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Nofs: Mandates not best solution for MI energy future

February 10, 2015

Article courtesy of MIRS News Service

With Michigan’s current renewable portfolio standards (RPS) set to expire, Sen. Mike NOFS (R-Battle Creek) said he thinks the time is ripe to take state energy policy in a new direction.

After months of deliberation and debate with all factions of the energy industry, the chair of the Senate Energy and Technology Committee said his ideal plan lies in foregoing a mandate on renewable energy, instead opting for a clean energy standard likely based on the emissions of a new, single-fired natural gas power plant.

Such a standard, he says, would allow the state flexibility if the federal government requires an overarching renewable energy mandate down the road while allowing for more competition and creativity among energy providers.

“With the current law, you have to try and guess what the future’s going to be, and try and write definitions in it,” Nofs said. “We want to get away from that.”

The current mantra on state energy policy among Republican leaders is simple in concept — make energy clean, make it affordable and make it reliable.

Both Gov. Rick SNYDER and Senate Majority Leader Arlan MEEKHOF (R-West Olive) have echoed these comments, but haven’t addressed specifics as to how those goals can be accomplished.

Snyder plans to deliver a special message on energy policy in March, but has indicated he’d like to make clean energy a top priority this year and begin to make “a long-term transition away from coal” (See “Snyder Hopes To Make Clean Energy Top Priority In 2015,” 1/15/15).  

Meekhof deferred to Nofs when asked about his caucus’ specific energy goals during his presentation of the Senate Republican agenda Tuesday, but noted that addressing the issue this year is critical to the state.

“Under the portfolio of renewables, my personal opinion is all of the above,” Meekhof said. “But again, they have to be cost effective — we can’t have something that’s subsidized and then when that subsidy goes away, that part of the energy industry goes away. That doesn’t work out either, and that’s not healthy.”

Discussions for a long-term strategy that could accomplish those goals began in earnest last June, when Nofs launched a workgroup to begin tackling the process of retooling PA 295 (See “Nofs Restarting Energy Work Group,” 6/2/14).  

Signed in 2008, the law set a renewable portfolio standard of 10 percent renewable energy production by 2015; a goal the state is expected to easily reach.

PA 295 worked, Nofs said — it jumpstarted the renewable energy sector in Michigan, drove prices down and showed the industry wind power is a formidable contender for future investment.

But mandates are for industries that aren’t tested or trusted, Nofs said. Because wind power has shown its ability to make clean energy in a cost-competitive manner, Nofs said the industry should be able to hold its own on the market without additional protections, especially as storage technology for renewable energy sources improves.

“Everybody wants certainty,” he said. “Before, in 2008, we didn’t have a track record. Now we do have a track record and they’ve done well — all the things they told us back then work, and they are cost competitive now.

“They’ve been telling me for years that it’s cheaper than the utilities, and I think I believe them. They have a good argument to make there, so let them go ahead and make their position available.”

While the continued focus on moving the state away from coal is encouraging to many in the environmental sector, some are concerned wrapping natural gas into the mix of clean energy and letting go of a renewable portfolio standards could set the wrong precedent for future investment.

Putting too much emphasis on natural gas energy production could drive up prices as the substance is used for more and more purposes, Michigan Environmental Council Policy Director James CLIFT said.

Without renewable portfolio standards, he said, there could be less of an emphasis on blending additional renewable energies into the mix, and the industry could fall onto natural gas as a less environmentally-friendly crutch.

“It’s kind of up in the air on how much of each of those they’ll blend into a portfolio,” he said. “We think a healthier blend is to blend that renewable energy in with natural gas with the other forms of energy. The question is, if you don’t have an RPS, how do you get to that right mix?”

The unpredictability of natural gas’ price and availability on the world market also makes it a less safe bet than other alternatives, said Jack SCHMITT, the deputy director of the League of Conservation Voters.

That said, Schmitt said he is excited to see the discussion move towards healthier energy options for the environment.

“I think fundamentally at this early stage, we’re open to and excited about discussing any greater use of renewable energy and energy efficiency,” Schmitt said. “The conversation, in broad terms, is the right one.”

Nofs said he realizes the price of natural gas will inevitably go up, but as coal-fired plants become more and more obsolete, he said natural gas is an ideal option to move to a cleaner carbon footprint. He predicted continued investment in the natural gas sector would ensure there wouldn’t be a shortage in the state.

One potential solution the Senate Republican said could promote the correct mix of energy options is to tweak the process companies move through to obtain permissions from the Michigan Public Service Commission.

He’d like to set up a system where companies step in and testify before the commission before proposals from utilities and other companies are set in stone — if they make their arguments and compete up front, the final product will likely be cheaper and more efficient, he said.

“We don’t have that process today, we have sort of a certificate of need, but it’s basically after they’ve already proposed something,” Nofs said. “We want to sort of put it at the front end and consider all options.”

Energy choice is also of grave concern to Nofs because of the energy situation in the Upper Peninsula. Ideally, he’s looking towards proposing a plan that would put major power consumers on the hook for costs of utilities building additional plants if those companies attempt to move back into regulated energy systems and excess capacity is unavailable.

“I’m not going to hurt anybody that’s out there. They can stay out there forever as far as I’m concerned,” he said. “What I don’t want is the people that are already being taken care of and paying the power plants in the regulated market . . . paying for that other guy being able to come back.”

Although it’s hard to say whether what Nofs is proposing is the right option to address barriers without concrete policy details, it could be enough to alleviate concerns of advanced energy companies, said Dan SCRIPPS, president of the Institute for Energy Innovation.

However, it’s important the policy ensures it’s the ratepayers — not utilities or businesses — whose best interests are kept in mind, Scripps said.

The institute recently released a report outlining a series of barriers facing Michigan policymakers as they attempt to access the benefits and opportunities associated with advanced energy options (See “What Comes After 10% Renewable Energy By 2015?” 1/26/15). 

Skip PRUSS, a principal with 5 Lakes Energy LLC who also worked on the IEI report, had a different take on how environmentally friendly businesses and renewable energy companies could perceive a clean energy standard policy.

“Broadly, it may not provide optimal market signals,” Pruss said.

For companies bent on using as little carbon as possible in their operations, lack of renewable energy options could deter them from settling down in Michigan, he said. While natural gas is far cleaner than coal, Pruss said sloppy extracting methods often release methane into the air and adds to the process’ carbon profile.

Nofs said his main focus is to promote clean and efficient energy solutions while remaining adaptable, because predicting the future likely isn’t going to work. Impeding federal government standards could also put the state in a bind in the long term if policymakers guess wrong this year, he said.

“We’ve got to get our policy in line, give (energy companies) the flexibility so that whatever their final rule is, they’ll be able to react and already be planning,” he said.

Considering the ever-changing status of the industry, Scripps said that goal is appropriate.

“I think his focus is exactly the right one — we don’t know what tomorrow will bring, and we have to respond to changes in technology and declining costs in certain areas as time goes on,” Scripps said. “We have to make sure we’re making the best decisions as they come up and be focused on energy innovation and finding new partnerships.”

Nofs said he’d like to have some bills introduced and begin talks in his committee by the time the Governor speaks in March. His “aggressive” goal to get a policy on the books is this June, but he said he’s willing to extend that deadline up to the end of 2015 if that’s what it takes to ensure everyone with vested interest in the topic has said their piece.

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