Economic Development, Government, and Technology

Michigan’s energy future generating debate

March 6, 2015
| By Pete Daly |
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Politicians, Michigan’s two big public utilities and various interest groups are jockeying for position as Gov. Rick Snyder prepares to unveil his state energy policy proposals to the Legislature.

Snyder’s energy address could happen March 13, according to some energy industry insiders, or it might be March 20. Less in doubt is a report from MISO — Midcontinent Independent System Operator Inc. — made to the Michigan House Energy Policy Committee last week, which predicts the Lower Peninsula’s “reserve margin” of electricity supply in 2016 will be about 21.8 gigawatts instead of the 24.8 gigawatts MISO says is prudent.

Snyder has laid out a basic philosophy behind his impending proposals at Michigan.gov/Snyder.

“Michigan’s energy policy needs to be set by Michiganders if our system is going to be adaptable and energy will be affordable, reliable and environmentally protective. If we don’t set our own policies here in Michigan, decisions will be made for us in Washington, D.C., and we won’t like them. We need a state-driven plan to ensure we make enough power in the right places to keep the lights on.”

Snyder says Michigan’s strengths include natural gas and renewable sources of generation, primarily new wind farms. The utilities also have demonstrated they can reduce some wasteful use of electricity.

“We have a robust and growing natural gas infrastructure (pipelines, supply, storage, homes using natural gas as a heating source). We achieved an aggressive renewable portfolio standard on time and at a lower cost than we expected,” states Snyder’s briefing on energy policy.

The big utilities want the natural gas solution. Consumers Energy is in the process of buying an existing natural gas plant near Jackson and already has a major gas generating plant in Zeeland.

Due largely to tightening EPA regulations on power plant emissions, seven of Consumers’ oldest coal-fired generating units will be retired in 2016, including three units at the B.C. Cobb facility in Muskegon and four others at two sites on the east side of the state. DTE Energy also has two coal-fired plants slated to be shut down.

According to Consumers Energy, in 2005 coal generated 41 percent of its electricity. That dropped to 34 percent in 2014 and is projected to be 24 percent in 2017. Renewables were 3 percent in 2005, jumping to 9 percent last year and 10 percent by the end of 2015. Nuclear was 10 percent of the CE-generated power in 2005; now it is 8 percent.

“In our view, natural gas as a fuel to make electricity has a very bright future,” said Dan Bishop, director of media relations for Consumers Energy.

Last week, Democrats in the Michigan Legislature jumped into the debate and announced Michigan’s current requirement of 10 percent renewable sources of electricity should be doubled.

State Rep. Bill LaVoy, D-Monroe, Democratic vice chairman of the House Energy Policy Committee, and Sen. Hoon-Yung Hopgood, D-Taylor, Democratic vice chairman of the Senate Energy and Technology Committee, said increasing renewable energy generation in Michigan will lure investment and business to the state, creating thousands of jobs and keeping utility costs affordable.

Michigan’s 2008 energy legislation required the state’s public electric utilities to sell 10 percent renewable energy by 2015, which has been accomplished. Now the assumption is that Snyder will propose a new version of energy policy legislation.

Ken Sikkema, senior policy fellow at Public Sector Consultants in Lansing, said the 2008 law does not expire in 2015 — that was just the deadline for what had to happen. But he said what is driving potential changes to the law is “the capacity challenges facing Michigan. And Michigan’s not alone.”

“We’ve got a problem because of retiring coal plants,” said Sikkema. He added he is referring to reserve margins going below the amount required by MISO, which is an independent, nonprofit organization responsible for maintaining reliable transmission of power in 15 states and the Canadian province of Manitoba.

“The Legislature has to deal with this capacity shortfall,” said Sikkema.

In his Jan. 20 State of the State address, the governor said Michigan needs a long-term energy policy; he said Michigan “made tremendous progress in solving a huge crisis and threat to the Upper Peninsula.”

The crisis was a potential tripling of the cost of electricity for U.P. residents last fall, according to Sam Gomberg, an energy analyst at the Union of Concerned Scientists in its Chicago office. We Energies of Wisconsin wanted to close its coal-fired power plant in Marquette when its biggest customer, a major U.P. iron mine, turned to another supplier of electricity.

Federal energy regulators, acting on a recommendation from MISO, would not allow the power plant to close; MISO said it was needed to maintain reliability of the system. But We Energies claimed it needed money to keep the plant operating, so the Federal Energy Regulatory Commission planned to put a major surcharge on U.P. electricity bills.

That was when Lansing became involved and why Snyder says on his website that due to a lack of a state-developed solution, “the federal system put us on the road to endless dependence at unacceptable costs, and it took a tremendous amount of work to stop that.”

Both Consumers Energy and DTE, which commissioned Public Sector Consultants to provide it with data, began a campaign last fall urging construction of new power plants to prepare for the loss of coal-generated electricity that will be reflected by reserve shortfalls in 2016.

Both utilities also want the law repealed that allows up to 10 percent of electricity they deliver to customers to be supplied by competing power companies.

Gomberg will be the featured speaker March 19 at the Gerald R. Ford Presidential Museum; the topic is “A Discussion on Michigan’s Energy Future – Beyond Coal.” The event is free to the public.

Gomberg told the Business Journal: “It seems like everyone is willing to just take the foot off the brake and get that natural gas train rolling down the tracks.”

He said the Union of Concerned Scientists hopes what Snyder and the Legislature agree to on an energy policy is “a bit more of a measured approach to finding the right balance of natural gas and renewable energy, to deal with this first wave of coal (plant) retirements coming.”

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