News Story

Michigan’s new green energy plan looks like its old plan

A decade after losing millions on ‘next-gen’ projects, Michigan gets federal approval for relaxed loan guidelines

New U.S. Department of Energy designations will allow two Michigan agencies to pursue green energy subsidies similar to those that cost Michigan taxpayers tens of millions of dollars in the 2000s.

Secretary of Energy Jennifer Granholm, a former Michigan governor, approved “state energy financing institution” designations in May for the Michigan Economic Development Corporation and the Department of Environment, Great Lakes, and Energy. The new status allows those agencies to use federal funding for projects that have not met certain federal requirements.

A Mackinac Center energy expert notes that these new funding powers resemble failed efforts that occurred in Michigan during Granholm’s own governorship.

As state energy financing institutions, the two agencies will have the authority to subsidize loan applications and streamline the lending process for green energy companies that do not meet the Department of Energy’s innovation requirement. This expands eligibility for loans through the Energy Department’s Loan Programs Office to include “certain projects that incorporate commercial technologies or aggregate technology-diverse projects,” according to the department.

The economic and environmental agencies would review applicants, authorize grants, and assist companies that apply for loans. The loans must be for more than $100 million, and the process of applying for one can cost millions of dollars, according to a webinar jointly hosted by the two agencies.

Whitmer celebrated the new designations when the federal government announced them in May.

"Michigan is committed to lead the future of clean energy and climate action so we can lower utility costs for families, create good-paying jobs, and grow our advanced manufacturing economy,” said the governor, who has set a 2050 deadline to make Michigan 100% carbon-neutral.

The chief executive officer of the Michigan Economic Development Corporation echoed that optimism.

“We are grateful for the Department of Energy’s vote of confidence in Michigan’s marriage of climate policy and profitable business activity,” Quentin L. Messer, Jr. Messer said in a statement. “Michigan is well-positioned to create economic development opportunities that generate good-paying jobs, spur entrepreneurial growth, and cement our state’s leadership in climate action.”

But Jason Hayes, director of energy and environmental policy at the Mackinac Center, compared the relaxed lending standards to the bundling of subprime mortgages prior to the 2007-09 recession.

“To help achieve Gov. Whitmer’s expensive and ineffective climate targets, two state agencies are encouraging businesses in Michigan to bundle together a minimum of $100 million worth of non-innovative (read: already failed once before) business plans,” Hayes told CapCon. “Once that’s done, they also require the businesses to sprinkle diversity, equity, and inclusion requirements over the mix to make them more palatable to the federal government that is printing the money to cover these loans.”

Whitmer’s push to create green energy jobs is not new.

“In five years, you’ll be blown away” then-Gov. Granholm said in 2006 while pushing Michigan to spend $2 billion on what were dubbed “next-generation industries.” Granholm pitched notable flops to John Podesta, then head of President-elect Barack Obama’s transition team. In a leaked email, Granholm touted the company Mascoma, which in 2008 received $26 million from the Department of Energy and $23.5 million from Michigan to convert biomass into ethanol.

“Michigan is proud to partner with Mascoma as part of our commitment to lead the nation in alternative energy production,” Granholm wrote.

Mascoma promised a facility in Chippewa County, saying it would employ 70 people by 2012. The company never built the plant, and it sold its intellectual property rights in 2014.

Another company, United Solar Ovonic, promised 700 Michigan jobs. In 2008, it was approved for $17.3 million in state tax credits, to be distributed over 20 years. In 2012, United Solar Ovonic filed for Chapter 11 bankruptcy.

Between 2003 and 2011, many private companies benefitted from Granholm’s green initiatives.

Despite hundreds of millions of dollars in taxpayer-backed funding, A123 Systems, Mascoma, Energetx, United Solar Ovonic, Azure Dynamics, Evergreen Solar, and Windspire Energy have all declared bankruptcy.

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.