As the last day of Michigan’s 2016 legislative session came to an end, legislators finally came to agreement on energy legislation (Senate bills 437 and 438) that settles some long-standing disputes, improves Michigan’s ability to plan for ongoing changes in its energy mix, and makes some (but not necessarily enough) progress toward Michigan’s clean energy future. As the legislation heads to Governor Snyder’s desk for signature, let’s take a quick look at some of the key clean energy provisions and how they will help shape a cleaner, more sustainable and affordable energy future for Michigan.
A strengthened RPS provides economic growth and an important floor for Michigan renewables
Is 15 percent renewable energy the best Michigan can do? Not even close. As UCS and several other independent analyses have shown, Michigan can easily achieve 25 percent or more renewable energy over the next decade at little to no additional cost to consumers. But strengthening the states renewable portfolio standard (RPS) from its current 10 percent by 2015 to 15 percent by 2021 is important for two reasons:
First, the strengthened RPS requires renewable energy resources to be built within the service territories of utilities that serve Michigan. This mean jobs, economic development, and clean energy will all be made in Michigan, too.
Second, it ensures a baseline level of diversity in the Michigan energy mix that is at risk of shifting from an overreliance on coal to an overreliance on natural gas. Independent analysis shows that merely swapping Michigan’s dirty, outdated coal fleet with natural gas plants carries many economic, reliability and environmental risks. Ensuring a minimum level of renewable energy will help protect Michigan against these risks and demonstrate the cost-effectiveness and low risk nature of clean energy.
Common ground on energy efficiency means ratepayers and utilities will benefit
These bills also make important changes to how Michigan will use energy efficiency to meet its electricity demand. It is well-documented (and widely accepted) that efficiency is the cheapest, cleanest, and most readily available energy resource we have. This new legislation takes advantage of that by making efficiency investments an attractive, economical alternative for utilities that might otherwise look to build costly new power plants.
While the legislation switches from the state’s current (and wildly successful) energy efficiency standard to a regulatory-focused process in 2021, it will preserve current levels of energy efficiency investments by requiring utilities to regularly submit efficiency plans that must maintain energy efficiency investments as long as they are the “reasonable and prudent” for ratepayers.
The legislation also removes the arbitrary spending limits that have previously limited cost-effective efficiency investments, and adds incentives for utilities to go above and beyond the current 1 percent baseline. This is done through two different pathways: one, allowing utilities to recover lost revenue due to reduced electricity sales caused by efficiency programs, and another that allows the utility to share in the proven cost savings from energy efficiency programs. The combination of these two incentives could drive utilities to achieve annual savings of 1.5 percent or more through efficiency programs, and will make efficiency investments an attractive alternative to building costly new power plants with ratepayers’ money.
Punting the net metering/grid charge debate to the Michigan Public Service Commission (where it should be).
One of the most contentious issues over the past year has been over fair compensation for customers that generate their own electricity (with solar panels, for example). The final bill includes compromise language that directs the Michigan Public Service Commission to explore these issues over the next year and determine what is fair for both self-generators and utilities. While maintaining current law would have guaranteed a robust market for rooftop solar in the coming years, the bill language was improved significantly during the legislative process; utilities’ original proposal would have effectively shut down the growing rooftop solar industry.
The process for determining a fair value for solar energy now goes to the Michigan Public Service Commission in 2017. The Union of Concerned Scientists and other supporters of the solar industry will be active participants to ensure rooftop solar customers are compensated fairly and the industry can continue to grow.
A few (mostly positive) loose ends
The legislation sent to Governor Snyder, along with the clean energy provisions above, contain a few other provisions that will further support Michigan’s transition to a cleaner, more sustainable and affordable electricity sector. The most significant of these is the creation of an integrated resource planning (IRP) process that will require utilities to submit plans to the Michigan Public Service Commission for approval every five years. Built into this process is a goal of achieving at least 35 percent of Michigan’s future energy demand with a combination of renewable energy and energy efficiency. While this goal is not mandatory, it will provide an important consideration for the Commission in deciding whether to approve or reject utility plans.
In all, the legislation passed last week marks an important step forward for Michigan’s clean energy future. Michigan can go further, and if we’re going to truly address the growing threat of climate change, we must go further. But it’s an important step forward – one that we will continue to build on in the coming years.
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