Michigan’s Not Good For Wind Power, So Consumers Energy Customers Will Pay More
Under 2016 state regulation rewrite, electric utility monopoly makes money either way
The Michigan Public Service Commission recently approved an application from Consumers Energy to buy an industrial wind farm development in Hillsdale County that is projected to begin operations by December 2020.
The Crescent Wind Project is said to have a levelized cost of electricity, a common industry metric, of about $48 per megawatt hour over a 31-year period. That’s above the average national cost, and the rate will hold only if the big utility company is allowed to use federal tax breaks to offset the project’s actual costs. The federal credit is worth $23 per megawatt hour.
Consumers Energy forecasts the production costs for the proposed 63 turbine towers to be $57.75 per megawatt hour, according to a plan approved in February by state regulators.
The average levelized cost for wind in the U.S. is $36.60 per megawatt hour, according to the Energy Information Administration. That means at best, Consumers Energy and its customers would be paying anywhere from $11.40 to $21.15 more per megawatt hour than the national average for the wind farm in Hillsdale County.
When contacted by Michigan Capitol Confidential, the company did not explain why it would pay so much more.
Jason Hayes, director of environmental policy at the Mackinac Center for Public Policy, said the public utility has to pay more for electricity generated by wind turbines because the wind isn’t as strong in Michigan as in other parts of the country.
“So, if Michigan’s utilities are building their wind facilities in areas with poor wind resources — like Hillsdale County — they will need to build a lot more turbines and have the turbines they build produce far less electricity. That ensures that the costs to build and operate wind facilities in Michigan is far higher than it is in states like Oklahoma or Kansas,” Hayes said.
Michigan’s two biggest electric utilities, Consumers Energy and DTE Energy, are both in the middle of plans to expand their capacity to generate electricity through wind turbines. This is due to a 2016 rewrite of the state’s utility regulations that they strongly supported. The law guarantees the companies a profit of around 10% even if the state-approved expansion of wind and solar power plants add more to their customers’ bills.
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.