This is Part 1 of our ongoing coverage of the MPSC solar work group. See the entire series here.
|A specially assembled “solar work group” is considering ways to deploy more solar energy in Michigan.|
When it comes to generating renewable energy in Michigan, solar power is stuck on the sidelines.
But the technology, which utilities in some parts of the country are now rapidly and aggressively embracing, could soon get into the game here, too.
A specially assembled “solar work group” of state regulators, officials from the state’s two largest utilities, and clean-energy business advocates is considering ways to deploy more solar energy in Michigan that help, not hurt the firms’ bottom lines; protect ratepayers’ wallets while offering them an entrepreneurial opportunity; and boost the state’s solar manufacturers and installers—who are part of one of the nation’s fastest-growing business sectors.
The group, consisting of about 40 people, first met on Feb. 4 to organize and propose initial goals. Now they will look at different ways to move the state’s largest electric utilities, DTE Energy and Consumers Energy, beyond their solar “pilot” programs. Over four years, the tiny programs for their customers, along with DTE’s company-owned projects, have hooked up fewer than 20 megawatts of solar panels—barely 3 percent of the output of a single, average-sized coal plant.
Both companies have twice asked MPSC for permission to drop the pilots, arguing that using solar power to meet the state’s 10-percent renewable energy mandate is too expensive. They say it makes more economic sense to use cheaper wind power to fulfill the mandate.
But clean energy advocates will argue that—mandates aside—the state, utility ratepayers, Michigan solar manufacturers and installers, customers and, crucially, the utilities themselves could benefit greatly from using more solar power more quickly.
They point to real-world numbers that they say bolster their case, and plan to use the work group meetings to demonstrate solar’s practicality to the utilities and MPSC staff, who will eventually decide whether to require more sun power from the companies.
The group meetings, aimed at producing a report in June that MPSC could then implement, take place as many American utilities view the sharp drop in solar panel prices with some alarm. As DTE and Consumers discovered with their pilot programs, there is strong interest among customers to install their own panels. Around the country, similar interest and dramatic surges in installations have prompted some companies to push for nullifying “net metering” policies that allow panel owners to subtract the power their equipment produces from monthly bills.
These utilities fear that having too many privately owned systems online would damage their bottom line and threaten their classic business model: generating power at large, central plants; distributing it via the grid; collecting rate-based fees from customers; and turning a profit.
New Views on Solar
But, solar businesspeople insist, utilities are looking at the potential of solar power incorrectly.
They agree that, even with recent drops in panel prices, the power they produce is still comparatively costly by conventional “per kilowatt” measures. But they say utilities can enhance their bottom lines by adding significant solar in well-thought-out ways. They point out that solar power not only is most plentiful when it’s most needed—on hot, sunny days, when using “peaker” plants to generate extra power for air conditioners is extraordinarily expensive—it is also “distributed generation.”
That means the electricity is used where it’s produced, avoiding the need for pricey new power lines and substations.
Solar panels are also immune to rising fuel costs and hedge against them. They don’t need expensive pollution controls that cut power plant efficiency. They reduce the severity and cost of grid outages, and they provide other cost- and risk-cutting technical advantages.
The problem, solar advocates say, is not solar power’s cost; it’s the classic utility business model’s inability to detect, analyze, manage, and exploit the savings and value that well-designed solar deployment produces. The best way to do that, they say, is by using “value of solar” formulas—which reveal and properly account for solar’s demonstrated bottom-line advantages.
The highly technical, relatively new economic metric has traction with the MPSC. A subgroup of the work group, created by the agency, will concentrate on understanding value of solar.
A Successful Intervention
The workshops are the direct result of interventions last year by the Environmental Law and Policy Center, a Chicago-based nonprofit that works on energy-related legal issues throughout the Midwest.
The firm teamed up with Michigan energy activist and expert Douglas Jester, a principal in the Lansing-based clean energy consulting group 5 Lakes Energy LLC, to contest DTE and Consumers’ required 2013 renewable energy plan. Neither utility had proposed additional solar development, tacitly ending DTE’s Solar Currents and Consumers’ Experimental Advanced Renewable Program.
Both programs pay panel owners higher rates for their solar power that can produce a profit in a few years, not a decade or more. The customer response is so strong that both utilities conduct lotteries to choose which applicants to admit to the limited programs.
In his deposition for contesting DTE’s plan to drop its solar pilot, Jester pointed to earlier MPSC determinations and criticized the company—as he did in a separate brief regarding Consumers—for not taking the next steps that conducting a pilot implies.
“The Company’s response appears to be begrudging compliance with the Commission requirement that it have a solar program, rather than a serious attempt to respond to Commission directives to support the growth of solar generation in Michigan,” Jester stated in his August 2013 deposition. “Other states are leaving Michigan behind in this sector and the situation will worsen unless the Commission reinforces its previous orders with concrete direction to the Company.”
ELPC also filed a deposition from Katie Bolcar Rever, of the Washington-based nonprofit Solar Energy Industries Association, who pointed out that Michigan’s numbers are paltry compared to solar development in other states. Maryland, Massachusetts, New Jersey, New York, and Pennsylvania, she said, have about as much sunshine as Michigan. Yet each installed more than 50 MW of solar power in 2012, while Michigan installed just 11 MW—about one-third of one percent of all solar installed in the U.S. that year.
Rever also testified that Michigan has 3,000 solar-related jobs, but most of them are in manufacturing because so little installation is occurring here.
“This represents a great opportunity for Michigan to complement its manufacturing jobs with additional jobs in the installation sector and continue to support the installation companies that have grown in response to its currently small solar market,” she said.
Rever also rejected the high prices the utilities projected for future solar installations, pointing to a 225 percent decline since 2008 when Michigan enacted its renewable energy mandate. She said that trend shows no sign of abating. That, she argued, means both utilities “can design a much larger solar program for a lower overall cost…[that] could likely … deliver significant economic and grid benefits to Michigan ratepayers in a cost-effective manner.”
MPSC responded to the ELPC motion for intervention by ordering DTE to participate in a solar work group, and invited Consumers, which faced the same intervention process, to participate as well. Both utilities accepted.
At the first meeting, MPSC staff, utility representatives, and solar business advocates each proposed goals for the work group.
Agency staff indicated they would like to eliminate the “boom and bust” cycle the utilities’ current programs foster, with their lotteries and incremental parceling out of power contracts; allow wider citizen and business participation in providing solar power; and bring long-term stability to Michigan’s solar growth.
Representatives of DTE and Consumers said little about specific goals, emphasizing instead that they were present to observe, listen, learn, add insight, and see if there was a way to develop more solar power that did not involve subsidies.
Solar business advocates repeatedly mentioned vanquishing the boom and bust cycle, and building a long-term and smooth path to more solar power in Michigan. They seek better understanding of the value of solar power, and to build a robust, community-based solar program that allows wide participation, particularly by people whose homes or budgets cannot accommodate building a solar system of their own.
The first meeting also established two other sub-groups: One will use the value-of-solar group’s finding to help design and propose new rates for power from panels; the other will propose different approaches the utilities could take to make solar development easier for its customers, while developing their own, utility-scale solar plants.
Jim Dulzo is the Michigan Land Use Institute’s senior energy policy specialist. Reach him at [email protected].