fbpx
Published in Energy
DTE Energy’s Pinnebog Wind Park in Huron County. DTE Energy’s Pinnebog Wind Park in Huron County. COURTESY OF DTE ENERGY

Corporate demand drives new renewable energy projects across Michigan

BY Sunday, September 25, 2022 06:58pm

Over the past few years, corporate demand for cleaner energy to power their operations has directly led to the development of large-scale wind and solar projects across Michigan.

Through voluntary “green pricing” programs created under 2016 statewide energy reforms, utilities regulated by the Michigan Public Service Commission have reported exponential growth in the amount of customer-purchased renewable energy. 

As well, this growing demand is creating “additionality,” or new projects being added to the grid as opposed to the trading of renewable energy credits that could involve already built or out-of-state projects.

“Voluntary green pricing programs are becoming a major driver of new renewable energy growth in Michigan,” the Michigan Public Service Commission declared in a February renewable energy report that it issues annually. 

That’s a statement backed up by clean energy advocates, consultants and the state’s two largest utilities — and represented in several recent, large deals.

In recent months, companies including Comcast, Ford Motor Co. and General Motors Co. have announced deals through their utilities — Detroit-based DTE Energy and Jackson-based Consumers Energy — for major renewable energy purchases. Other large buyers, which utility officials say span a variety of industries, include the state of Michigan and the University of Michigan. 

Ford’s most recent deal, announced in early August, will add 650 megawatts (MW) of new solar power to support the automaker’s Michigan operations. The capacity will come online in 2025 and, at this point, represents a 70-percent increase in Michigan’s entire solar energy portfolio.

“One of the hallmarks of the program is this concept of additionality. What that really means is we’re not in the business of having a bank of renewable energy certificates sitting on the shelf that we then pull off and give to customers who enroll in the program,” said Brian Calka, DTE’s vice president of renewable energy sales and project development. “We’re all about building new renewable energy projects here in the state of Michigan so that customers enrolled in the program can connect new projects to what their enrollment represents.”

Three wind projects and a utility-scale solar project currently support DTE’s MIGreenPower program.

“But, quite frankly, we have to triple that capacity, if not quadruple it in the coming years, to meet the demands of customers,” Calka said.

 

Advocating for buyers

Public Act 342 of 2016 includes a section requiring state-regulated utilities to offer green power pricing programs, a voluntary transaction allowing utility customers to basically pay a premium for renewable-sourced power. Prior to the 2016 law, utilities offered renewable energy credits that experienced far less participation.

The 2016 law requires utilities to add renewable energy capacity to meet program demand beyond the 15 percent renewable energy standard required under a separate state law. In other words, these customer-driven renewable energy projects are on top of what utilities were already mandated to build.

DTE Energy offers voluntary programs for all classes of customers, from residential to small business to large industrial users. Its program now has more than 63,000 residential subscribers, 600 businesses and 36 industrial customers.

“It’s been remarkable growth. Within our residential and small business segments, we have seen program enrollments double every year for the past three years,” Calka said. “We’re just growing at such a rapid rate. No one really expected this kind of growth, but obviously, we’re extremely happy we’re seeing it.”

Clean energy experts say additional factors are leading to more of these contracts, including more favorable terms for buyers. Groups like the Michigan Energy Innovation Business Council (MEIBC) have been working for years through the MPSC’s formal ratemaking process to advocate on behalf of buyers.

In a settlement reached in late July, Consumers Energy agreed to a variety of new contract options, including allowing customers to resubscribe to the same designated project. The utility also will start to plan options for residential and small business customers. 

Consumers has 120 MW of fully subscribed renewable capacity that’s currently in operation supporting its program for large energy users. The utility has been permitted to add another 1,000 MW of renewable capacity “to satisfy our customers’ demand,” said Eric Clinton, Consumers’ director of renewable products.

“We’re actively seeking contracts for that new capacity that will come online in the future,” he said.

MEIBC President Laura Sherman said utilities had to be pushed to adopt these programs in ways that would be favorable to buyers. DTE’s MIGreenPower program, for example, in 2018 “was a shadow of what it is today,” Sherman wrote in an op-ed last month.

“It’s gotten to the point where the options are attractive enough to big companies and the cost of renewables have come down so much, contributing to the attractiveness and the value they see in having these long-term contracts,” Sherman told MiBiz.

Most recently, rising electricity prices have brought a new dynamic to the equation. Effectively, program participants help pay off the cost of building a renewable energy project through their subscription. As broader energy prices increase, the renewable energy premium shrinks in relation to their overall electric bill.

“They’re not only using the program to decarbonize their electric footprint, but they can do so at zero cost or maybe even at a cost savings, depending on the month we’re looking at,” Calka said. “Right now, customers are very clearly receiving their required renewable energy attributes at no cost. That’s been huge.”

Sherman agreed that the cost side has been a key part of the growth.

“These aren’t companies in the business of losing money — it has to make sense in the long run,” Sherman said. “These programs now offer that and offer enough flexibility to make sure the terms the utility is offering line up with the terms the corporate purchaser can accept.”

 

Sustainability commitments

On top of the legal and regulatory changes in Michigan, large — particularly publicly traded — companies are responding to shareholder and consumer pressure to take action on climate change. That’s particularly true in the automotive industry, and backed by the recent large purchases by GM and Ford.

Mike Troupous, vice president at Grand Rapids-based consultancy Foresight Management, said “pressure” is a key driver of corporations’ decision making.

“A lot of companies doing this are publicly traded and getting pressure from investors, mostly, but they have other stakeholders,” he said, noting that environmental, social and governance (ESG) goals are playing a growing role in the marketplace.

Last month, telecommunications behemoth Comcast announced that it would offset half of its power consumption from its Michigan operations with renewable energy, driven primarily by the company’s 2035 carbon neutral target.

“We are pursuing a variety of sourcing options, prioritizing contracts that create additional renewable energy capacity where feasible, as we know that additionality is important to bringing more clean energy capacity to the communities we serve,” Chandler Clay, Comcast senior director of corporate environment communications, said in an email.

But companies’ sustainability goals are also creating favorable conditions for the utilities, Troupos added. Program participants effectively take on the risk of building new generating assets while receiving the sustainability benefits.

“It’s an effective way for DTE and Consumers to build more renewable energy assets in the state, which gets them good PR, better products for customers and the end user is trading risk for additionality,” Troupos said. “A lot of corporations have said: ‘I’ll take on the up and downside risk of the assets, in exchange I’m getting these additional (renewable energy credits).’” 

Read 2342 times Last modified on Monday, 26 September 2022 17:58
SUBSCRIBE TO MIBIZ TODAY FOR WEST MICHIGAN’S FINEST BUSINESS NEWS REPORTING >