Fast-Tracking Pilots the Right Way Can Ensure Michigan’s Clean Energy Transition

September 19, 2022 | 2:02 pm
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Guillermo Pereira
Former Contributor

The Michigan Public Service Commission (MPSC) is considering a proposal to expedite approvals for certain utility pilot projects to encourage innovation and enable utilities to get up to speed more quickly. The rationale behind the proposal is to help utilities decarbonize their operations more rapidly and support Michigan’s ambitious goal of achieving economy-wide carbon neutrality. The state plans to reduce heat trapping emissions 28 percent by 2025 and 52 percent by 2030 below 2005 levels, and to become carbon neutral by 2050.

Rethinking the role of innovative pilots is an exciting development, because most utilities have not yet fully supported, let alone adopted, the technologies needed to reduce emissions. For instance, pilots can help utilities learn how to effectively integrate distributed energy storage, including batteries installed in ratepayers’ homes, which will be key to reducing emissions. Pilot projects also can help spur widespread implementation of community solar, electric vehicle charging infrastructure, and smart meters and thermostats.

That said, any process that fast-tracks such pilot projects must ensure transparency, stakeholder engagement, and opportunities for collaboration, which will make or break how effective expediting pilot approvals will be.

If the MPSC adopts this proposal, it will establish a dedicated place in Michigan’s regulatory framework to identify, select, rapidly approve, and implement pilots.

A dedicated space for innovative pilots

Typically, utilities must submit their pilot proposals through existing processes, including rate cases or integrated resource planning proceedings, which are bigger litigated cases that take longer to complete, resulting in fewer opportunities for pilot proposals to be considered.

Under the process the MPSC is considering, utilities opting to propose pilots for expedited approval must first work with stakeholders to identify areas where pilots are needed and present them in a pilot workplan. After they complete the workplan, utilities must propose specific pilots for commission approval through pilot notices, which are more detailed proposals. These notices then undergo an expedited 45-day review process.

Pilot proposals must meet eligibility and budget criteria. For eligibility, utilities will have to provide estimates on their expected contributions, including global warming emission reductions, and their contribution to the state policy goals of carbon neutrality.

For budgets, the MPSC has suggested that large utilities’ pilot projects have a $3-million annual budget cap, while smaller utilities’ projects would have a budget ranging from $30,000 to $400,000. Recognizing that it may be harder for smaller utilities to benefit given their relatively small budget cap, the MPSC’s proposal includes the possibility that smaller utilities could collaborate on a project.

The MPSC proposal’s details may change as the commission deliberates over the final language. Last month, the commission received a fresh set of comments from stakeholders, including the Union of Concerned Scientists and our coalition partners. We would like the commission to provide even more opportunities for collaboration by allowing parties other than utilities, including scientists, community representatives and technology providers, to participate. Utilities, meanwhile, are calling for a higher budget cap. Indiana Michigan Power, for example, recommended a $5-million cap. Consumers Energy proposed $10 million.

Other state regulators are setting an example

In 2014, the Vermont Public Utility Commission approved a process for Green Mountain Power to launch pilots lasting as long as 18 months and costing as much as $5 million each without commission approval. In 2020, Hawaii’s Public Utility Commission implemented an expedited process for pilot approvals.

In March of this year, Connecticut’s Public Utility Regulatory Authority established what it calls Innovative Energy Solutions, a new process to support pilots. It encourages more collaborative approaches compared to other state programs, including proposals by utilities, third party companies, and collaborations between utilities and third-party companies. The Connecticut program’s budget cap is $5 million for any given project.

The MPSC’s proposed process is very similar to that of the Hawaii PUC requiring utilities to file a workplan and pilot notices, but the Hawaii commission’s cap for a pilot is $10 million per year.

Developments in Hawaii are relevant for Michigan given the similarities of the process in both states. Hawaiian Electric filed its workplan in November 2021, and Hawaii’s Public Utility Commission recently asked the utility to be more specify how it plans to prioritize, budget and develop proposals based on its initial workplan, as well as how it plans to engage stakeholders in the process. Utilities in Michigan can learn from these developments in Hawaii as they consider how to engage in the proposed process.

A step in the right direction

We need innovation that supports decarbonization, we need it fast, and pilots can play a critical role. But haste must not compromise transparency, collaboration, and stakeholder inclusion and protection. The Michigan commission must prioritize these issues as it considers its pilot proposal.

Transparency is crucial for the MPSC to ensure that this new process leads to pilots that are developed with input from and supported by stakeholders and selected using objective criteria.

It is also vital that the MPSC include stakeholders when identifying the areas where pilots are needed, and when reviewing specific pilot proposals. While this may require a longer time frame to finalize decision, it is absolutely worth it if it results in more opportunities for stakeholders to help identify and prioritize Michigan pilots.

In addition, the MPSC must have clear guidelines to approve and assess pilots. This has not always been the case in Michigan. A 2020 MPSC report found that many previously approved pilot proposals lacked clear goals and didn’t specify the need for the pilot in the first place. The good news is that the commission has increased transparency. In 2021, it ordered that future proposals have to include objective criteria. It should apply this transparency policy to its new proposed process, too.

As I mentioned earlier, the commission should open up the process so multiple utilities and non-utility third parties can collaborate. Such collaboration would enable pilots to leverage the strengths of different participants and could result in a greater impact and a broader application for a pilot’s findings.

Finally, the MPSC must consider—and mitigate—any stakeholders burdens that result from this new process. Utilities will likely be able to draft multiple pilot proposals for expedited reviews, and other stakeholders, including customers, community representatives, technology providers and public interest organizations, may not be able to match them. The commission must take such disparities into account.

There is real value for the MPSC to establish a dedicated space for innovation pilots. For it to work, however, the MPSC must create a framework ensuring transparency, stakeholder inputs, and oversight that fosters beneficial outcomes for customers and collaboration between utilities and other organizations.