CEO expects Michigan to expand renewable standard in 2015

Source: Jeffrey Tomich, E&E reporter • Posted: Monday, April 28, 2014

The chief executive of Michigan’s second-largest utility believes it’s likely that the state will raise its renewable energy requirement next year when the existing green power law expires.
“I would expect that to happen,” John Russell of Jackson, Mich.-based CMS Energy Corp. told analysts and investors yesterday morning on a conference call. “There’s a lot of interest in renewable energy, and we like to build renewable energy.”We’ve built one wind park, we’re building another,” he said. “It’s going very well, and the costs are coming down.”

Russell’s comments are in line with statements from Michigan Gov. Rick Snyder (R), who has also advocated reducing the state’s dependence on coal and increasing the use of renewable energy and energy efficiency (EnergyWire, Jan. 13).

For all of the momentum behind increasing reliance on renewables in Michigan, it was less than two years ago that clean energy advocates and utilities engaged in a bitter fight over Proposal 3, a ballot initiative that would have amended the state constitution to require the state to get 25 percent of its electricity from renewables by 2025.

CMS and the state’s biggest utility owner, DTE Energy Corp., were part of the CARE for Michigan Coalition that poured millions of dollars into helping defeat the measure at the polls.

Michigan’s current standard, adopted in 2008, requires electricity providers get 10 percent of their electric generation from renewable resources by 2015. It is among the weakest of 29 states with renewable energy requirements. By contrast, Illinois and Minnesota each requires utilities to get at least 25 percent of their electricity from renewable fuels by 2025.

A recent study by the Michigan Public Service Commission showed the current renewable energy standard is working as intended, creating clean energy at an affordable price and generating jobs.

The law is specifically credited with helping spur more than 1,100 megawatts of new wind development, representing $2.2 billion in capital investment.

Meanwhile, the weighted average price of existing renewable energy contracts is $78.39 per megawatt-hour, which is less than utilities initially forecast and is continuing to trend downward, the report said.

The declining cost of renewable energy enabled CMS subsidiary Consumers Energy to eliminate a renewable surcharge for its customers last year. DTE Electric has reduced the surcharge to 43 cents a month.

Russell cited declining costs of wind energy in Michigan compared with relatively high costs in 2008 when the renewable standard was enacted.

Today, about 8 percent of Consumers Energy generation comes from renewable resources, including the 100 MW Lake Winds Energy Park. The utility’s 105 MW Cross Winds Energy Park will begin operation later this year. Consumers also gets wind energy from two Exelon Corp.-owned wind farms.

“Today, [wind] is pretty competitive,” Russell said. “Natural gas is the only one that really beats it in our minds, so the wind regime here is good in Michigan, we can do some more and we like to build it.”

What happens next?

A report released last fall by the Michigan PSC chairman and the director of the Michigan Economic Development Corp.’s Energy Office concluded that increasing the penetration of renewables in the state to 30 percent by 2035 — the most aggressive scenario studied — was achievable within cost caps that exist under the 10 percent standard.

The Union of Concerned Scientists followed with its own report last month using an economic model developed by the Department of Energy showing that meeting a third of Michigan’s electricity demand with renewable energy in 2030 adds just 0.3 percent to electricity prices over the next 15 years. In some years, the report said, it could reduce costs.

Sam Gomberg, an energy analyst for the group and co-author of the report, said the discussion about renewable energy in Michigan has come a long way over the past year, helped by the studies and public meetings called for by Snyder.

Still, there’s been little discussion about precisely what happens beyond next year when the existing renewable standard expires.

“Once there’s a policy proposal on the table, we’ll see how this shakes out,” Gomberg said. “But it’s not nearly as contentious as the Prop 3 battle was.”

CMS, the parent of Consumers Energy, which has 1.7 million customers in the state, hasn’t taken a position on what’s an appropriate mix of renewables in Michigan in future years.

Detroit-based DTE likewise hasn’t taken a policy position on the renewable standard post-2015, spokesman Scott Simons said.

“We are looking at continued renewable development in the state,” he said. “As for what form that will take, that has yet to be determined.”

Meanwhile, policy discussions continue with an eye toward 2015.

Larry Ward of the Michigan Conservative Energy Forum, a conservative group that supports the increased use of clean energy sources as part of an “all-of-the-above” energy policy, said the governor’s efforts to study the increased use of renewable energy has helped redirect the discussion in the state after a divisive ballot initiative in 2012.

“I think the governor and his team are going about it exactly the right way,” Ward said.