Eight months after taking over from a governor who strongly championed bringing clean-energy manufacturers to Michigan, it’s clear that Governor Rick Snyder is using a different approach to foster that industry’s growth.
What’s less clear, however, is whether his new approach will be as effective as former Governor Jennifer M. Granholm’s.
Ms. Granholm, in office from 2003 through 2010, successfully pushed for renewable energy legislation, and several of her state agencies used incentive packages, including tax write-offs, to aggressively recruit clean-energy manufacturers. Her efforts, by most accounts, brought thousands of new jobs to a state that badly needs them.
|U-M Photo Services/Eric Bronson|
|University of Michigan’s Nick Cucinelli and Governor Snyder present the 2011 Clean Energy Prize to doctoral student Nick Moroz, team leader at CSquared Innovations, a university start-up.|
Governor Snyder, by contrast, is offering sizeable reductions in corporate business taxes as his chief recruiting tool, aimed at all companies, not just renewables manufacturers. The untargeted tax cut, along with retention of most Michigan Economic Development Corporation programs, aim to improve the state’s general business environment.
But the Snyder administration also changed its approach to tax incentives, a hallmark of the Granholm administration’s renewables recruiting. Governor Snyder also seems reluctant to try to increase 2008’s legislative mandates requiring utilities to provide more efficiency and renewable energy. According to several people who personally urged the governor to do more for Michigan’s renewables manufacturers, Mr. Snyder is unlikely to push new energy policies or legislation this year.
Renewables industry advocates cheered, however, on Aug. 12, when MEDC officials appointed a new energy policy officer—Valerie Brader, a business attorney with a strong background in, among other environmental issues, incentives and tax credits for brownfield redevelopment.
The governor’s administration is saying little else publicly about accelerating green manufacturing growth. Some of his critics still worry that his seeming reticence could cause Michigan to miss out on major recruiting opportunities in one of America’s fastest-growing industries, even as other states hotly pursue them. Ohio, for example, recently moved to second place in the country in solar panel manufacturing, thanks to its aggressive efforts.
Many manufacturers still strongly endorse Ms. Granholm’s approach—which also included coordination and financial assistance for public-private partnerships, and teamwork with state and local officials. They say this smoothed the way for their expansion in new fields such as wind turbine and solar panel parts manufacturing, fabrication, and installation.
And many of them either expressed strong enthusiasm or a wait-and-see attitude about what they have seen so far from the Snyder administration.
Granholm’s Track Record
Whatever strategy Governor Snyder follows, it’s a tall order to match Ms. Granholm’s success repositioning Michigan’s automobile manufacturing, research, and engineering base to embrace renewables.
One of the most notable Granholm accomplishments, according to David Gard, energy program director for the Michigan Environmental Council, was enacting efficiency and renewable energy mandates in late 2008. Supportive lawmakers had to overcome what proved to be unfounded fears that it would prove too costly to utilities and their customers.
“These programs,” Mr. Gard says, “have been cost effective for the rate payer, especially on the energy efficiency side” and were “ an important first step.”
With mandates in place, the Granholm administration helped attract 48 clean energy companies to Michigan. The MEDC and the former Department of Energy, Labor, and Economic Growth, according to Ms. Granholm’s Web site, recruited $9.4 billion in new clean energy investments in Michigan, which could produce nearly 90,000 new jobs by 2020.
When battery-related companies are included, the potential jumps to 67 companies and 153,000 jobs, her site said. A recent New York Times article found extensive new battery manufacturing activity occurring in Michigan due to Granholm initiatives. And the Chicago-based Environmental Policy and Law Center, a non-profit, lists 241 companies in Michigan’s wind and solar power manufacturing supply chain, and estimates there are now more than 10,000 jobs in that supply chain.
One Granholm hallmark was its comprehensiveness: she not only championed renewables, she also installed crucial administrative policies such as “decoupling,” which makes it profitable for utilities to encourage energy efficiency, and the Michigan Saves program, which finances homeowners’ energy-saving projects.
Several renewables business leaders agreed that Granholm had a very positive effect on their industry. For example, MAG Industrial Automation Systems LLC, of Sterling Heights, and Energetx Composites LLC, of Holland—two companies producing wind turbine components in Michigan—participate in Centers of Energy Excellence; officials from both companies said their excellence-center projects are some of their most exciting work.
For example, MAG, Dow Chemical Company, Astraeus Wind Energy Inc., and Oakridge National Laboratory are advancing carbon fiber technology to decrease turbine blade weight and produce a more consistent product—steps that cut wind energy costs.
“You have to reduce the cost of energy, and in our Center of Energy Excellence we’re working to do that,” says Steve Busch, director of human resources for Energetx. “The heavy interaction within the groups is focused on creating the next generation of blades and technologies.”
Jeff Metts, president of Astreus Wind, said the centers have effects well beyond the wind industry.
“Carbon fiber technology is going to be huge,” Mr. Metts said of the technology’s myriad applications. “This is all being driven because of energy. It’s the right thing to do—we have opened so many doors.”
However, the Snyder administration is not renewing funding for the 13 excellence centers. The state invested $73 million in them; although state funds have dried up, the centers may continue to tap federal dollars.
Where Does Snyder Stand?
