A clean power plan for Michigan

Many of us working on energy and climate policy looked forward to June 2 like it was Christmas morning. That was the date set for the EPA to announce a new draft rule to cut carbon pollution from power plants, building on the Clean Power Plan President Obama drafted last summer.

Now that we’ve had a couple of weeks to dig into the rule, does it match the hype leading up to it? On one hand, yes: It is undoubtedly the most significant action the U.S. government has taken to address climate change, and it should yield economic benefits and job creation.

On the other hand, the reality of the rule’s impact—at least in Michigan—does not match the sky-is-falling rhetoric opponents to carbon regulation have used to describe it. The rule reaffirms the action Michigan took in 2008 by passing Public Act 295, and meshes well with the clean-energy discussion started by Governor Snyder in 2013.

Still, Michigan will not achieve the required carbon reductions with a business-as-usual approach. We will need to be more aggressive in our transition to renewable energy and in reducing energy waste. Fortunately, MEC is already taking part in discussions in Lansing to outline the next steps for Michigan’s clean energy programs.

So, what’s actually in the rule?

First, let’s note this is a draft rule that won’t go into effect until next June at the earliest. It first must undergo a public comment period and withstand all but inevitable legal challenges.

In its current form, the historic rule would require the U.S. to cut overall power-sector emissions 30% below 2005 levels by 2030. It takes a staggered approach: the interim goal is 26% below 2005 levels by 2020.

It’s up to the states to set their own plans and mechanisms to achieve that goal. Options include four different building blocks measured by the EPA: making coal plants more efficient; using gas plants more effectively; increasing renewable and other clean energy methods; or increasing energy efficiency on the demand side. There is an extraordinary amount of flexibility built into the rules.

What does it mean for Michigan?

For Michigan, not only is the federal target achievable – we already are well on our way there. Through our diversified energy portfolio and strategic investments in renewable power, we have dipped 17% below our 2005 greenhouse gas emissions, so we’re more than halfway there. Meeting the federal standard will require an additional reduction of 13%.

Michigan’s 2008 renewable portfolio standard law requires utilities to derive 10% of their power from renewable sources by 2015 – a target we are well on track to achieve at very low cost. Were state leaders to require an additional 1.5% increase in renewable energy each year after 2015, they would put Michigan comfortably on track to meet the federal standard and yield numerous health, economic development and natural resource benefits. Our friends at the Union of Concerned Scientists even helped demonstrate how Michigan is capable of meeting up to 33% renewable power by 2030 in a recent report.

On the energy efficiency front, Michigan is already ahead of schedule on meeting targets set in 2008 through robust energy efficiency increases of 1% annually. Investments to achieve those efficiency improvements have saved Michigan families $3.83 for every dollar invested.

What’s more, there is abundant opportunity for further efficiency gains by adopting more stringent uniform energy building codes. Quicker adoption of building codes and stronger state efficiency targets will give Michigan a big push toward meeting the Clean Power Plan goals.

How will Michigan’s power companies comply with the rule?

Reaction to the rule from both of Michigan’s major investor-owned utilities has been generally positive. DTE Energy spokesman Alejandro Bodipo-Memba said the Detroit-based utility believes “it’s prudent to take reasonable steps to reduce greenhouse gas emissions through energy efficiency, continue operation of our Fermi 2 (nuclear power plant) and through development of renewable energy resources.”

Consumers Energy said in a statement: “Along with our customers, business and community allies and industry colleagues, we will be carefully reviewing the EPA’s announcement today on energy regulation issues. We believe that our balanced energy approach positions us to serve our customers with affordable, reliable and increasingly clean energy.”

Not bad overall, considering the response from utility executives in neighboring coal-producing states like Indiana and Ohio, who immediately labeled the rule a job-killer.

As far as how the companies are planning for the future, it really boils down to a tale of two utilities. Consumers Energy has taken great strides in recent years by announcing the retirement of 1,000 megawatts of outdated coal capacity. They also have invested in cleaner natural gas plants instead of new coal power, primarily for economic reasons.  They expect coal will make up just 21% of their portfolio by 2020.

DTE Energy, on the other hand, has been dragging its feet. For 75% of its power generation, the company still relies on coal plants, many of them older, less efficient plants which are only used on a part-time basis.

The smaller-scale municipal and cooperative power companies also have significant opportunity to expand their renewable programs. The Lansing Board of Water and Light, for example, recently announced plans to build what will be by far the state’s largest solar installation.

What’s next?

All in all, Michigan should be able to meet the EPA’s carbon pollution standards handily, largely by simply continuing the transition that began in 2008.  Without a doubt, though, MEC and allies are fully committed to helping with Michigan’s implementation process, ensuring we make maximum investments in renewable power and energy efficiency and fending off any attempts to expand the state’s coal and nuclear generation capacity.

The EPA intentionally designed a rule that gives states flexibility, rather than a one-size-fits-all model. The next 12 months will be critical in determining the best combination of compliance methods to help Michigan meet the federal standard.

Personally, I’m optimistic about the process. There’s a steady stream of good news about wind and solar development in the state, and I think Michigan’s energy future looks bright.

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Photo courtesy Wikipedia.