Analysis

Michigan’s Electric Companies Sign Onto Green Agenda

Expect costlier and less reliable electric power supplies

Michigan’s energy landscape has seen several significant changes over the past 10 years as state lawmakers began requiring utilities to generate more electricity from renewable energy sources. In 2016, the mandates were expanded, and in 2018, the state’s two largest utilities made a deal with billionaire activist Tom Steyer to go even further. Recent planning documents released by the state’s two big utilities paint a picture of what electricity users in the state can expect in 2019 and beyond.

In 2018, Consumers Energy and DTE Energy announced plans to close all their coal-powered generation facilities by 2040. The announcements are part of efforts to move from coal and natural gas-powered generation (and in the case of Consumers Energy, nuclear power) toward depending on thousands of acres of photovoltaic solar collector arrays, plus more wind turbines, with these intermittent sources backed up by natural gas. The plans also include offering incentives to certain customers to use less power; historically, these incentives have been paid for by imposing surcharges on all electricity bills.

The picture of what electricity users can expect will become clearer when DTE Energy, Michigan’s largest utility, reveals more about its plans in a regulatory document expected in early spring of this year. The company has already committed to closing all its coal-fired generation plants by 2040. DTE has announced plans to build a new 1,100-megawatt generation plant, fueled by natural gas. Consumers has not revealed any plans for using more natural gas to back up the renewables.

In June 2018, Consumers, Michigan’s second-largest electric utility company, filed its own power generation plan with state regulators. It calls for closing all of the company’s coal-fired plants as well as much of its natural-gas generation capacity.

Jason Hayes, who analyzes energy and environmental policy at the Mackinac Center for Public Policy, said the big utilities’ plans will most likely mean more expensive and less reliable electricity for Michigan households and businesses.

“With both Consumers Energy and DTE publicly partnering with California environmental activist, Tom Steyer, and agreeing to shutter much of their reliable, baseload generation fleet, Michigan will be facing many, rapid changes in the cost and supply of electricity,” Hayes said.

Jim MacInnes, who is chair of the Michigan Utility Consumer Participation Board, created by a 1982 law to represent the interests of residential electric and gas ratepayers, said the state can lean more heavily on wind- and solar-powered resources moving forward.

“Michigan can depend on renewable sources and power purchased from elsewhere for much of its future electricity use,” MacInnes said. “The keys are transmission upgrades and allowing power grid operators like the Midcontinent Independent System Operator (MISO) to economically dispatch a diverse set of generating resources such as wind, solar photovoltaic, battery storage, and even some fossil-fueled generators to move electricity within the state and between states where and when it is needed.”

Consumers and DTE control most electricity generation plants in the state. Data from the Michigan Public Service Commission, which regulates these regional monopolies, indicates how substantial the companies’ proposed shifts in electric generation capacity would be by 2040.

In 2017, the most recent year for which data is available, all of Michigan’s regulated electricity utilities owned about 9,500 megawatts of coal-fired generation capacity. Consumers and DTE own about 9,200 MW of this, with DTE controlling more than 7,100 MW.

The companies’ recent announcements signal that they are largely getting out of coal as a source for meeting the state’s residential and business electric power needs. In 2017, a little more than 45 percent of the generation capacity owned by regulated electricity utilities here was powered by coal (9,501.3 of 20,393.1 MW).

Coal, like natural gas and nuclear energy but unlike solar and wind turbines, is “dispatchable.” That is, these energy sources are available whenever electricity-grid operators – and consumers - need more power, such as an especially hot day in the summer or a very cold day in the winter.

While DTE hasn’t officially released its plans for future developments, announcements by the Detroit-based utility as well as the plans created by Consumers give clues into how the company thinks it can replace this lost capacity.

The companies say they plan to construct more than 1,000 additional megawatts of wind turbine capacity over the next five years. Michigan had 1,904 MW of wind-powered electricity capacity at the end of 2018, according to the American Wind Energy Association. More ambitious plans for wind energy appear to have been scaled back recently in the face of resistance from residents of rural communities targeted for expanded wind farm development.

Consumers has announced plans to install some 6,300 megawatts of photovoltaic solar capacity by 2040. As of summer 2018, Michigan had 148.6 MW of solar capacity, according to the Solar Energy Industries Association.

Both Consumers and DTE have also signaled that they plan to increase demand response practices to reduce electricity demand at certain times. Consumers also intends to respond to spikes in demand by purchasing large amounts of electricity in a regional energy market and installing large batteries to store electricity from solar and wind generators when demand is light.

Randi Berris, DTE Energy’s manager of corporate communications, said the plans the company is now making will help it deliver more clean energy.

“We know that our customers want a cleaner energy portfolio. Our [plans] will help us deliver that, balanced with reliability and affordability,” Berris said.

Consumers Energy spokesperson Katie Carey said the company intends to work with regulators and interested parties to answer questions about its plans.

“We submitted our company’s Clean Energy Plan (IRP) to the Michigan Public Service Commission (MPSC) in June 2018. The MPSC has about one year to review the plan and determine whether we’ve developed the most reasonable and prudent strategy to serve our customers,” Carey said.

How We Got Here: Legislative and Regulatory Milestones, 2008-2018

  • The legal groundwork for many of the announced changes in 2018 was laid during the second term of former Democratic Gov. Jennifer Granholm.
  • In 2008, Granholm signed into law a bill that rewrote much of Michigan’s electricity regulatory regime, which among other things, guarantees Consumers and DTE 90 percent of the electricity market in the regions they serve.
  • That year, Granholm also signed legislation that created the “renewable energy portfolio standard,” a mandate that required utilities to get 10 percent of their electricity from renewable sources by 2015. It also encouraged the companies to use demand response practices. Both bills were supported by Consumers Energy and DTE.
  • In 2016 the renewable mandate was expanded by a bill signed into law by Republican Gov. Rick Snyder.
  • This legislation increased the renewable source mandate from 10 to 15 percent of the state’s generation capacity by 2021.
  • Snyder also signed into law a measure that requires utilities to submit energy plans to state regulators, like the one submitted by Consumers Energy in June. Both bills were supported by the big utilities, which under law are guaranteed a profit on all these activities, whether they tear down existing coal plants or install huge new solar arrays.
  • In May 2018, Consumers and DTE made a deal with billionaire environmental activist Tom Steyer to use renewable sources to produce 25 percent of the energy they sell by 2030.
  • In return for these promises, a Steyer-backed organization called Clean Energy, Healthy Michigan did not submit petition signatures it had collected to advance a ballot initiative. The initiative, if enacted, would have required utilities to use renewable sources for 30 percent of the electricity they sell by 2030.
  • On June 15, 2018, Consumers submitted its plans for generating electricity in the future to state electricity regulators. (DTE must file its plans with state regulators by March 28, 2019.)