Michigan’s Clean, Renewable, and Efficient Energy Act represented a major policy shift in the Great Lakes State. The law established a renewable energy mandate called a renewable portfolio standard (RPS) for the state. An RPS mandates that an electricity provider produce a certain amount of its energy via renewable means (Lyon & Yin, 2010). Similar to most major policy reforms, this law is the end product of a drawn-out, multifaceted political process. In this essay, I intend to portray this process in greater detail. I begin by explaining how the Michigan policy shift fits in with the surrounding national context. Next, I describe how the interactions among political elites, environmental interest groups, and electricity companies shaped the resulting policy. Finally, I cover the specifics of the law and detail their intended effect..
The National Picture
Michigan is by no means a policy innovator in establishing an RPS. A report by Wiser & Barbose (2008) shows that at least 25 other states and the District of Columbia had renewable energy mandates on their books before Michigan enacted its law in 2008. Furthermore, half of these laws were enacted in just the previous four years.
While it has become commonplace for the states to use RPS style mandates to encourage renewable energy, the federal government stalled several times on implementing a nation-wide requirement. According to Wiser & Barbose (2008), at least four bills establishing a national RPS passed one house of Congress at various times between 2002 and 2007. Federal inaction has encouraged and perhaps forced states to craft their own energy policy.
Plans for Michigan’s Energy Future
The basis for Michigan’s renewable energy mandate has its roots in Lark’s (2007) Department of Public Service report on Michigan’s energy future. Michigan’s 21st Century Electric Energy Policy, (21st Century Plan) prepared for then Governor Jennifer Granholm, strongly recommended that Michigan implement an RPS. The plan calls for a renewable standard of 10% by the end 2015, and 20% by 2025. Infrastructure investments, job creation, environmental benefits, Michigan’s abundant wind resource potential, and decreased exposure to energy price volatility are all cited as rationales for quickly enacting an RPS plan.
An analysis by NextEnergy, a non-profit group advocating for energy investment and job creation, in collaboration with several state agencies studied the possible impacts of the 21st Century Plan. In their report (Polich, 2007) concluded that an RPS in Michigan, similar to the one recommended by the 21st Century Plan, would be economically beneficial. However, they were reluctant to estimate the effects of moving the RPS beyond the 15% renewable standard. They also cited the large potential for job growth if manufacturing of renewable energy components were to gain footing in the state.
According to the 21st Century Plan projections, a new conventional power plant would still be required by 2015. This spurred at least one environmental group to design an alternative plan with increased reliance on renewables. Environment Michigan, an environmental interest group, was one of the first outside groups to propose an alternative plan. Environment Michigan (2007) proposed a much more ambitious reform with a higher RPS. They advocated for a 25% renewable mandate by 2025, a halt to new fossil fuel powered generators, and hundreds of millions of dollars of public investment in efficiency technologies. Compared to the 21st Century Plan, they claimed their plan would create more than twice as many jobs and lead to additional environmental benefits.
The Political Process
The 21st Century plan made little headway in the legislature in the next few months. The plan to implement a RPS failed to gain traction until Governor Granholm began a public campaign for reform. Granholm toured and campaigned at nine separate sites in November, 2007 (Hornbeck, 2007). At this stage, the Governor was advocating a 25% renewable mandate by 2025, showing the possible impact of Environment Michigan.
One early ally of the Governor’s proposal was DTE Energy, Michigan’s largest energy provider. They agreed to support the proposal so long as it included a caveat allowing for conservation efforts to be counted towards the goal and allowing for adjustment if the costs of implementation were too high. (Morath, 2007)
The end of the year came and went without any meaningful action by the legislature, but Granholm continued her campaign into 2008. However, her tone seemed noticeably altered. She now focused more on the first increment – the 10% RPS by 2015. She also redoubled her focus on the economic benefit the new policy could bring, touting predicted investment and job growth. She found a committed partner in the Senator Bruce Patterson, Republican chair of the Senate Energy Policy and Utilities Committee. With many Republicans unconvinced of the need for an RPS in Michigan, Patterson’s support was absolutely crucial (Hornbeck, 2008). Granholm also had the support of perhaps the most valuable entity – the public. A survey conducted by the University of Michigan concluded that three out of four Michiganders supported increasing renewable energy production, even if it meant paying more. (US Fed News Service, 2008)
There were also plenty of people opposed to the Governor’s 21st Century Plan. The Mackinac Center for Public Policy (Morath, 2007), smaller and interstate utility groups, and consumer advocacy groups (Hornbeck, 2008) all believed renewable energy mandates would unnecessarily drive up electricity rates.
