Michigan’s Consumers Energy bets big on solar as it dumps coal

Source: Jeffrey Tomich, E&E News reporter • Posted: Friday, June 15, 2018

Michigan’s second-largest utility is making a big bet on solar as the linchpin of a plan to eliminate coal from its fuel mix and slash carbon emissions by 80 percent over the next two decades.

Jackson, Mich.-based Consumers Energy, which sells electricity to 1.8 million customers, announced plans to add 5,000 megawatts of solar generation plus other clean energy resources. No new fossil fuel generation is included in the utility’s long-range integrated resource plan to be filed with the Michigan Public Service Commission this week.

The Consumers Energy plan drew particular interest among clean energy groups in Michigan and across the Midwest in light of an agreement last month between the state’s largest utilities and the organizers of a campaign backed by Tom Steyer’s NextGen America. The NextGen campaign had been pushing a ballot initiative to increase Michigan’s renewable standard to 30 percent by 2030 (Energywire, May 21).

That agreement called for Consumers and DTE Energy, the state’s largest utility, to get 50 percent of their energy from clean energy resources by 2030, including at least 25 percent from renewables.

Consumers Energy’s plan goes well beyond what’s called for under the agreement and even exceeds the 30 percent that would have been required if the ballot initiative had been approved.

“We think we have the opportunity of a generation with this clean energy plan to reshape how energy is delivered to the people of Michigan,” CEO Patti Poppe said in a call with reporters. “This plan embodies our clean and lean generation strategy with small cleaner resources and avoids big bets on large new fossil fuel generation plants.”

In addition to the solar capacity, the Consumers Energy plan calls for an additional 550 MW of new wind capacity to help meet the state’s 15 percent renewable standard by 2021, as well as increased investments in energy efficiency, storage and other demand-side resources, such as demand response programs, where energy users are compensated to reduce electricity use at peak times.

Overall, the plan, which would need approval by the Michigan PSC, would increase renewable energy from 11 percent of the utility’s fuel mix to 37 percent by 2030 and 43 percent by 2040.

The clean energy push is part of Consumers Energy’s broader goal announced earlier this year to reduce carbon emissions 80 percent and eliminate the use of coal by 2040 (Energywire, Feb. 20).

Solar modeling beats gas

This week’s plan calls for retiring its two-unit Karn generating plant near Bay City, Mich., in 2023. The utility also plans to retire two units at the Campbell coal-fired power plant in 2031 and the third in 2040.

The coal retirements continue a trend for Consumers Energy, which retired a group of seven coal-fired units known as the “Classic Seven” in 2016, and for Michigan utilities in general. The state’s largest utility, DTE Energy, likewise is retiring many of its older units on a similar path to eliminating coal from its power plant fleet by 2040.

Unlike DTE, which just won approval for a new $1 billion, 1,100-MW natural gas plant near Detroit, Consumers Energy’s long-term plan includes no new natural gas generation (Energywire, April 30).

While natural gas will remain an important part of its generating fleet in coming decades, Poppe said renewable energy, and specifically solar, is the best resource to help the company meet its carbon reduction goals while keeping rates low and minimizing investment risks that go along with a large central-station fossil plant.

“When Michigan needs the most power is on our hot summer days, and that’s a handful of days, a handful of hours,” she said. “Rather than building a baseload plant that is severely underutilized, we can build the right size of solar.”

Brandon Hofmeister, Consumers Energy’s senior vice president, told E&E News that solar also beat peaking and combined-cycle natural gas plants in most of the hundreds of modeling runs the company did as it chose the portfolio being presented to the PSC.

“In most instances, the modeling found renewables with cost declines and energy efficiency and demand response as more economical than natural gas plants,” Hofmeister said. There are some sensitivities where if you assume very low natural gas prices where natural gas facilities would be selected as the most economical.

“But when we holistically look at it, the vast majority of the model runs suggest that really doubling down on energy efficiency and renewable energy was the most economical,” he said.

‘Technology enables that’

The modeling parameters aimed to meet Consumers Energy’s carbon reduction goal.

Poppe said the utility has already cut carbon emissions by 38 percent from 2005, exceeding the 30 percent reduction that would have been required nationally under EPA’s Clean Power Plan.

The long-range plan filed this week is the first submitted under a new energy law passed by the Michigan Legislature and signed by Gov. Rick Snyder (R) in 2016.

Yesterday’s announcement drew praise from environmental groups and clean energy advocates.

“Advanced energy contributes to job growth, lower electric bills for Michigan ratepayers and infrastructure investment in communities hosting renewable energy sites,” said Liesl Clark, president of the Michigan Energy Innovation Business Council.

Ed Rivet, executive director of the Michigan Conservative Energy Forum, called the plan “a major step forward for Michigan ratepayers. The plan will result in significant investments in clean energy and energy efficiency, moving our state closer to a diversified ‘all of the above’ energy strategy, and in turn helping to reduce electricity costs.”

The solar capacity being added by Consumers Energy will be added throughout the 2020s and be a mix of company-owned projects and energy purchases. The company projects a 35 percent reduction in solar costs by 2040 — a decline the company acknowledges is “conservative.”

Those power purchases may come from solar projects developed by independent power producers under the federal Public Utility Regulatory Policies Act as long as they’re competitively priced.

“Michigan is going to be open for business,” Poppe said. “There are going to be market opportunities, but those market opportunities need to be competitively priced. As long as they have the best price, they will have a place to play in our future.”

Poppe said the solar capacity will complement two existing natural gas plants, representing 10 percent to 15 percent of the utility’s generating mix, that will operate beyond 2040. The company also operates the Ludington pumped storage plant — one of the world’s largest — and will increasingly lean on demand response.

“We can have a leaner system than we could before,” she said. “Technology enables that.”