DTE, Consumers’ peak-hour pricing plans have it all backward
Stanford study undermines utility peak-hour rate planning
Michigan’s big utilities, including DTE Energy, claim that their summer peak-rate electricity pricing plans are designed to “reduce energy use.” But a recent Stanford University study appears to show that the utilities have it all backward.
Michigan’s monopoly utilities have publicly committed to meeting self-imposed net-zero CO2 emissions targets and transitioning to so-called green energy sources like wind and solar. The state of Michigan, large utilities, and supportive green groups are all pushing for rapid elimination of fossil fuel energy capacity, arguing that electrification of our homes, transportation, and businesses is essential to help protect the environment.
“Electricity generation costs are lower when pollution-free electricity, like solar, is abundant relative to demand, like during sunny weekday afternoons,” says environmental special interest group, Michigan Environmental Council. "Costs are also lower when demand for electricity is low, like later at night.”
But rapid statewide electrification will shift the periods of highest demand from sunny summer days to the dead of winter, according to Isaac Orr, energy policy expert and policy fellow at the Center of the American Experiment. Transitioning to electric vehicles that are typically charged at night “could increase peak electricity demand by up to 25%” in California, according to a recently published Stanford University study.
The study “does an admirable job of explaining that efforts to electrify the transportation sector are running into the problem that most people charge their cars at night. But our electric grids are becoming more reliant on solar panels that don't work after the sun goes to sleep,” Orr said in an interview.
“The study suggests charging EVs during the day when the sun is shining to avoid building more capacity,” Orr said. “But California already has trouble keeping the lights on in the late afternoon, meaning drivers will have to unplug around 3 p.m. to prevent drawing too much power from the grid as the sun begins to set.”
The problems described in the Stanford study will be compounded in a fully electrified Michigan. The state’s utilities plan to replace reliable fossil fuel energy sources by building a largely solar-fueled electric grid. This means the majority of our renewable generation will produce electricity on sunny summer days. But peak-rate programs are pushing people to use less electricity during this time, and toward evenings, when solar will be offline.
Shifting peaks to winter evenings, as Orr warns will happen, aggravates the problem and makes plans to spend billions on solar generation effectively useless. In Michigan, solar panels often produce at less than 10% of their rated capacity in winter months, according to data produced by the Energy Information Administration.
“In the end, attempts to electrify everything are running headlong into reality,” affirms Orr. “It will be exceedingly difficult to electrify anything as long as policymakers keep forcing us to switch to unreliable, weather-dependent energy sources.”
Utilities have made the commitment to eliminate reliable energy sources despite wind and solar’s extreme land use, heavy impacts on wildlife, rapidly growing recycling and disposal issues, as well as their potential to leach toxic materials into nature. The energy, minerals, and metals that go into the construction of wind and solar actually make them “pure embodiments of [the] fossil fuels” their supporters claim they are designed to wean us away from, according to academic and author Vaclav Smil.
Additionally, utilities and grid managers across the Midwest are admitting that rushed decarbonization plans could leave electricity customers “at risk of insufficient electricity supplies” during periods of increased demand. To mitigate that risk, utilities are implementing peak rate programs that impose far higher prices on electricity services during periods of peak demand, to pressure customers to reduce energy use.
Consumers Energy’s Peak Rate program charges an additional 50% on top of Michigan’s already high residential electricity rates on weekdays from 2 p.m. until 7 p.m., June 1 to September 30. During peak rate periods, Consumers Energy customers pay 22 cents per kilowatt hour.
These higher rates contrast with Michigan’s 2021 average residential rate of 17.54 cents per kilowatt hour and adjacent Ohio’s average residential electricity rate of 12.77 cents per kilowatt hour.
Jason Hayes is director of environmental policy at the Mackinac Center. Email him at firstname.lastname@example.org.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.