Where are we now?

Thanks largely to Michigan’s clean energy standards—created by a bipartisan team of legislators in 2008—our state has seen incredible growth and investment in renewable energy and energy efficiency. But we are in danger of losing that progress because of legislative proposals that are currently on the table in Lansing.

Michigan is a success story for clean energy job growth, a success story we would like to keep telling. As the Legislature considers changes to the 2008 energy laws, we need to make sure we’re building on this success, not turning back the clock on progress.” – Liesl-Eichler Clark, President Michigan Energy Innovation Business Council

The goal of a strong Michigan-centered energy policy should be to maximize benefits for Michigan families and businesses. And in order to ensure sustained growth in Michigan’s renewable energy and energy efficiency industry, Michigan legislators should provide businesses the certainty they need to make investments here in Michigan rather than somewhere else.

Why Do we need Standards?

Our clean energy standards are lowering electricity costs for consumers while allowing us to transition away from expensive and dirty coal-fired energy:

The renewable energy we’re adding is actually helping to lower energy prices because it’s so competitive. We just need the best decision-making process so that, depending on what the prices are and what we need, we can take advantage of our lowest cost resources, which in many cases will be renewable energy.” – Valerie Brader, Executive Director for Michigan Agency for Energy, (Traverse City Record Eagle, November 2015)

But although renewable energy is cost-competitive with natural gas (and much less expensive than coal), these different energy sources do not operate on a level playing field. The scales are structurally tipped to favor expensive, conventional power plants. That’s why a diversified energy mix won’t happen without the support of a standard or enforceable goal. And that’s why we need to keep doing the legwork to make sure renewable energy gets a fair shot.

What would set Michigan up for a successful, achievable Clean energy Future?

• Michigan should move beyond our current 10% renewable energy standard to achieve a new 25% renewable energy standard
• Michigan should increase our energy efficiency standard from 1% annual improvements to at least 1.5%
• Michigan should improve our current net metering standard to include fair grid cost recovery without unfairly burdening individual solar producers.

Unfortunately, the Michigan legislature is set to double-down on dirty energy and the higher costs that come with it. There are currently two competing proposals in the Michigan House and Senate, both of which (as currently written) would put our state on the wrong path. 

Michigan LCV and our members have been fighting hard to stop or improve both plans before they land on the Governor’s desk.

It’s up to us to fix these bad bills before they become bad laws.

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THE SENATE ENERGY PLAN:

Spearheaded by State Senators Mike Nofs (R-Battle Creek) and John Proos (R-St. Joseph)

Status: Passed out of State Senate, under consideration in Michigan House of Representatives

Legislators in Lansing have been debating proposed changes to the 2008 clean energy law for the last several years. With multiple Michigan coal plants retiring, we need to plan long term how to meet  future demand. However, clean energy options such as energy efficiency and renewable energy can address much of the need, not simply looking to build out natural gas. After much negotiations and debate, the Michigan Senate just passed its energy package (Senate Bill 437 and Senate Bill 438) and sent the bills to the Michigan House for consideration.

As it stands now, the Senate energy package includes a promising 15 percent by 2021 renewable portfolio standard that will ensure we see steady and continued increases in Michigan-based renewable energy. However, the bills still contain language that seriously undercut successful energy efficiency programs, gut our net metering program, and establish a very weak integrated resource planning process.

changes still needed:

Net Metering

Net metering is a system in which solar panels or other on-site renewable energy is connected to the grid and surplus power is transferred onto the grid, allowing customers to offset some or all of the costs of their utility bill. Michigan’s current net metering system allows customers to use all the power they generate on-site and then sell back excess power to the utility at the retail rate. Retail rate net metering allows for a reasonable payback timeline for customer’s upfront investment in on-site renewable generation systems. Additionally, under our current system solar net metering in Michigan has expanded — growing by a quarter from 2013 to 2014, to 1,840 customers. Michigan has barely scratched the surface of our small, on-site solar potential. While this growth is promising, Michigan’s current net metering system makes up a very small fraction of overall generation in Michigan and is capped at 0.5% of sales.  

The Senate energy package includes language that would greatly undermine net metering in Michigan. Specifically, the bill would allow the MPSC to establish an unspecified “grid usage charge” on net metering customers. The charge would greatly reduce a customer’s return on investment and thereby put a chilling effect on any new net metering projects in Michigan. It would also drive existing solar companies out of business. Any net metering pricing system should fully compensate customers for the additional benefits rooftop solar provides the grid and utilities, including less demand for new generation capacity, decreased environmental compliance costs, and increased grid resiliency.

