouse gas emissions as part of a climate change initiative and as Michigan utilities plan to shut down their aging coal-fired plants.
While some Michigan companies are benefitting from market certainty with the 2008 law, “overall, the impact has been an increase in rates” for the rest of the business community, said Mike Johnston, vice president of government affairs for the Michigan Manufacturers Association.
“We think a mandate was acceptable as part of jumpstarting the wind industry and for a diversified energy portfolio, but now that we have a substantial amount of wind, going forward, we wouldn’t want to see a mandate,” Johnston said.
The 2008 law allowed utilities to charge ratepayers a renewable energy surcharge on their bills, which the Public Service Commission capped at $3 a month for residential customers, $16.58 a month for smaller commercial customers and $187.50 a month for large commercial and industrial customers.
Statewide, though, those surcharges have been cut down or eliminated entirely. Consumers Energy eliminated its surcharge on all of its customers in July. Detroit-based DTE Energy decreased its surcharges on customers last year, including a reduction from $3 to 43 cents for residential customers. Consumers Energy and DTE, the two largest investor-owned utilities in the state, serve nearly four million electric customers in Michigan.
Additionally, a January report from the University of Michigan’s Energy Institute examined cost scenarios under hypothetical expansions of the Renewable Portfolio Standard, or RPS. Doubling it to 20 percent by 2030 would cost the average household $1.70 per month. Increasing it to 25 percent by 2025 (a goal that failed to pass by ballot initiative in 2012) would cost the average household $2.60 a month, and even less if federal production tax incentives are extended, researchers found.
Jason Geer, director of energy and environmental policy for the Michigan Chamber of Commerce, said while energy costs are a “key thing on our members’ minds,” the RPS costs have “had less of an impact on our members than originally thought.”
The largest source of renewable energy in Michigan comes from wind, which makes up 59 percent of the renewable portfolio, followed by hydroelectric and biomass. About half of the state’s wind capacity is generated in the Thumb region. The relatively fast development there has local officials scrambling to come up with new zoning regulations for turbines, and Huron County officials are considering a six-month moratorium on new development.
Geer said his organization supports an “all of the above” energy strategy that relies on various sources, renewable or otherwise. He added that the Michigan Chamber has “always been opposed to mandates.” Instead, he said, the state should adopt policies that encourage or make it easier for ratepayers to install their own power generating systems — for example, small-scale solar or wind projects.
“Our members’ preference is that they can invest in renewables and have that count towards the RPS in a more meaningful way,” Geer said. “Why not encourage everyone to make investments?”
Dan Scripps, president of the Michigan Energy Innovation Business Council, agrees that the state should have a better policy in place to encourage this kind of distributed power generation from sources other than the utilities.
But, he adds, the 2008 law has provided market certainty for Michigan developers and companies in the advanced-energy manufacturing sector. The MPSC report notes that, based on the best available data, the renewable and alternative energy sector added 1,600 jobs statewide between 2005 and 2014. It also generated $2.9 billion of new investment.
Scripps also said the policy has been “highly cost effective” as prices for new wind generation continue to decline. He noted that sources of renewable energy — including wind, solar, biomass and hydroelectric — are nearly all below the cost of new coal generation and typically below natural gas generation.
“In terms of the rate shock people were concerned about, it’s actually gone the other way,” said Scripps, a former state legislator from the northwest Lower Peninsula. “That’s good for businesses in the energy sector and for businesses across the state. In places where projects have been developed, there have been huge economic impacts,” including funding for essential local services.
“We’re finding with wind and increasingly with solar that there is no difference between generating with renewable sources compared to traditional ones. Often, it is cheaper,” he said.
Scripps questions the logic behind eliminating the RPS on the grounds that it’s government overreach, noting that utilities in Michigan are already heavily regulated monopolies that are overseen by the Public Service Commission.
He wonders whether the utilities alone should be allowed to chart the course of Michigan’s energy future.
“If we say we’re not going to have any government involvement in this after providing a regulated structure to govern all of this, it basically hands those decisions over to utilities,” he said. “Whether it’s a mandate or not: Are we willing to give a blank check and let utilities make the best decisions? I’m not comfortable handing over all of that to utilities.”