Mich. Gov. Snyder, others see different pathways to cleaner energy future

Source: Jeffrey Tomich, E&E reporter • Posted: Wednesday, July 1, 2015

When Michigan Gov. Rick Snyder presented his vision for the state’s energy future three months ago, he relied on a series of large, color-coded pie charts that could have been confused for supersized Trivial Pursuit game pieces.

The charts showed a current energy portfolio dominated by dark gray wedges to reflect the 54 percent of the electric generation that comes from coal. Nearby were other charts providing a glimpse of the state’s fuel mix a decade out under different natural gas price scenarios. In each, the gray area had shriveled, the void filled by purple, green and blue pie pieces indicating cleaner energy sources (EnergyWire, March 16).

What is less clear is the pathway that Michigan will follow to achieve its clean energy future.

“We have a lot of decisions coming up, and the decisions we make are going to affect us for decades,” Valerie Brader, executive director of the newly created state energy agency, said in an interview.

Brader, 38, is executive director of the Michigan Agency for Energy, a state agency formally created in May. Before that, she was Snyder’s deputy legal counsel and senior policy adviser specializing in energy issues.

A Harvard graduate and Rhodes scholar, Brader’s recent duties have included helping negotiate a complex, multiparty settlement to the Upper Peninsula’s energy crisis — a job that required seven hours of negotiations on New Year’s Eve (EnergyWire, Jan. 14). She also represented the Snyder administration in the Detroit bankruptcy case — the largest municipal bankruptcy in U.S. history.

Brader will remain the governor’s point person on energy policy in the new role. And the formation of the new agency comes as Michigan reaches an inflection point on energy — a vital issue for the Rust Belt state in the midst of an economic revival.

Nine coal-fired plants in the Lower Peninsula are set to close by the end of 2016 — the reason why the region’s grid operator continues to project a generation capacity shortfall in the state. Michigan’s 2008 energy efficiency and renewable energy standards have run their course. There is sharp division over the state’s hybrid retail electricity market. Then there’s EPA’s Clean Power Plan, which could drive additional coal retirements.

Anyone who’s listened to Snyder, a moderate Republican, knows he’s wont to point out that Michigan — not the EPA — should decide the state’s energy future. He’s also clear about his guiding principles on energy: affordability, reliability, adaptability and environmental protection.

Those are guideposts that no one would disagree with. But there’s less agreement on how to achieve them.

Rather than expand the state’s renewable or energy efficiency mandates, Snyder wants to build on another less-obvious section of the 2008 energy bill, Public Act 295.

The proposal revolves around integrated resource planning — long-term plans prepared by utilities that outline how they will meet electricity demand. But the so-called IRPs, submitted to the Public Service Commission, would be used in combination with a “certificate of need” process that involves providing pre-approval of capital projects that are shown to be the most prudent and reasonable. The goal is more certainty for utilities when it comes to recovering costs and ideally lower financing costs and savings for consumers.

The 2008 legislation established just such a process, but only for projects in excess of $500 million.

Snyder wants to expand it to be used by utilities to buy or build renewable energy or do energy efficiency. The proposal also aims to ensure that efficiency is valued on the same basis as generation so there’s incentive for utilities to choose one resource over another.

The governor’s proposal has yet to be formally introduced in legislation, but Brader did review it in testimony before the House Energy Policy Committee.

When Snyder’s energy proposal is filed, it will join a crowded field.

The Energy Committee’s chairman, state Rep. Aric Nesbitt (R), proposed a package of eight bills to overhaul Michigan’s energy policy (EnergyWire, March 12). The proposal includes replacing the existing renewable and energy efficiency standards with an integrated resource planning process.

Michigan Democrats are seeking to double the clean energy standards, a proposal that would require utilities to get 20 percent of their generation from renewable resources by 2022 and boost the current energy savings requirement for electric utilities from 1 percent annually to 2 percent.

