Michigan’s Clean, Renewable, and Efficient Energy Act increased Michigan’s renewable energy production by establishing a renewable energy standard, which mandated all electricity providers generate 10% of their electricity from renewable sources by the end of 2015. The deadline to meet this standard is still more than a year away, but with 6 years having passed since the laws enactment we can begin an early analysis of the implementation and effects thus far. To accomplish this, I report key facts on the progress of the electricity companies in meeting this mandate. I also attempt to measure the law’s effectiveness by studying changes in Michigan’s generation portfolio as well as fluctuations in consumer energy rates..
Electricity providers had several means by which to generate renewable energy. Along with traditional wind and solar generation, hydroelectric dams, anaerobic digesters, and landfill natural gas recovery all constituted a source of renewable energy under the law (Legislative Council, 2008).
Regardless of generation technique, meeting the renewable energy standard would require massive investments on the parts of the electricity companies. The Michigan Public Service Commission (MPSC) report estimates a “conservative” investment amount through 2013 at $2.2 billion (2014a, 23). To help offset the large costs of these investments, the law allowed electricity companies to establish a monthly surcharge for each metered customer. This renewable energy surcharge is capped based on customer classification. However, only 13 of 59 eligible companies had such a charge in 2013 according to the MPSC (2014a) report.
Individual consumers were also given the opportunity to increase renewable energy through a relatively small but noteworthy net metering program. The MPSC (2014b) report shows growing demand for net metering, where a customer can generate electricity via solar panels or small wind turbine and sell that energy to the grid. These programs are still small pilot projects and contribute little to the state’s overall energy portfolio. However, if demand continues to grow these projects could become a significant part of reaching the renewable energy mandate.
Since the renewable energy mandate become law in 2008, Michigan has come a long way in increasing its renewable energy portfolio. According to the MPSC (2014a) total renewable generation in 2009 was a meager 17 Megawatts (MW) – roughly enough to power 3000 homes for a year (Solar Energy Industries Association, 2014). By 2013, the MPSC (2014a) reports renewable generation increased to 1182 MW and is projected to reach over 1400 MW by the end of 2014. Nearly all of this new generation is from wind turbines. At least 33 major projects have been undertaken across the state to increase renewable generation including 21 wind farms completed or under development (p.54).
According to the MPSC (2014a), Michigan is on track to meet its 10% renewable energy target by the end of 2015. Individually, nearly every electric company is expected to meet the 10% standard, the lone exception being the Detroit Public Lighting Department. Matheny’s (2014) Free Press article further details Michigan’s progress. At the end of 2012, renewable energy made up approximately 5.4% of electricity sales. That percentage increased to 6.9% by the end of 2013.
It should be noted that Michigan’s voters had the opportunity to increase the mandate with a public referendum vote in 2012. The modification would have implemented a second renewable mandate of 25% by 2025 and capped annual rate increases at 1% (Proposal 12-3, 2012). However, the measure was soundly defeated with 63% of voters voting against its adoption (Michigan Department of State, 2012).
To evaluate the law’s impact on Michigan, I use data from the U.S. Energy Information Agency (2014). I chose to focus first on increases in renewable energy production. This was the stated goal of the bill. I also look at changes in the average price of electricity. I feel like the policy cannot be viewed as a success if it raised energy rates of the average citizen by a substantial amount. The Agency’s data largely mirror that of the report from the MPSC (2014a).
Graph 1 shows that renewable energy began a rapid increase in 2012. To compare trends before the renewable energy mandate was in place, the graph reports data beginning in 2007. An interesting fluctuation occurs after 2012. This could be related to seasonal weather changing the effectiveness of wind turbines.
*Source: U.S. Energy Information Agency
Graph 2 charts the average price of electricity in Michigan, as well as the average across the region (Illinois, Indiana, Michigan, Ohio, and Wisconsin). There is clearly a small growth in Michigan’s price relative to the rest of the region. However, the difference is substantively quite small – roughly 1 cent per kilowatt-hour. Also, there appears to be little change in the rate of increase around 2012 – when the renewable energy production began to rapidly increase. Taken together, it would seem the increase in renewable energy hasn’t had a major impact on electricity prices.
*Source: U.S. Energy Information Agency
The MPSC (2014a) also suggests renewable energy holds its ground economically with traditional generation means. They find that the average lifetime costs of wind-produced energy is around $76 while the costs of coal generation is closer to $133. They do, however, recognize that the costs associated with coal generation are relatively volatile due to changing input costs and shifting EPA standards and penalties.
Michigan’s renewable energy mandate is coming to fruition. Energy companies have until the end of 2015 to establish a portfolio consisting of at least 10% renewable energy. By all accounts, progression towards this goal is going very smoothly. Michigan’s electricity companies have built up a renewable generation infrastructure over the previous 6 sears and are now poised to meet their goal. The data clearly show that energy from renewable sources has increased and that price has risen only slightly. In terms of increasing generation of renewable energy without substantial increases in price, this policy appears successful.
Legislative Council. (2008). Clean, Renewable, and Efficient Energy Act: Act 295 of 2008. State of Michigan. [link]
Matheny, K. (2014). Wind turbines propel Michigan closer to 2015 renewable energy goal. Detroit Free Press. 2-17-14. [link]
Michigan Department of State. (2012). Summary Totals. State Proposal - 12-3: Constitutional Amendment: Establish a Standard for Renewable Energy. [link]
Michigan Public Service Commission. (2014a). Report on the Implementation of the P.S. 295 Renewable Energy Standard and the Cost-Effectiveness of the Energy Standards. Department of Licensing and Regulatory Affairs. [link]
Michigan Public Service Commission. (2014b). Net Metering & Solar Pilot Program Report for Calendar Year 2013. [link]
Proposal 12-3. (2012). A Proposal to Amend the State Constitution to Establish a Standard for Renewable Energy. [link]
Solar Energy Industries Association. (2014). How many homes can be powered by 1 megawatt of solar energy? SEIA Organization. [link]
U.S. Energy Information Administration. (2014). Electricity Data Browser. U.S. Department of Energy. [link]
*Data table derived from U.S. Energy Information Administration also available.