Legislation Puts Michigan on Path to Clean Energy Future
NRDC Expert Blog by Ariana Gonzalez
What began as bills dismantling the successful renewable energy and energy efficiency standards evolved into legislation that in fact improved aspects of both. Two years of testimony, substitutes, amendments, and caucuses finally concluded with the passing of a comprehensive energy package that had something for everyone. The achievement comes as particularly welcome news as the federal landscape threatens daily to walk back on recent climate action. Luckily, the latest developments in Illinois and Michigan show that states are ready to drive clean energy forward until the U.S. is ready to lead again.
Diving into the Bills
In previous state law, the renewable portfolio standard called for 10% renewable energy by 2015 and was affordably achieved on time. The first iteration of the bills repealed the standard, but as passed the current renewable portfolio standard was retained and extended by requirements for 12.5% renewables in 2019 and 15% renewable in 2021. It may seem a modest increase especially in light of states like California aiming for 50% renewable energy, but this isn't California or New York, it’s the Midwest and that makes every inch of progress even more meaningful.
Previous law included an energy efficiency resource standard of 0.75% annual increment in first-year savings for natural gas utilities and 1% annual increment in first-year savings for electric utilities with a spending cap of 2% of annual revenue. This cap unnecessarily singled out and limited the amount spent on energy efficiency and no other resource.
As first introduced, these bills would have terminated the requirement for electric utilities. However, as passed, the current standard for natural gas utilities continues indefinitely and the electric standard for regulated utilities may be changed up or down by the Public Service Commission after 2021 by a showing that a new standard is the most reasonable and prudent. Otherwise, the standard continues at the previous level. Regarding the spending limitation, the cap for both natural gas and electric utilities was removed allowing utilities to pursue the cheapest resource as much as is cost effective.
Though the standard’s targets remain the same, new incentives for efficiency programs were modified providing increasing incentives with increasing performance. These incentives should be enough to persuade most utilities to operate in excess of 1.5% per year which is good news for Michigan customers who got $4.35 in benefits for every dollar spent in 2015 according to a public service commission report.
Net metering proved to be a juicy topic in Michigan over the past few years. The original law allowed true net metering with systems less than 20 kW until these systems produce 0.5% of a utility’s sales and modified net metering for larger systems until they produce 0.5% of a utility’s sales. When first introduced, the bills could have imposed a significant cost on net metering customers through a vague “grid charge.” Luckily, after extensive negotiations we were able to retain the current net metering for each utility until the Public Service Commission approves the first general rate revision requested by a utility after June 1, 2018. This process appropriately allows for the Commission to study the costs and benefits of net metering before hastily assigning an inhibiting and unfounded charge.
Integrated Resource Planning
The passed bills require each regulated utility to file an integrated resource plan by the end of 2018 and every five years thereafter. The Public Service Commission approval standard for an integrated resource plan is that it must be the most reasonable and prudent alternative, including a plan to eliminate energy waste and consideration of demand response. This comes after a scare where one iteration of bills essentially eliminated the integrated resource plan section. A well done integrated resource plan’s goal is to investigate least-cost, least-risk resource mix options to meet future energy needs. The analysis can illuminate facts and figures that will best guide a utility toward what type of investment protects the system and its customers from possible expensive, dirty futures.
It was no small feat securing clean energy legislation in light of where we began ideologically and where we are geographically. Not only did legislation begin by attempting to rid the state of the renewable portfolio and energy efficiency standards, but it all took place in the context of a Republican supermajority in the Midwest. However, despite what you hear outside of the Beltway, there is real clean energy and climate action movement in the Midwest. This victory was possible because of the delicate balance between grit and compromise. Each party fought tirelessly by writing op-eds, blogging, tweeting, calling in, speaking on the radio, educating, and testifying on what they believed in. But ultimately it was bipartisan compromise that won this bill. We all agreed the details could be compromised, but the pursuit of clean energy could not be.
Republished with permission from the Natural Resources Defense Council's expert blogs
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