As Switch Ltd. planned a new data center in Gaines Township outside Grand Rapids three years ago, the company considered it critical that Consumers Energy could power the facility entirely with renewable energy.
In the following months, the companies reached an agreement that would credit the data center’s energy usage with wind power generated in Tuscola County.
In a state that gets about 10 percent of its electricity from renewables, Switch’s demand may have seemed strong. But the company is part of a growing trend of businesses looking to power their operations with renewables, often to meet corporate sustainability goals.
In early October, the Michigan Public Service Commission approved two “voluntary green pricing” programs allowing all types of Consumers Energy customers — residential, commercial and industrial — to invest in renewable energy.
While these programs have been in place in varying forms for years, Consumers officials say the latest tariffs will be able to meet the increased demand it’s seeing from customers. In turn, the demand may drive more renewable projects than statewide mandates, utility officials say.
“We’re definitely seeing growth in interest from the (commercial and industrial) sector becoming more dependent on renewable energy,” said Jeff Myrom, Consumers Energy’s director of renewable energy and electric vehicle customer products. “That’s where a lot of growth is coming from, frankly. It’s not so much the Renewable Portfolio Standard.”
Michigan’s RPS calls for utilities to get 15 percent of their energy from renewables by 2021.
“I’m getting calls every day almost from new customers asking how can they do this,” Myrom added.
The MPSC’s Oct. 5 order also requires Consumers to submit a plan within 60 days showing how it will add solar generation to accommodate more residential and commercial customers, which may include plans to repurpose contaminated brownfield properties with solar panels.
And as renewable costs decline, Myrom sees even more potential subscribers.
“I think we could have large growth just based on the decline in costs for renewable energy by 2021,” he said.
How it works
Green pricing programs are required of all utilities under sweeping statewide energy laws passed in 2016. They allow all customer classes to voluntarily specify an amount of renewables they want to purchase on top of their standard rates.
The MPSC approved tariffs for Consumers’ Solar Gardens Program for residential and commercial customers and the utility’s Large Customer-Renewable Energy Program. The programs offer various rates, payment plans and bill credits that make the costs variable throughout the year rather than a fixed fee.
“We believe there is significant interest in the potential for utilities to partner with local communities and renewable energy developers to meet this customer demand,” MPSC chairperson Sally Talberg said in a statement.
Consumers’ Green Generation program — which was approved in 2004 and allows customers to pay a premium for renewables at roughly 1 cent per kilowatt-hour, or an additional $6 to $7 a month for the average household — will stop accepting subscribers in six months. The program, which has nearly 20,000 customers including the city of Grand Rapids, will be phased out in 2028.
Solar Gardens and the Large Customer-Renewable Energy Program function differently by requiring subscribers to pay the full cost of the generation but then receive credits.
For large customers with more than 1 MW of demand, subscribers pay 4.5 cents per kilowatt-hour on top of their normal rate and are credited for the energy sales and capacity value from the Cross Winds Energy Park II project. The net cost for subscribers is around 1.5 cents per kilowatt-hour, which varies throughout the year, Myrom said.
Solar Gardens reserves blocks at 500-watt increments and offers multiple payment options, including a $1,215 upfront cost. Each block produces a certain amount of kilowatt-hours per year, averaging out to an annual bill credit of roughly $60.
“There’s a long-term payback — eventually you’ll get your money back within 25 years, but it does require an upfront investment,” Myrom said.
Until now, a majority of the power offered through the programs was from power purchase agreements with in-state wind projects. The Green Generation program would also pair subscribers’ energy usage with renewable energy credits (RECs).
“That’s where it began,” Myrom said. “We’re starting to see, especially with larger customers, some more complexity in what they’re interested in.”
That includes the concept of “additionality,” or adding renewable generation rather than trading credits from existing projects. Additionality came with Solar Gardens, which is supplied by 4 megawatts of power from projects at Western Michigan University and Grand Valley State University. The Cross Winds Energy Park II project in Tuscola County also is supplying subscribers like Switch and General Motors, which account for more than 100,000 megawatt-hours of power from the project.
“There’s been a great deal of development because of the additionality component,” Myrom said. “More people lately have been talking about ‘locationality’ — they want renewables that might be in their service area or where their customers are at.”
Until now, advocates for corporate purchasers and environmental groups have said in MPSC filings that Consumers’ and DTE Energy’s offerings were inadequate.
Liesl Eichler Clark, president of the Michigan Energy Innovation Business Council, said Consumers’ programs are “moving in the right direction.”
“A lot of customers in the state are interested in that (renewable energy) tariff,” Eichler Clark said. “They understand renewables benefit their company and they want access to them.”
Meanwhile, the MPSC withheld approval of DTE’s proposed voluntary renewable energy program until the utility provides more information about program costs and expands options for large customers.
In April, the MPSC approved voluntary renewable energy programs for six other utilities, mostly in Northern Michigan and the Upper Peninsula.
When the MPSC began looking at ways to structure voluntary renewable energy programs last year, advocates said state policy was lacking to bolster corporate purchases.
The Michigan Corporate Purchasers group — which employs 92,207 people in Michigan with 2016 revenues of $689.8 billion — said in state filings that Michigan could use these programs as an economic development tool.
“Green pricing programs should be reviewed in the context of spurring state economic development efforts,” the group said in the filing. “Many of Michigan’s largest companies have aggressive renewable energy procurement goals, and some of the largest new investments in the state have been paired with requirements that these new projects be powered with renewable energy.”
The purchasers group also notes that U.S. corporate procurement of renewables increased from 1.18 gigawatts of capacity in 2014 to 3.23 GW in 2015. The Renewable Energy Buyers Alliance aims to increase the market to 60 GW by 2025.
Companies in Michigan investing in renewable energy include General Motors, Switch, Whirlpool, Herman Miller, Steelcase and Amway.
As renewable energy costs continue to decline, utility officials say the voluntary programs may end up saving participants money.
“As we see the price of renewables continue to come down, we’ll see a sweet spot in the early 2020s that will hopefully bring programs to cost neutrality and to a net benefit depending on the subscription,” Myrom said. “When that happens, we think growth will be strong.”
Editor’s Note: This story has been updated to note that the Solar Gardens bill credit averages out to $60 annually, not monthly.
MiBiz energy news coverage is supported by Consumers Energy, a public utility that provides natural gas and electricity to 6.6 million Michigan residents. For more information, visit consumersenergy.com.