An energy bill proposal is also expected from state Sen. Mike Nofs, chairman of the Senate Energy and Technology Committee and one of the architects of the 2008 energy bill.

What’s changed?

Debate over the best approach to reshaping Michigan’s energy mix continues in the meantime.

Clean energy advocates see momentum for the IRP process, which they say is a good thing. But they’re skeptical that any IRP proposal can drive the same amount of wind, solar and efficiency activity as expansion of mandates.

“We fear that the IRP process undervalues energy efficiency and renewable energy,” said Sarah Mullkoff, energy program director for the Michigan Environmental Council.

Mullkoff said history should be a guide. Michigan had little in the way of renewable development, and utilities did virtually nothing to help customers reduce energy consumption before the establishment of clean energy standards, she said.

The 2008 renewable and efficiency requirements were undisputed successes.

Renewable standards have been similarly successful in other states. And the American Council for an Energy-Efficient Economy found that states with efficiency standards are far more successful at reducing energy use than states without statutory requirements.

Ironically, the same key data point is recited to support both policy approaches — the IRP process and the expansion of mandates.

One big Michigan utility, Consumers Energy, has already eliminated a surcharge used to help comply with the state’s 10 percent renewable standard. Detroit-based DTE Energy has sharply reduced its renewable surcharge and last month filed a proposal with the PSC to eliminate it.

“The governor has said the 2008 law, which included mandates for renewable energy and efficiency, is a good law,” Brader said. “And he would say that today.”

What’s changed, she said, is cost. Seven years ago, mandates made sense because renewables weren’t cost competitive with fossil generation. But that’s changed. Likewise, if reducing kilowatt-hours is as profitable for utilities as building new generation, there’s no need for artificial thresholds in the law, Brader said.

“Reducing energy waste is much less expensive than any kind of energy, renewable or conventional. We’ve done real testing, measurement, verification that shows it’s true,” she said. “So, again, if buying your neighbors insulation is cheaper than buying Wyoming’s coal, and it’s better for reliability, and it’s better for the environment, why exactly do you have to mandate it as opposed to saying, ‘Let’s do the smartest thing.'”

Sam Gomberg, an energy analyst based in the Midwest office of the Union of Concerned Scientists, said there are key concerns with the proposal to do away with clean energy standards.

First, the plan proposed by Snyder is a utility-driven process and means more energy policy decisions are arrived at through litigated cases before state regulators.

The calculus may also ignore other benefits of renewables or energy efficiency, such as the value of reduced air emissions and economic development, that would be unlocked by expanding existing clean energy requirements.

“Those type of things are almost never accounted for in integrated resource plans,” he said.

Division with a side of partisanship

No matter the distinct differences in policy proposals, the energy debate in Michigan has so far been a polite one.

Rep. Bill LaVoy, minority vice chairman of the 25-member House Energy Committee, is among sponsors of the Democratic proposal to expand Michigan’s renewable and energy efficiency standards.

LaVoy also acknowledged a preference among Republicans to achieve a transition in the state’s energy mix without mandates and said there are talks ongoing to find middle ground.

A compromise could involve a hybrid policy approach that would involve an IRP process and trigger mandates only if the state failed to meet carbon reduction goals that are part of Michigan’s Clean Power Plan compliance strategy.

“We’re trying to get a flexible policy that doesn’t need to be changed for the next 10 years, if that’s possible,” LaVoy said.

While there remains a clear divide among Republicans and Democrats over how Michigan achieves its energy transition, the debate has been free of the partisan rancor witnessed in other states.

And in contrast to some other Republican governors, Snyder has been an evangelist for reducing energy use. And Brader has driven home the message in her speeches across the state.

In fact, the underpinning of Snyder’s much-anticipated special message on energy in March — the address that involved all of the pie charts — was reducing the size of the pie (energy demand) by eliminating energy waste.

It’s a point not lost on clean energy supporters.

“His speech in March was spot on,” said Mullkoff of the Michigan Environmental Council. “He is one of our best allies on energy efficiency and renewables.”