U.S. power companies are in the middle of a major shift that includes an increased focus on smaller, modular renewable energy projects and less on centralized fossil fuel plants. Jackson-based CMS Energy Corp., the parent company of Consumers Energy, is no different. Following the closure of its “classic seven” coal plants in 2016, Consumers released its long-term energy vision in June that spans the next two decades. It includes a 43 percent renewable energy portfolio by 2040 that relies heavily on solar power, as well as an 80-percent reduction in carbon emissions. The company also plans to eliminate its coal portfolio in this time while building no new natural gas plants. Another key component of the utility’s strategy is managing the demand side of its business. For decades, utilities have focused solely on managing their supply to match demand. Now, energy efficiency and increasingly demand response — which relies on customers to reduce energy usage during peak demand times — have emerged as valuable energy resources. Meanwhile, Consumers is in the middle of a multi-billion-dollar capital investment plan that includes infrastructure upgrades for its natural gas and electric businesses. These clean energy and infrastructure investments are Consumers’ key priorities for the future, says President and CEO Patti Poppe, who has led the company since 2016.
2018 was a big year for Consumers with the release of its long-term Integrated Resource Plan. What’s the outlook for 2019 and putting that plan in action?
It’s all about execution and backing up the promise. We’ll have the (Michigan Public Service Commission) order on the IRP, which will be important so we can remain aligned with the commission’s ambitions as well as our own. The first phase of the (statewide) renewable portfolio standard will start to get built out with additional wind and solar — 150 megawatts of new solar and 350 megawatts of wind. This will not complete construction next year, but we’ll finalize the plans of when, where and how that will be built.
The other thing that is very important in 2019 is continuing to enable this demand response capability, the idea that for the first time ever we’re going to optimize both supply and demand. For 130 years, we’ve only optimized supply. Demand is what it is and we build stuff to serve it. Now we’re going to optimize demand, shave the peak and create an energy supply that matches it. That’s a big difference.
What kind of response are you getting from commercial and industrial customers on the shift to renewables?
They care about a couple of things: Obviously, reliability is very important to them, as is price. But many of them have strong environmental commitments and the fact that we can deliver cost-effective renewable energy to serve them is really important. That’s a conversation we’re having with our industrial customers. I’ll tell you, I can’t go to a customer meeting without them saying, ‘Hey, I’d like to do solar here on my property, can we do that?’ Four years ago that never happened. That’s a big demand. If our customers want renewable energy on their property, we’ve got to figure out how to make that happen.
What are they saying about participating in demand response plans?
Commercial customers … have a huge economic incentive to participate in demand response because they act a lot more like residential customers. If we can help them be smarter about how they use their energy and can optimize their load and save them money, that’s a big deal.
Can you elaborate on Consumers’ big bet on solar over the next few decades?
It’s not a big bet, per se. A big bet is a 1,000 megawatt natural gas power plant. What I like about renewables is you don’t have to make that big bet. You can gradually add. I can turn on a solar farm in six to 12 months. You can turn it around fast so it’s actually a lower risk. We call this our clean and lean energy strategy. It’s lean because you only build to demand as opposed to building a 70-year asset that you hope you’re going to need.
The modular nature of renewables is just so important. People want to compare the unit cost of a combined cycle gas plant with the unit cost of a solar farm. Well, it’s a bad comparison. Unit cost is not the variable. Total cash outlay and operating cost thereafter — the levelized cost of that energy — is a much better comparison. So if you have to build a 1,000 megawatt gas plant, that’s $1 billion. I can build 22 megawatts of solar for a lot less.
Do you foresee stranded assets in Michigan with large gas plants being or planned to be built?
I’m not going to speak for the state, but I’ll say that we built a plan that optimized and accelerated retirements so that we don’t have large stranded assets. Other people are in different situations. Some haven’t retired any coal yet. We’ve retired a gigawatt of coal already.
Consumers and DTE Energy are both making major investments in the electric grid and natural gas distribution. Where do those plans stand and what comes next?
We filed a five-year electric distribution plan. About two-thirds of it is blocking and tackling investments: poles, conductors, substations. The other third is new technologies in the latter half of the five years. You can’t put a smart communicating switching device on a pole that’s falling over. We have a large physical distribution system in Michigan. Therefore the technology is back-ended in the five-year plan.
On the gas side, there has never been a better time to make our gas system safer. It is old and invisible to people, and it is our job to ensure the public is able to count on a safe gas distribution system. The next opportunity is just doing it in a way that customers can afford, but they have the lowest prices they’ve had in 15 years. Our bills are the lowest in the Midwest and Michigan. Now is the time to then make the system safer.
Interview conducted and condensed by Andy Balaskovitz.
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.