Leaders in state government may be united under the Republican Party banner, but when it comes to revamping Michigan’s comprehensive energy policy, differences in vision have emerged over the past month.
Since early March, Gov. Rick Snyder and leaders in the House and Senate have either formally or informally presented their energy plans. But big questions remain over whether legislators will continue on a path of renewable energy and efficiency standards — which has guided state policy since 2008 — and whether they’ll stick with an experimental, hybrid form of electric choice in which some ratepayers can shop for energy on the open market.
Lobbying is underway in Lansing on both fronts and the debate is likely to intensify into the summer.
What appears to be a common theme among the plans from Snyder, Rep. Aric Nesbitt and Sen. Mike Nofs, though, is a desire to move away from mandates, or requiring utilities to generate a certain percentage of energy from renewable sources by a target date in the future.
As Nofs, R-Battle Creek, and Nesbitt, R-Lawton, chair energy committees in their respective chambers, they have paid a great deal of lip service — as has Snyder — to wanting policies focused on affordability and reliability for ratepayers, as well as adaptability for utilities as the wholesale energy market and technology shifts.
The state is on track to meet its 10 percent requirement when P.A. 295 levels off at the end of this year. While Snyder outlined goals on what Michigan could accomplish by 2025, including a greater mix of renewables and energy efficiency, Nofs and Nesbitt have said a mandated target can be replaced with new rules requiring utilities to file detailed energy forecasts every three to five years.
Democrats, meanwhile, want Michigan to continue growing its renewable portfolio, getting to 20 percent over the next seven years.
The governor’s plan
Synder’s goals, which he outlined in metro Detroit last month, drew praise from both sides of the aisle for recognizing the importance that renewables and energy efficiency can play over the next decade.
Snyder said under certain scenarios, the state could meet 30 to 40 percent of its portfolio through a combination of renewables (mostly onshore wind) and eliminating energy waste in the next decade. Snyder sees efficiency as a good investment for the state: The Michigan Public Service Commission has reported that for every dollar spent on saving energy, ratepayers save nearly $4.
“We saved two-thirds of our dollars, and did so while making Michiganders’ homes and businesses more comfortable and their bills lower,” Snyder said in his energy message. “Why wouldn’t we do more of that?”
He called his goal of reducing energy waste by 15 percent over the next 10 years “actually conservative, as it represents carrying out only half of the projects that already pay for themselves.”
While Snyder’s plan predicts a greater reliance on natural gas, it also recognizes the volatility of natural gas prices, which will be a key factor in the coming years as policymakers replace coal-fired generation that is scheduled to retire. The choice between going with renewables and natural gas to make up the difference is largely affected by cost. Should renewables beat natural gas on cost, Michigan could get roughly 25 percent of its portfolio from renewables by 2025, Snyder said.
Larry Ward, executive director of the Michigan Conservative Energy Forum — a coalition of Republicans and faith-based groups pushing for more energy efficiency and renewables — said he “loved” Snyder’s message.
“The governor set a very good tone of how important energy efficiency is and where he thinks renewables fit in,” Ward said. “He gave some pretty concrete numbers. It begs the question of how we get there. The proof is in the details at this point.”
Ward also thinks it was important for Snyder to bring up natural gas prices and how those will affect the state’s energy mix.
“A lot does depend on the price of natural gas: Why put all your eggs in one basket?” Ward said. “It seems like a great solution now, but at what point is it not? I’m a big proponent of natural gas, but people need to keep that in check.”
Despite giving some broad numbers and goals, Snyder faced criticism after his announcement for not offering a detailed policy plan.
Speaking to an audience last month at the Gerald R. Ford Presidential Museum in Grand Rapids, Sam Gomberg, Midwest energy analyst for the Union of Concerned Scientists, said: “It’s nice to see Michigan recognize old, dirty and inefficient coal plants won’t meet the needs of tomorrow. … What (Snyder) didn’t lay out was a lot of policy specifics to get there.”
Gomberg, along with other clean-energy advocates, is also critical of the idea that Integrated Resource Planning for utilities — which is being proposed in the Legislature and that Snyder hinted at — could replace renewable and energy efficiency standards. The idea behind IRPs is that long-term, detailed forecasts related to supply and demand will ultimately provide the most efficient and cost-effective energy mix.
Martin Kushler, senior fellow with the American Council for an Energy Efficient Economy, also approved of Snyder’s 30 percent to 40 percent combination of renewables and energy efficiency by 2025.
