As Michiganders prepare to head to the polls in less than two weeks to cast their vote on Proposal 3, which would increase the state’s renewable electricity standard from 10 percent by 2015 to 25 percent by 2025, the cost of meeting the higher standard is one of the most important issues on their minds. The experience of other states that have adopted similar standards should help dismiss the extreme scenarios that fossil fuel interests are presenting to the public.
This is part of a series on Proposal 3: The Michigan Renewable Energy Ballot Initiative.
In other blogs and studies, we have shown that increasing Michigan’s renewable standard is affordable:
- Data from the Michigan Public Service Commission (PSC) shows the state’s utilities are on track to meet the 10 percent standard at lower costs than anticipated, and that wind and other renewable energy projects are cheaper than new coal plants.
- The cost of wind and solar continues to fall while the price of coal has more than doubled and the price of natural gas has been extremely volatile over the past decade.
- Because of this Consumers Energy lowered their renewable energy surcharge from $2.50 to 65 cents per month last year, saving the average household $22 per year and all consumers $54 million annually. In August, Consumers lowered this surcharge again to 52 cents per month.
- Michigan utilities spent $10.4 billion between 2002 and 2010 to import coal from other states.
- A recent study shows the costs of meeting the 25 percent standard are likely to be below the 1 percent rate cap, and could actually reduce electricity bills over the long-term.
Map showing average Michigan wind speeds at an altitude of 80 meters. (Click on map for larger version.) Source: AWS Truewind.
Another strong piece of evidence to show that increasing Michigan’s renewable standard is affordable is to look at the actual experience of other Midwest states that are implementing renewable standards. For example:
Minnesota’s renewable standard of 30 percent by 2020 for Xcel Energy (the state’s largest utility) and 25 percent by 2025 for all other utilities has had little or no impact on rates for eight of 14 utilities who submitted reports to the state’s Public Utilities Commission (PUC) (search for docket #11-852) in late 2011. A few of these utilities even reported savings to consumers. For example, Xcel Energy reported that renewable energy investments actually lowered prices in 2008-2009 by 0.7 percent. Xcel also reported that customers will pay only 1.4 percent more to meet its standard over the next 15 years. While the other six utilities reported wholesale rates increases ranging mostly from 1 percent to 6.6 percent in 2010 (with one outlier utility reporting a 16 percent increase), costs would likely be lower in other years, as wholesale prices in 2010 were suppressed because of the economic recession and historically low natural gas prices.
Illinois’s 25 percent by 2025 renewable standard is resulting in a small rate increase of 0.05 percent to 0.83 percent for ComEd and Ameren customers, according to an Illinois Power Agency (IPA) report. Modeling commissioned by the IPA also found that wind and other renewables have reduced wholesale electricity prices in Illinois and the entire Eastern U.S., resulting in $176.85 million in savings for Illinois in 2011 alone.
Wisconsin’s standard has resulted in a 3-year (2008-2010) rate impact of 1 percent for supplying 7.4 percent of total electricity use from renewables in 2010, up from 3.8 percent in 2006 according to a Wisconsin PSC report. The report also indicates that all 118 Wisconsin electric providers met their renewable standard for 2010 and collectively have achieved three-quarters of the level of renewable energy that the state will need to reach its 10 percent target in 2015 (the same as Michigan’s current standard).
According to PSC Commissioner Eric Callisto, “Commission staff analysis confirms that balancing the state’s generation portfolio with clean, renewable energy facilities comes at a reasonable cost to consumers. As was intended by the passage of the Renewable Portfolio Standard, these additions to the fleet provide balance to the fossil fuel units that make up the majority of Wisconsin’s generation, act as important risk mitigation tools in a future of increasing air regulation, and provide opportunities for economic development within the four corners of the state.”
Michigan has the potential to produce more than all of its electricity needs with wind power, according to data from the National Renewable Energy Laboratory. Given these ample resources, the experience in meeting higher standards in neighboring states, and Michigan’s success in meeting the current 10 percent standard ahead of schedule and at a modest and declining cost, shows that ramping up the standard to 25 percent by 2025 is a smart and affordable proposition.