Michigan Decides 2012: Proposal 3 dictates renewable energy standards for Michigan utilities 

Michigan Decides 2012 is a six-week series in which MLive explores the half dozen proposals facing Michigan voters on the Nov. 6 ballot.

Two sides of the renewable energy ballot Proposal 3 paint very different pictures of Michigan if voters approve the measure.

Supporters depict a state infused with more than $10 billion in investments, tens of thousands of new jobs, and a cleaner, healthier environment.

Opponents convey the image of a Michigan rattled with $12 billion in burdensome costs, higher electric bills, and some 3,100 wind turbines taller than the state Capitol obstructing the landscape.

Known as the 25 by 25 proposal, it would amend the constitution to require Michigan utilities to derive at least 25 percent of their annual electric retail sales from clean renewable sources, including wind, solar, biomass and hydropower, by 2025. It also calls for providers to limit rate increases to 1 percent per year to meet the standard.

It would supersede a 2008 law that requires 10 percent of Michigan’s energy to come from renewable sources by 2015.

Proposal backer Michigan Energy Michigan Jobs (MEMJ) is largely underwritten by environmental groups in Michigan, California and New York. Supporters include renewable energy firms, about a dozen unions, including the UAW, faith leaders and several local and state leaders, including former Gov. William Milliken.

The opposition is led by Clean Affordable Renewable Energy (CARE) for Michigan, funded by the state’s largest electric utilities – Consumers Energy and DTE Energy. Others against the proposal include Gov. Rick Snyder, utility associations, chambers of commerce, manufacturing and agricultural trade groups, utility and construction worker unions, along with several local and state leaders.

Consumers and DTE are about halfway toward achieving the 10 percent mandate and want to wait until 2015 to consider increasing the standard. The companies were involved in drafting the 2008 law and are against putting energy policy in the state constitution.

Michigan is behind many other states when it comes to renewable portfolio standards. Twenty-nine states have renewable energy standards, while eight have voluntary goals.

Michigan’s mandate of 10 percent by 2015 is less aggressive than most states with standards, including Hawaii’s 40 percent by 2030, California’s 33 percent by 2020 and Colorado’s 30 percent by 2020.

“I see this as the only strategy that at this point will move us into the competitive position that we need to grow a healthier economy, create more jobs, and improve the health of our citizens through our energy choices,” said Debra Rowe, renewable energies professor at Oakland Community College.

Coal-fired plants supplied nearly 60 percent of the state’s electricity in 2010, and Michigan plants spent about $1.7 billion to import coal last year, according to the U.S. Energy Information Administration.

Proposal backers say more of that money should be spent in-state to manufacture and operate wind turbines, solar panels and other renewable energy infrastructure that can support Michigan jobs and keep the environment clean.

The proposal states that facilities used to meet the standard must be located in Michigan or within the customer service area of utilities operating in Michigan, which expand into parts Indiana and Wisconsin. Current law has a similar restriction but allows for several exceptions.

Proposal backers estimate it would take $10.3 billion to meet the mandate, while opponents use a $12 billion price tag.

Estimates for the monthly cost to ratepayers vary widely. Pro-25 by 25 group Michigan Environmental Council estimates it’d cost 50 cents more per month compared to the current 10 percent standard.

The Mackinac Center for Public Policy, which opposes the measure, says it would cost $15 more per month compared to having no renewable standards at all.

Utility rate increases associated with meeting the standard are limited to 1 percent per year under the proposal. If utilities can’t comply, they could receive a time extension for meeting the standard.

Opponents are skeptical of the caps, saying utilities may pass along costs to ratepayers through other means or that customers would bear the expense as taxpayers funding subsidies.

It’s currently cheaper to generate electricity from existing coal plants, but the cost of renewables is declining. Michigan’s coal plants are aging and will need investments to maintain or replace them, along with improvements to meet federal environmental regulations.

The Michigan Public Service Commission reports that the life-cycle cost of most new renewable energy generators is less expensive than the life-cycle cost of a new coal plant.

New wind power is generally cost-competitive with natural gas, and solar and biomass power can be even more costly than wind, according to the neutral Citizens Research Council of Michigan (CRC).

Even with more renewable energy, the state will still rely on coal plants, especially since wind turbines and solar panels don’t always produce energy. New renewable generators also require transmission upgrades.

Another factor is the federal production tax credits for renewable energy, which are set to expire at the end of the year.

A CRC analysis found that in general, electric costs have not increased since the 2008 law because the recession lowered demand for electricity, therefore dropping wholesale prices. Natural gas prices also have fallen, offsetting increased costs for renewable energy.

Renewable energy costs have declined over the last few years, allowing Consumers Energy to reduce its monthly renewable energy surcharge for residential customers from $2.50 to 52 cents.

