Michigan regulators: renewables cost less than coal

Commission ties renewables to jobs, growth

Phil Carson | Feb 22, 2012

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The following statement, by a conservative public service commission in Michigan, is a sitting duck for controversy.

"A Michigan Public Service Commission (MPSC) report show's Michigan's renewable energy standard is directly sparking Michigan's economy, generating $100 million in investments, spurring manufacturing and business growth, and creating jobs, the Energy Innovation Business Council said today. The report also shows that renewable energy now costs less than coal."

Personally, I will be fascinated to see how this statement and the report that purportedly supports it play out in the media and the presidential campaign. Many of us consider the 2012 election an opportunity for the American people to choose a candidate that reflects their view on clean energy, among many other issues. But any time someone compares renewable energy sources to coal—let alone states that the former is less costly than the latter—they're looking for attention.

Of course, this bombshell landed yesterday, just before last night's Republican primary debate and days before Michigan's voters go to the polls next Tuesday to cast ballots in their state's Republican primary. That's a "closed" primary in which any voter who declares their interest in voting in the Republican primary may do so. In practical terms, Michigan voters of many stripes are likely to determine a very important dynamic: whether Rick Santorum or Mitt Romney gets a much-needed boost prior to the Super Tuesday contest on March 6, in which 10 states hold their primaries.

Let's connect current events to the future of clean energy efforts, leaving aside for the moment the argument over whether renewables have reached parity with fossil fuel costs. (Perhaps I'll undertake to examine the MPSC's logic around that issue in tomorrow's column.)

Michigan, of course, is pivotal in the 2012 Republican primaries because Mitt Romney grew up there; his father served as governor of the state during tumultuous times, 1963-1969. Forty-three years later, George's son is looking for some home state love as Santorum pulls ahead in many polls. Santorum has made much of his grandfather's coal mining experience.

Will a moderator at the debate or a reporter covering the primary next Tuesday pose a related, clean energy question to the candidates? It would be good to know where the two leading Republican candidates stand on the general issue of clean energy and economic development and the particular question of the Michigan commission's surprising finding.

Why would folks in the smart grid space care? Well, if President Obama wins in the fall, but faces a House controlled by his opposition, federal energy policy will remain gridlocked. Should one of the Republican candidates win the White House and have an allied Congress, which direction will they go on federal energy policy? We know Santorum and Romney are hostile to regulation in general and environmental regulation in particular. But what  are their positions on the dozens of key issues buffeting the power industry? The Michigan report would be an excellent vehicle for finding out. 

How Michigan regulators reached their conclusions linking clean energy to economic development should be examined, because Michigan has been hit so hard in the downturn that it has developed a very practical approach to growth. The state is not likely to be chasing chimeras.

I think back to two examples of Michigan's outlook that I've covered.

First, I closely covered Consumers Energy's efforts to test and deploy advanced metering infrastructure and foundational IT systems in a cooperative fashion with the commission's oversight and the state's other utilities. (See "Consumers Energy's Measured Steps.")

That story made clear that the MPSC was exercising its full power to ensure that any such grid modernization programs were beneficial and cost-effective for the state's ratepayers, who've been battered more than most Americans during the recent recession.

The other insight was a talk given in November 2010 at an Itron users' conference by Steven Kurmas, president and CEO of Detroit Edison, an investor-owned utility serving southeast Michigan. Kurmas described some of the impacts on Detroit and his utility as a result of "the most difficult economy in our lifetimes." Whereas the average ratepayer nationally pays out 3.7 percent of their out-of-pocket expenses on home energy use, Detroiters spend as much as 10 percent, largely due to poorly insulated homes, Kurmas said.

The upshot is that scorching economic times have given Michigan a very conservative, show-me-the-money-and-the-hard-numbers kind of perspective. If steely-eyed realism has resulted in a positive take on the economic development aspect of clean energy, either there's really something to base that on or those folks have, under pressure, lost their minds.

I'm guessing it's the former. In fact, the bombshell press release and report cited here was a cooperative effort between the MPSC and the Energy Innovation Business Council. According to the EIBC, it "aims to diversify and accelerate the growth of Michigan's energy sector and create partnerships to expand business opportunities, secure access to capital, engage the public and policymakers, advocate and build consensus for policy, and advance energy innovation with the goal of generating jobs and economic development."

According to regulators and businesses in one of the nation's hardest hit states, that approach is working. Let's see what everyone else now has to say.

Phil Carson
Editor-in-chief
Intelligent Utility Daily
pcarson@energycentral.com
303-228-4757

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Comments

MPSC Report

I'm a bit skeptical of both the ten and 13 cent per kWh estimates for a new, coal-fired plant.  I'll confess I read the report pretty quickly but I didn't see any workpapers that show how the various per kWh costs were derived.

I'd also like to correct a misconception contained in one of the above comments.  The last thing most grids need right now is more baseload generation.  What they do need is flexible generation.  Storage is flexible but expensive.  Gas-fired generation is also flexible and less costly.  Coal plants are actually a bit less flexible than wind and solar PV because they can't be turned off quickly, whereas solar and wind can.  One of the biggest mistakes people make in this debate is assuming renewables are bad because they can't provide base load supply.  That's just not true.   

Jack Ellis, Tahoe City, CA

It's all in the details

Much of the reason coal costs more is because of air quality restrictions. Are those needed? I suppose most people today would say yes. It's also interesting to note that the estimates for coal were made before the latest EPA restrictions.

However, the landfill and hydro sources are inherently limited. No way can they supply the majority of needs. The estimates for wind as usual do not provide a provision for energy storage and as such are not suitable for baseload power. How do you price the advantage of coal over wind in this use?

Besides, these days coal is not cost effective with natural gas. I would like to see the same study done comparing natural gas with renewables, as well as including the cost of storage for wind so it can be used as baseload power.

More of the Same

"We know Santorum and Romney are hostile to regulation in general and environmental regulation in particular."

I don't believe they are "hostile to regulation"...I believe they are hostile to regulation that will bear harmful near term economic effects.

One of the problems that continues to bedevil this entire debate is that Big Renewable is joined at the hip with Big Green toward an agenda that is utterly eccentric in favor "saving the planet": all things green at any price.

The adults in the room continue to be shouted down by the eco-anarchists, ergo gridlock on energy policy. Better gridlock than a disasterous "do the right thing" policy based on "consensus science".

You can do better

I'll politely ask that you read the Michigan report and have something substantive to say about this issue, based on the report's argument. Your language reveals that you have not done so and therefore your viewpoint is discounted. 

I invite intelligent commentary on this interesting report and, tomorrow, I'll provide a good bit of detail direct from the MPSC report to explain that body's logic. 

We need more rationality in this RE vs. coal discussion, not vitriol. I'll thank readers in advance for keeping the discussion constructive. 

Regards, Phil Carson

Here's how their findings are rebutted

One question will put the lie to their conclusion:  Why do renewables need PTCs and cash grants if they cost less than coal?