Published in Economic Development
The cost of renewable energy from solar and wind projects, like the one shown here in Michigan’s Gratiot County, continues to come down and in some cases has reached parity with traditional fossil fuel sources. The cost of renewable energy from solar and wind projects, like the one shown here in Michigan’s Gratiot County, continues to come down and in some cases has reached parity with traditional fossil fuel sources. MiBiz File Photo

As renewable energy prices drop, business groups split on state mandates

BY Sunday, February 07, 2016 11:33pm

As the price of wind and solar energy declines and even falls in line with fossil fuels, some policymakers have started to wonder if it’s time to expand Michigan’s renewable energy mandates.

Still others say it’s evidence that Michigan’s Renewable Portfolio Standard, which leveled off at 10 percent last year, is no longer needed as the costs will determine the market for the wider adoption of renewables.

As it turns out, Michigan business advocates remain split on the matter.

However, the Grand Rapids and statewide chambers of commerce maintain that as Michigan lawmakers work to craft a new statewide energy policy this year, a mandate with an “arbitrary” percentage is no longer necessary.

Detailed planning requirements for utilities, together with declining wind and solar prices, will inevitably lead to more renewables in the state’s portfolio, said Joshua Lunger, director of government affairs for the Grand Rapids Area Chamber of Commerce.

“When talking about renewables getting down to the point where they’re competitive (with traditional energy sources), we certainly think they have a place in Michigan’s energy future,” Lunger said. “We’d certainly like to see it in the planning process, so why mandate it one way or the other? When standing on its own, renewables definitely have a place in Michigan.”

Lunger said the Grand Rapids Chamber supports a planning process that considers a variety of social and economic factors, “not an arbitrary percentage.”

But ending the state’s renewable standard is not a position taken by other business interests in Michigan. They argue that it’s in ratepayers’ best interests to require utilities to lock in steadily declining renewable energy prices as a hedge against volatile natural gas prices. Additionally, they say the clean-energy standards support a burgeoning sector of Michigan’s economy.

“There is a component of our local economy that is growing that deals directly with the theory of technology and turning it into commercialized products that you can buy and use to put renewable energy to work,” said Andy LaBarre, executive vice president of the A2Y Regional Chamber of Commerce representing Ann Arbor and Ypsilanti. “We view (the renewable standard) as going beyond the environmental and social benefits. There are commercial and economic benefits for our members that need to be taken advantage of.”

While LaBarre said he doesn’t have a specific renewable percentage in mind, he wants to see “something that keeps the momentum up.”

He understands the argument for cheaper renewables standing on their own, but he doesn’t think Michigan has reached that point yet.

“My guess is we’re not quite to the spot we want to be — where the need for a subsidy or policy is no longer paramount and the market simply makes these technologies the most viable,” LaBarre said. “I think we’re on that road, but to abandon the carrot-and-stick approach is premature at this point.”

Policy in the works

A recent report by the global asset management firm Lazard — regarded highly for its relatively objective analysis based on investment strategies — projected renewables will continue to play a greater role in the energy sector.

Among the report’s key findings: “Despite a sharp drop in the price of natural gas since last year’s (Levelized Cost of Electricity), the costs of all forms of utility-scale solar photovoltaic and utility-scale wind technologies continue their dramatic declines.”

In Michigan, the declining price of renewables “has been pretty exciting, dramatic even,” said Julie Baldwin, renewable energy manager for the Michigan Public Service Commission.

In November, the MPSC approved a contract between Geronimo Energy and Jackson-based Consumers Energy Co. for a project in the Thumb region at the lowest wind price to date. In the deal, Geronimo will sell wind energy to Consumers for less than $45 per megawatt-hour. In 2010, the MPSC approved contracts for more than double that amount. A project that came online in 2014 was approved at $59 per megawatt-hour.

Against that backdrop, Michigan lawmakers are working to complete a comprehensive state energy package. Michigan’s 2008 law that mandated 10 percent renewable energy and energy efficiency investments leveled off at the end of 2015. The Republican energy committee leaders in both chambers of the state Legislature have proposed abandoning standards in favor of Integrated Resource Planning, which requires regulated utilities to present detailed energy outlooks for the years ahead. The details of those plans are still being decided.

Gov. Rick Snyder said last year that up to 40 percent of Michigan’s energy supply could be met with renewable energy and by cutting energy waste.

LaBarre of A2Y recognizes that his group’s support for a renewable standard runs counter to other business interests in the state or even nationally. He said Southeast Michigan may have stronger ties to the clean-energy economy compared to other areas of Michigan.

“It’s knowing that what works in Washtenaw County may not work in the U.P. or even Livingston County,” he said. “In our own backyard, it’s important.”

Clean-energy advocacy groups like the Michigan Environmental Council and the Michigan Energy Innovation Business Council have also touted the economic benefits of committing to clean energy, particularly as a way to attract businesses to Michigan.

The dispute appears to rest over the degree to which government intervention can drive down energy costs for ratepayers.

“I’m certain the incumbent utilities and other energy companies are very much factoring in renewables for their plans for the future,” said Lunger of the Grand Rapids Chamber. “It’s here to stay — that’s great, it’s better for the environment — so why do we need to mandate that?”

Read 7177 times Last modified on Monday, 08 February 2016 13:50