Ads from MEMJ say the proposal would create 94,000 jobs in construction, operations, maintenance and manufacturing of renewable energy infrastructure like wind turbines.

The figure comes in part from a Michigan State University study claiming the proposal would add 74,000 jobs in construction, operation and maintenance. The study has been criticized because it measures the number of job years, meaning one person working for 10 years would be listed as 10 job years.

MEMJ spokesman Mark Fisk reached the 94,000 figure by adding what he said is a conservative estimate for Michigan’s share of renewable energy manufacturing jobs created by the proposal.

The wind industry employed about 75,000 people nationwide last year. Michigan ranked 7th for total wind-related employment with 4,000 to 5,000 jobs, according to The American Wind Energy Association.

The Small Business Administration of Michigan, which is against the proposal, commissioned a study by Anderson Economic Group that says the new mandate would result in 1,600 to 1,700 fewer jobs in Michigan every year for 30 years. It considered job losses due to higher energy costs along with jobs created to build and operate new renewable infrastructure.

Supporters refute the study, saying it uses incorrect assumptions on the cost of coal and renewable energies.

Many opponents say their biggest objection to the proposal is that it would lock energy policy into the state constitution.

“No state in the nation, not even California, has a renewable energy mandate in its constitution,” said Monica Martinez, who served on the Michigan Public Service Commission from 2005 to 2011. “Putting something like a renewable energy mandate in the constitution where there is not more definition, where things are not clearly understood as to how they’re going to be implemented, is something that is extremely risky.”

Gov. Snyder also argues a constitutional amendment isn’t the way to go.

“If we don’t know what the federal government is going to do, do we want to have our hands tied by what we’ve done with our constitution, rather than making good calls and judgments as time passes?” he said.

Proposal supporters say the constitutional amendment was necessary because the financial clout of Consumers Energy and DTE Energy would prevent such a measure from passing the legislature.

“Unfortunately, most of the politicians in Lansing have sold out completely to the big energy companies and the big oil companies, so our coalition felt that letting the people decide through constitutional amendment was only way,” Fisk said.

The constitutional amendment has the support of Ron Binz, former chairman of the Colorado Public Utilities Commission. Colorado voters passed a 10 percent renewable energy mandate for investor-owned utilities in 2004. State lawmakers later increased the standard to 30 percent by 2020.

“I understand the argument, but I think the language that I’ve seen here is pretty elegant and simple,” Binz said of concerns over the constitutional amendment. “It doesn’t mandate a lot of details in the constitution … There’s a lot of room for creatively implementing this statute in a way that I think will aid its success.”

The legislature and public service commission will play a role in implementing the measure if it passes.

The two groups disagree on what energy sources could be used to meet the mandate.

The proposed amendment states “Clean renewable electric energy sources, which naturally replenish over a human rather than geological time frame, are wind, solar, biomass and hydropower.”

Opponents say the language is limiting and wouldn’t include geothermal, landfill gas or other technology. It also wouldn’t count credits from advanced cleaner energy or energy efficiency projects, which are used under the current law.

Fisk said that geothermal and landfill gas could be included and that the amendment was not written to exclude certain types of renewable energy sources.

Both sides agree that wind would make up the lion’s share of the generation. Opponents believe it would take 3,100 wind turbines to meet the standard.

Some Michigan communities have aggressively fought proposed wind farms in their backyards.

“This is not grandpa’s windmill, nor is it these cute little Dutch windmills … these are large industrial scale wind machines, getting ever larger all the time,” said former state lawmaker Ken Sikkema, a senior policy fellow at Public Sector Consultants, which has been hired by the opposition group to study the ballot proposal.

Sikkema, Martinez and others have said they fear siting of the wind farms may require state authority over local zoning.

Proposal backers refute that, saying the National Renewable Energy Laboratory estimates that Michigan has some 56,000 megawatts of unused onshore wind capacity. The 25 by 25 standard would require about 4,600 megawatts, a fraction of the state’s capacity, Fisk said.

BALLOT PROPOSAL WORDING

Below is the exact wording for Proposal 3. Check out wording for all the ballot proposals here.

Proposal 3: A PROPOSAL TO AMEND THE STATE CONSTITUTION TO ESTABLISH A STANDARD FOR RENEWABLE ENERGY

This proposal would:

• Require electric utilities to provide at least 25% of their annual retail sales of electricity from renewable energy sources, which are wind, solar, biomass, and
hydropower, by 2025.

• Limit to not more than 1% per year electric utility rate increases charged to consumers only to achieve compliance with the renewable energy standard.

• Allow annual extensions of the deadline to meet the 25% standard in order to
prevent rate increases over the 1% limit.

• Require the legislature to enact additional laws to encourage the use of Michigan
made equipment and employment of Michigan residents.

Should this proposal be approved? (Yes or No)