Environment Picture

President's Column: A reasonable proposal for continuing Michigan’s renewable energy momentum

MPSC: Renewable energy cheaper than the alternatives
Chris Kolb
Gov. Rick Snyder has launched a series of public discussions regarding energy policy in Michigan. The first of those seven meetings took place Feb. 14 in Lansing. A day later, the Michigan Public Service Commission (MPSC) released its annual report on renewable energy. The report found that Michigan is well on its way to meeting the renewable energy standard of 10% by 2015, and the price of renewable energy continues to fall.

“More renewable energy came online in Michigan in 2012 than ever before. Michigan added 815 megawatts of new wind capacity in 2012, and now has a total of 978 megawatts from 14 operating wind farms,” John Quackenbush, chair of the MPSC, said in the agency’s press release.

The report notes that since the passage of the state’s renewable energy standard in 2008, “conservatively” over $1.79 billion has been invested in Michigan through 2012, and the standard can be credited with the development of over 1,000 MW of new renewable energy projects.

 The report highlighted that the actual cost of renewable energy continues to fall, 10 percent less than a year ago and down 50 percent from the first contracts. The newest contracts approved by the MPSC for new wind capacity have a levelized cost of $52 per MWh, which is half of the cost of the first renewable energy contracts approved in 2009 and 2010. (Levelized cost reflects the construction, fuel and all other costs including capital over the lifetime of an energy resource.)

 The renewable energy legislation that created the 10% standard, PA 295 of 2008, also included an energy efficiency standard. When these two standards are combined, the weighted average cost of electricity is $45.98 per megawatt hour (MWh). That is less expensive than the cost of any new fossil fuel generation plant regardless of technology type—including combined cycle natural gas—and almost a third of the cost of electricity from a new coal plant. Importantly, it is also cheaper than the cost of existing non-renewable resources, which average around $70/MWh for our largest utilities.

 The report further states that “Commission staff believes that the cost of renewable energy will continue to decline, and the benefits from energy optimization savings and emission reductions from offset generation will continue to increase.”

 In addition, the Commission’s 2012 Report on the Implementation of the P.A. 295 Utility Energy Optimization Programs found that for every dollar spent on energy optimization, ratepayers see a return of $3.55 in avoided energy costs. It also found that the companies were more than meeting energy optimization standard requirements.

 The governor has stated that 2015 is not an end point when it comes to energy policy in Michigan. That raises the question, if the standards laid out in PA 295 of 2008 for renewable energy (10%) and energy efficiency (1% annually), are not end points for our state’s energy policies, then what should Michigan do next?

 Beyond 2015? A proposal
Here is my proposal for new renewable energy and energy efficiency goals after 2015.

 When it comes to renewable energy standards, we should maintain the same pace we are on for the near term. That would mean adding about 1.5% worth of new renewable electricity generation annually. Our progress then should be reviewed periodically to confirm it is still the best deal for Michigan ratepayers. That won’t produce a snappy goal or slogan, but it will provide Michigan with a clear, achievable goal that will continue to drive Michigan investment and jobs in the renewable energy field and save residents and businesses money. It gives the energy industry a clear direction that this is where their investments should be going.

 Our commitment needs to be long enough for businesses to make investment decisions without being locked into any one technology. It also provides the utilities with the flexibility they said they needed to continue to integrate renewable energy into their future plans.

 On the energy efficiency side, I would set a goal of increasing the energy optimization standard annually by 0.2%. The electric and gas companies have been meeting and beating the current standard. Increasing the amount by two-tenths of a percent each year is both an achievable goal and a great deal for ratepayers. Investing in energy optimization provides the greatest return on investment and reduces costs and harmful emissions. What’s not to like?

 I would also suggest that, along with the continued oversight by the MPSC, in the third year of these new standards (2018) that the governor convene a stakeholder roundtable to review the available data and reassess the program. Based upon the data, we can make adjustments, if need be, to the standards.

 This is not an us-against-them issue. It’s an area in which we can all work together to better Michigan’s future.

-Chris Kolb, President & CEO
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