By the end of September, the legislature produced a renewable energy mandate to Granholm’s liking. The final bill included a 10% RPS by 2015, a 12% rate increase cap, and market protection measure for DTE Energy and Consumer’s Energy (Hornbeck, & Heinlein, 2008). Governor Granholm signed the bill into law October 6, 2008 (Legislative Council, 2008).
The Clean, Renewable, and Efficient Energy Act
The final bill passed in October 2008 resembles the initial proposal of the 21st Century Plan originally proposed in January 2007 in that it mandates an RPS of 10% by 2015. However, there is no incremental step up to 25% in 2025. The law also includes a number of other measures. The law mandates utility companies operate more efficiently and administer efficiency programs. Utilities can also claim a credit if they reach their RPS and efficiency ratings earlier than the law prescribes. (ACEEE, 2013)
The Clean, Renewable, and Efficient Energy Act dramatically changed energy policy in Michigan. Across the nation, states were playing an increasing role in setting energy policy by preempting federal action and establishing RPSs within their borders. Michigan was originally not part of this trend until Governor Jennifer Granholm took up the cause. Comparing the original 21st Century Plan with the final law, one can observe how the political process changed the proposal. For example, the final bill included no mandate for an RPS beyond 10%. It is also interesting to see how outside interest group publications may have influenced the specific proposals the Governor was fighting for. In the end, this act is the result of a great deal of research, analysis, and politics on the part of political elites and interest groups. As we near the apex of the laws requirements in 2015, it will be interesting to see the progress in energy production inspired by this law.
ACEEE. (2013). Michigan Utility Policies. American Council for an Energy-Efficient Economy. [link]
Environment Michigan. (2007). Energizing Michigan’s Economy: Creating Jobs and Reducing Pollution with Energy Efficiency and Renewable Electric Power. Environment Michigan Research & Policy Center.
Hornbeck, M. (2007). Granholm Pushes Alternative Energy. Detroit News. Detroit, MI. 11/3/2007. [link]
Hornbeck, M. (2008). Gov: Michigan is Behind in Green Jobs Race - Granholm Says Michigan Behind Times, Must Use More Renewable Energy That Will Create Jobs. Detroit News. Detroit, MI. 2/27/2008. [link]
Hornbeck, M., & Heinlein, G. (2008) Granholm Will Sign Bills to Raise Power Rates, Increase Alternative Energy. Detroit News. Detroit, MI. 9/19/2008.
Lark, J.P. (2007). Michigan’s 21st Century Electric Energy Plan. State of Michigan, Public Service Commission, Department of Labor & Economic Growth. [link]
Legislative Council. (2008). Clean, Renewable, and Efficient Energy Act: Act 295 of 2008. State of Michigan. [link]
Lyon, T. P., & Yin, H. (2010) Why Do States Adopt Renewable Portfolio Standards?: An Empirical Investigation. The Energy Journal, 31(3) 133-157. [link]
Murray, G. (2008). Michigan Commits to an Energy-Efficient Electric Future. American Council for an Energy-Efficient Economy. [link]
Morath, E. (2007). Granholm Calls for Energy Standards - State Should Have Mandate That 25% of Power Come from Renewable Resources Such as Wind, Governor Says. Detroit News. Detroit, MI. 11/9/2007. [link]
Polich, R.A. (2007). A Study of Economic Impacts from the Implementation of a Renewable Portfolio Standard and an Energy Efficiency Program in Michigan. NextEnergy Center. Prepared for: Michigan Department of Environmental Quality. [link]
US Fed News Service. (2008). University of Michigan Report: Michiganians Willing to Pay Extra for Renewable Energy Production. HT Media. [link]
Wiser, R., & Barbose, G. (2008). Renewable Portfolio Standards in the United States - A Status Report with Data Through 2007. Lawrence Berkeley National Laboratory. [link]