Thursday, March 12, 2015

Michigan Mulls Energy Options

By Nick Lawton, Staff Attorney

Michigan’s legislature, led by Republicans in both chambers, is considering several bills that would alter the state’s Renewable Portfolio Standard (RPS). A Republican bill in the state House of Representatives would expand the RPS’s definition of “renewable” to include municipal waste, scrap tires, and unsustainably harvested woody biomass. Another Republican proposal (not yet formally introduced) in the state Senate would eliminate the RPS altogether, moving the state toward a utility-led, cost-driven planning process. In contrast, Democrats in the House and Senate aim to double the RPS.

Currently, Michigan’s RPS requires the state’s utilities to produce or procure 10% renewable energy by 2015. According to the Michigan Public Service Commission, utilities are on track to comply. In other words, Michigan is poised to meet its renewable energy goals. However, those goals are among the lowest in the nation. Most states with an RPS have a target of at least 20% renewable energy. Thus, the Michigan Democrats’ goal of doubling the existing RPS would put the state in line with most other states that have similar policies.

In contrast, Republican Senator Mike Nofs’ proposal to eliminate the RPS would place Michigan among the minority of states that lack an RPS. In lieu of a renewable energy mandate, Sen. Nofs’ proposal would set emissions standards for various pollutants from the electricity sector and then require an unspecified percentage of generators to meet those standards. Renewables would gain extra credit toward this unspecified percentage and could remain eligible for other existing incentives. Additionally, Sen. Nofs’ proposal would rescind Michigan’s targets for energy efficiency.

A separate bill from Republican Representative Aric Nesbitt would allow municipal waste, scrap tires, and woody biomass to count as renewable energy under the RPS. The current RPS counts woody biomass as “renewable” if it is “derived from sustainably managed forests or procurement systems,” but Rep. Nesbitt’s proposal would eliminate that requirement. (Additionally, Rep. Nesbitt’s proposal would rescind Michigan’s deregulation of the electricity market, instead moving the state back to a fully regulated system in which utilities are guaranteed the authority to sell power to 100% of the consumers in their territories.)

In stark contrast to these Republican proposals, Democrats in the Michigan House and Senate have proposed doubling the RPS to require 20% renewable energy by 2022. The Democrats’ proposal would give the state the same 7-year period of time to reach the new target as the original RPS did. Additionally, the Democrats’ proposal would aim to keep costs in check by limiting utilities’ ability to impose special surcharges. Finally, the Democrats’ proposal would expand the state’s energy efficiency goals as well.

Expanding the RPS is a good idea for Michigan for several reasons. First, by complying with the existing RPS, Michigan’s utilities have already shown that they can obtain a 10% increase in renewable energy in a 7-year window, which is exactly what the RPS expansion would require. Second, as Democratic lawmakers Senator Hoon-Yung Hopgood and Representative Bill LaVoy note, the existing RPS has attracted nearly $ 2.9 billion in renewable energy investment to the state. Expanding the RPS could draw similar sums over the next seven years. Third, Michigan ranks fourth in the nation for clean energy job growth, according to a new report by Environmental Entrepreneurs. That group’s executive director notes that to continue growing jobs, governments need to support clean energy, not quash it. Expanding the state’s RPS would provide a mechanism for Michigan to continue its strong trend in developing clean energy jobs.

Finally, despite the fact that both Republican bills in Michigan would erode or eliminate the state’s RPS, renewable energy does enjoy support from conservatives. Indeed, the Michigan Conservative Energy Forum’s executive director Larry Ward opposed the Republican proposals, stating that the state “can and must be bolder” on energy efficiency. Although he stops short of advocating expansion of the RPS, Mr. Ward has said, “It would be really nice to continue making progress on the use of more efficiency and renewables and our economic impact studies show the advantage of that.”

Given the clear benefits of renewable energy and broad political support, Michigan should adopt the proposal to expand its RPS. The expansion would bring economic and environmental benefits and would help Michigan’s renewable energy industry become increasingly competitive.

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