After taking office, Governor Snyder also substantially changed several other prime Granholm renewables programs. For one, he transformed DELEG into the Department of Licensing and Regulatory Affairs and transferred many of DELEG’s staff and functions to MEDC.
And now, instead of offering targeted tax credits for recruiting renewables manufacturers—credits approved by the State Legislature, applied to a company’s state tax return, and tapped out before Mr. Snyder took office—MEDC can draw from a $100 million pool of incentive funds to make direct, cash payments to projects it finds worthwhile, including but not necessarily green manufacturers.
According to Michael Shore, who came to his post as MEDC’s corporate communication manager during the Granholm era, that makes sense. “The [Granholm era] renewable energy incentives have been maxed out; we have laid a base for growth; so now our focus is different.”
Today the Snyder administration touts a low, 6-percent corporate tax rate to retain and attract businesses, effective January 1, 2012. Such a “corporate tax structure will reduce the tax burden on all businesses, regardless of industry” according to the MEDC Web site. The cut moves Michigan’s corporate tax ranking from 48th to 22nd-best in the nation, according to the Tax Foundation, a Washington non-profit.
Mr. Shore said MEDC is supplementing the lower rate—and possible grants from the new incentives pool—by continuing to help companies with workforce development, financing, permitting, and teamwork with local authorities.
Mr. Shore noted that there are approximately 50 businesses, in a variety of industries, currently interested in moving to Michigan, but could not say how many are renewables firms. And, he said, the administration’s interest in recruiting such companies is very strong.
“We were very excited about our progress on recruiting renewables manufacturers while Granholm was governor,” he said, “and we’re very excited now. We are using a slightly different toolkit to accomplish the same goals—that is really the only difference—and we are being aggressive with them.”
Reasons for Optimism
It is still too early, most observers agree, to determine whether Governor Snyder’s broader, untargeted approach is working for renewables.
Mr. Gard, of the MEC, believes it will take more than corporate tax cuts.
“There are big barriers for renewable companies,” he pointed out. “Fossil fuels have institutional power, externalities, and built-in subsidies that make it difficult for replacements to compete.”
“We know, looking at global trends, that renewable energy is going to be huge going forward,” he added. “We are competing with other states and other countries for leadership in the industry.”
Mr. Gard said he’s by no means giving up on the new governor’s intentions for clean energy manufacturing.
“It took Granholm until her second term to make energy a focus,” he noted. He hopes that, with a completed state budget, Mr. Snyder will address energy more in the fall term.
Several renewables industry leaders greatly impressed by Ms. Granholm’s efforts say that Governor Snyder’s new approach is valuable, too.
Steve Busch, director of human resources for Energetx, which builds generator housings and blades for wind turbines, said that, in 2008, the company, which has manufactured yachts for 50 years, looked into the wind industry.
“Both governors, Granholm and Snyder, have been very supportive,” said Mr. Busch “They both realize the amount of talent that there is in Michigan and that we can tap into that talent in this new emerging industry. Both have been very supportive on job development and work force development.”
Mr. Metts, of Astraeus, noted that, under Granholm “the state was making some really bold moves where the payoffs were really going to be great. I think Snyder is not against it, but not as passionately involved in it as she (Granholm) was, so it will be interesting to see where this takes the state.”
Roger Cope, a former president of MAG, America’s largest machine-producing company, now chairs one of his firm’s advisory boards.
“Granholm was very supportive and I like her a lot,” said Mr. Cope, “but I have to tell you people looked at Michigan and saw that the business environment was not favorable. The fact that we have a budget and the fact that we have the low business tax and the fact the governor is involved in making the environment more business-friendly is huge.”
He said he’s aware of outstate companies interested in coming to Michigan in light of the Snyder policies, and expects only good things.
“The MEDC is great,” he said, and “they continue to be extremely helpful.”
Mr. Cope also said that the transition to a low business tax, now that financing seems to be more available, is a good move. And, he said, making renewables truly competitive with coal power, Michigan’s dominant generating fuel, means driving down their cost. DTE Energy’s recent power purchase contract with a new windpower development now rising in south central Michigan indicates that is occurring—six cents per kilowatt hour, which is far cheaper than the cost of new, coal-fired power contracts.
Mr. Metts, however, noted that being cost competitive remains difficult when the fossil fuel industry enjoys such large subsidies.
“They need to level the playing field, either by getting rid of all the [energy] subsidies or subsidizing everything at the same rate, just so it levels things out,” he said. “Give us the same treatment you give everyone else.”
Meanwhile, the announcement of Ms. Brader’s appointment as MEDC’s energy policy officer arrived with official state enthusiasm about energy. According to the announcement on the department’s Web site, “Brader will work closely with the Governor’s office, the Michigan Energy Office, and MEDC business development, and entrepreneur services groups to make energy policy recommendations for the state.”
The announcement may mark an uptick in the administration’s attention to clean energy: It quotes MEDC President Finney proclaiming that energy concerns “are at the center of our economic future, whether we are talking about its cost and availability or job creation and new business potential in green energy manufacturing.”
Mr. Metts, for one, is enthusiastic about the appointment.
“That’s great,” he said. “It is really good news. This is what we need to really get this thing moving.”
Claire Perry is a sophomore from Haverford College who interned with the Michigan Land Use Institute this summer. You can reach her at [email protected].