June 16, 2014

Updating the Renewable Energy Standard in Michigan

Public Act 295 was enacted in 2008 as Michigan’s first step towards a renewable energy standard. This act required cooperatives and municipal electric utilities to generate 10% of their retail electricity sales from renewable sources by 2015. Unfortunately, Michigan was in the last group of states to adopt such a standard and the renewable energy target itself was one of the lowest nationwide. Several other states such as Illinois, Ohio, and Minnesota have already increased their renewable energy targets beyond their original standard and have passed new legislation in recent years. With the failure of Proposal 3 in 2012, commonly known as 25% by 2025, Michigan currently does not have a plan in place to take renewable energy to the next level beyond 2015.

Michigan, like most other states, includes wind, solar, hydro, geothermal, and biomass as renewable the energy options allowed to meet the standard. However, Michigan, Ohio, Pennsylvania, and West Virginia have included provisions for using non-renewable sources to meet their goals. In these states, a certain amount of the overall goal can be met with a cleaner/more environmentally friendly version of traditional coal-fired plants. For example, in Michigan, up to 10 percent of the RPS can be met with “integrated gasification combined cycle facilities” or other “advanced clean energy” technologies that reduce emissions by 85% relative to average coal-fired plants. Generally use of these technologies are transformed into “advanced cleaner energy credits” (ACECs) and can be applies towards each state’s renewable energy goal. Also worthy of mentioning is that the four aforementioned states, combined with Connecticut, Hawaii, Nevada, and North Carolina, also include energy efficiency to meet their goals. These 8 states rely heavily on these nonrenewable options as they are usually cheaper and easier to implement.

This push for energy efficiency or alternative energy components can be seen in recent years in proposed and passed bills from the Michigan legislature. In December 2013, the House introduced a Bill 5205 which proposed to include solid waste as a clean energy source. This bill would revise the original standard definition of a “renewable energy source” to include different facilities that use waste as their fuel source. House Bill 4232 of 2013 dealt with increased energy efficiency primarily in schools by increasing loans and funding to weatherize, update, and improve school buildings and buses. While there are many other bills that deal with energy efficiency and alternative sources, there is little movement on actually increasing the standard. Senate Bill 322 of 2013 proposed to increase Michigan’s standard to 22% by 2022 but only made it to committee for ongoing discussion.

While the current political climate may cause some to question the chances of another renewable energy bill passing, one must also take into account the ease of meeting the current 2015 standard and across the board support for the original PA 295 by both sides of the aisle and businesses. In the original bill, the Chamber of Commerce combined with the usual liberal policy actors both were in support of the bill. The Chamber of Commerce acted as a bridge-builder between the conservatives and liberals, pointing to the bill as an opportunity for businesses to cut their energy costs in the long run. Other conservative groups soon began to agree with the majority view and are now in support of the bill. While support for new legislation and regulation has waned recently due to changing economic and political factors, Michigan shouldn’t rule out the possibility of an updated policy in the near future.

Model legislation and analysis by groups such as the Union of Concerned Scientists, Michigan’s Public Service Commission, (MPSC) and Michigan Energy Office provide a look at multiple options that could be considered in future legislation. In a very detailed report by the joint effort of MPSC and the Energy Office, the feasibility of expanded renewable energy is analyzed, focusing on issues such as energy storage, site location, infrastructure improvement, cost of different resources, and many, many more. These groups do make note of Michigan’s low standard and political challenges to adopting new legislation. They state that from a technical perspective, Michigan could easily meet a RPS target of 30% by 2030 from in-state resources. However, this report points to public concern over cost, legal battles, grid reliability, and storage of excess renewable energy generated as obstacles in the path the energy independence.

The Union of Concerned Scientists offers some solutions to the problems presented above and tests several models to see the future projections of different standards. This group compares 3 models: 1) current law with no future increase, 2) 17% by 2020 and 3) 32.5% by 2030. Their analysis combines costs for renewable versus nonrenewable energy, average retail prices, capacity and technology limits. Essentially, these models assume that the renewable energy requirement for each year would increase at the current rate or slightly above the PA 295 levels. The Union points to job creation, a low increased electricity cost of .3% between 2014 and 2030, as well as the obvious environmental benefits to reinforce their models and push for further legislation. They also suggest increased energy efficiency, long-term purchase agreements to lock in costs, a variety of renewable energy to reduce risk, and maintaining or expanding state incentives for clean energy and efficiency. As the reader can see, this group addresses the issues of cost, reliability, and risk that the MPSC and Energy Office bring up. However, the issues of legal battles and storage/transportation of energy across the state remain unresolved. Still, these reports give Michigan several options as we move forward and outline which strategies and technologies may be most useful in the future.

In 2011, the MI Public Service Commission published a report on PA 295 stating that the act is proceeding as expected and that “future years will provide for more growth, an emerging marketplace and ever evolving opportunities.” This report and others have said that all Michigan electric providers, except Detroit Public Lighting, are well within reach of the 2015 goal. Also, energy companies have found that Michigan’s main source of renewable energy, wind power, is cheaper and can produce more power than originally anticipated. With multiple wind farms being constructed throughout the state since PA 295, energy suppliers were able to eliminate a surcharge on their consumer’s bills that was originally intended to cover the cost of increased renewable energy. Successes like these have stirred up bipartisan support with Governor Synder suggesting in December 2013 that he might support a doubling of the state’s standard by 2025, which would be similar to what many other states have already adopted. The ease of meeting the current standard as well as its success and popularity should increase the chances of passing an updated bill in the near future.

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