But he added: “I have not seen any explanation of what the policy mechanism is to get there.”
“In fact, what’s proposed in the Legislature takes away two specific policy mechanisms” that have made Michigan’s standards successful until now, he said. “If you knock out that pillar of policy requirements, how do you expect to do even better?”
Where the Legislature is heading
Indeed, as supporters point out that Michigan’s renewable and efficiency standards have been successful in driving growth and certainty in those sectors since 2008, neither Nofs nor Nesbitt are interested in keeping or expanding them.
“An all-of-the-above energy approach from generation and efficiency is something that can be achieved working through an IRP, which I believe is a better system than looking at things separately in terms of mandates,” Nesbitt told reporters last month. “Cookie-cutter mandates need to be a thing of the past.”
Yet Kushler, who has recently studied the effectiveness of IRPs versus standards, says evidence from other states shows that standards are nearly three times as effective in terms of driving spending and savings.
“The data set and 30-plus years in the field tells me that having solid energy efficiency targets is by far producing much stronger results than states that are more voluntary,” Kushler said. “A lot of IRPs become paper exercises that don’t get translated to boots-on-the-ground energy-efficiency programs.”
While Nesbitt has sponsored a series of bills outlining his energy priorities, Nofs recently wrapped up a months-long working group process for his own comprehensive energy plan.
Details of the plan released so far show an apparent agreement with Nesbitt to move toward an IRP process and scrapping generation and efficiency mandates.
However, Nofs has for months advocated for a new “clean energy standard” that credits utilities based on the decrease of greenhouse gas and particulate matters released during generation. This would effectively credit utilities for switching to natural gas, which releases fewer pollutants than coal.
Nofs has reasoned that, given federal regulations on pollutants and pending rules for carbon dioxide, the goal of Michigan’s policy should be emissions-based rather than mandating certain technologies.
“That can be complicated,” Gomberg said of Nofs’ clean energy standard. “The devil is in the details. It could basically give the green light to a wholesale shift to natural gas.”
An over-reliance on natural gas could bring a whole new set of problems related to the price of fuel and stranded assets in the future, experts say.
A question of energy choice
But while efficiency and renewables are key components of a new comprehensive energy policy, Michigan’s energy choice law is also being thrown into the mix.
Michigan has a hybrid regulatory structure in which the ability for ratepayers to choose an alternative energy supplier is capped at 10 percent of a utility’s load. Also referred to as deregulation, the 10-percent cap has been in place since 2008 following an eight-year period of full deregulation.
Supporters of energy choice say the market will ultimately drive down energy prices if everyone can participate (there is currently a waiting list to participate in Michigan), while utilities hope to eliminate choice entirely to prevent uncertainty in the capacity they are required to maintain.
While wanting to eliminate mandates, Nesbitt took criticism over his plan from free-market advocates because he has proposed eliminating electric choice. Nofs, meanwhile, would keep the 10-percent cap but require those customers participating in choice to make a one-time declaration about whether they will keep an alternative supplier or come back to a regulated utility. After a certain date, no others would be allowed to participate. Those already participating could do so for as long as they choose under Nofs’ plan.
Work to be done
Nofs is expected to introduce formal legislation in the coming weeks, while Nesbitt has already started debating the general themes of his proposal in committee. Observers say the committee process could play out well into the upcoming summer.
“It’s interesting to see three Republican leaders coming out with three different proposals,” Gomberg said.
An official with the Michigan Chamber of Commerce declined to comment for this story, saying the organization has not yet finalized its position on energy policy.
While the most politically plausible scenario appears to drift away from a renewable energy and efficiency standard that has guided Michigan over the past seven years, some recent polling shows strong public opinion in favor of both.
A statewide poll of voters done by Public Opinion Strategies — a nationally prominent Republican polling firm — and released March 30 by the Christian Coalition of Michigan showed more than 80 percent of those surveyed support an increased renewable energy standard. And that spans the political spectrum.
Other findings showed respondents would set the renewable energy standard at 62 percent if it were up to them, while 70 percent were more likely to support an elected official who supports more renewable energy.
Ward, whose organization was involved in the poll, said those strong numbers send a clear signal.
“What we’re sharing with the legislators is: Look, guys, here are the numbers,” Ward said. “Seventy to 80 percent want more renewables and efficiency. Why buck that trend?”
Editor’s Note: This story has changed from its original version to correct the hometowns of Sen. Nofs and Rep. Nesbitt, which were inadvertently transposed.