Michigan LCV recommends that the Legislature:

• Preserve Michigan’s current retail net metering rate structure and reimbursement system.

Energy Efficiency

SB 438 essentially repeals our 1 percent annual energy efficiency standard by sunsetting it and replacing it with an energy efficiency planning requirement. Under that new requirement utilities have to submit an energy efficiency plan to the MPSC specifying the level of energy efficiency the utility will seek to hit. Based on that plan, the MPSC may authorize an increase or decrease in percentage efficiency level from the previous plan. The bill also increases incentives for utilities- providing overly generous financial incentives for levels of efficiency that utilities are already achieving.

Energy waste reduction continues to be the least cost method of meeting energy demand. Michigan customers save over $4 for every $1 invested by utilities in energy efficiency programs. To date, Michigan utilities have been exceeding the current 1% standard, reducing demand by an average of about 1.3% per year, and other states like Illinois are pushing legislation for over 2% annually through 2025.

Michigan LCV recommends that the Legislature:

• Continue the 1 percent energy efficiency standard through the end of 2021.
• Clarify the standard requires an energy provider to reduce energy demand by at least 1 percent for electricity and 0.75 percent for natural gas through the life of the programs.
• Ensure that increased incentives are offered only for demand reductions of more than 1.5% per year.  

Renewable Surcharge

Michigan utilities were authorized to collect renewable energy surcharges to offset the higher costs of renewable energy in the early years. Over time, the cost of renewable energy dropped. Now renewable energy costs significantly less than all other types of new generation. Although surcharges were reduced in later years, a couple of the larger utilities collected in excess of $100 million more than needed to pay for renewable energy. The law requires that the excess collected should be refunded at the end of a 20 year period, however many of the customers who overpaid will not be around to receive the amount they contributed.

Michigan LCV recommends that the Legislature:

• Require energy providers to immediately refund excess renewable energy surcharges.

Integrated Resource Planning Process

The Senate energy package establishes a revised integrated resource planning (IRP) process. The mission of an IRP is to model, investigate, and identify least-cost, least-risk resource mix options to meet future energy needs.  We support the establishment of a robust utility planning process. However, the proposed IRP, which was once championed by Governor Snyder’s administration as a robust long term planning process, has now been gutted so that it is even weaker than the existing certificate of necessity (CON).

Michigan LCV recommends that the Legislature:

• Establish a true IRP that analyzes alternative options including renewable energy and non-generation resources such as energy waste reduction and demand response.
• Require incorporation of all available cost-effective energy waste reduction.

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THE HOUSE ENERGY PLAN:

Spearheaded by State Representative Aric Nesbitt (R-Lawton)

Current status: Passed out of committee, yet to be brought up in full House of Representatives

House Bill 4297 would eliminate Michigan’s energy optimization standard and caps Michigan’s renewable energy standard at 10 percent. HB 4297 allows energy generated out of state to qualify for credit under Michigan’s renewable energy standard and classifies the incineration of municipal solid and hazardous waste as renewable energy.

House Bill 4298 would not allow utilities to implement a rate increase prior to the issuance of an order from the Michigan Public Service Commission, even if the application for a rate increase is considered complete after 30 days. The bill requires the commission to implement a refund process for electric and gas rate overcharges for the customers of utility companies; this provision does not include energy utility companies currently organized as a cooperative corporation. The commission would also require electric utilities to submit an integrated resource plan every 5 years that examines the capacity and reliability capabilities to generate electricity for all consumers. This bill would eliminate the Customer Choice and Electricity Reliability Act. The elimination of the act includes prohibiting alternative electric suppliers from entering into agreements with customers, and requires customers of alternative suppliers to return to their initial electricity provider once the contract with the alternative supplier ends.

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Energy Quick Facts:

-According to the Michigan Public Service Commission (MPSC) Michigan’s renewable energy standard has brought in close to $3 billion dollars of investment to Michigan.

-According to the MPSC, Michigan’s Clean Energy sector has resulted in more than 87,000 jobs.

-According to the MPSC, Michigan ratepayers save $4.38 for every dollar invested in energy efficiency.

-As of March, 2016, Michigan’s electricity costs are the highest in the Midwest, according to the U.S. Energy Information Administration (March 2016).

-Utilities have shifted costs from industrial to residential customers – placing an excessive burden on Michigan’s ratepayers.

-According to a Lazard Study, renewable energy is now the cheapest form of new generation and is even cheaper than coal and natural gas.

-According to a Michigan Environmental Council report, Michigan’s nine oldest coal plants had a impact of $1.5-billion on public health costs.