DTE Energy's long-term resource plan undersells renewable resource opportunities while assuming lengthened lifespans for its uneconomic coal units, according to numerous comments filed on behalf of stakeholder groups.
The utility's integrated resource plan (IRP) assumed no "persistent capacity need" until 2030, effectively predetermining its starting resource mix and ignoring more variable modeling scenarios that would have signaled more accurate, lower solar prices, say witnesses.
"Rather than letting the modeling actually determine on an economic basis what came out of the process and what was the least cost solution, they sort of hard-coded in a lot of these resources into the mix," Solar Energy Industries Association (SEIA) Director of Rate Design Kevin Lucas told Utility Dive. "So what we were left with was a modeling exercise that didn't actually have an opportunity to optimize the overall system."
"[DTE] selectively chose to use some older data when newer data was available and ... didn't make it as robust of an effort to incorporate the near term price declines in solar."
Director of Rate Design, SEIA
Research increasingly finds renewable energy resources are cheap, viable options for utilities planning their long-term capacity needs. Even in traditionally coal-heavy states like Indiana and Michigan, the paradigm is shifting for what consumers and regulators expect from their utilities.
But undervaluing the benefits of more economic resources, such as renewables and energy efficiency, isn't necessarily uncommon for utilities, Union of Concerned Scientist Senior Research Analyst Joe Daniel told Utility Dive.
"A lot of utilities overestimate the cost of renewables. A lot of utilities underestimate the benefits of efficiency. But what makes the DTE IRP unique is that they come out and admit that the model runs that they did for this process didn't inform their plan," said Daniel.
Pricing shortcut undersells solar
Several groups pointed to DTE's modeling as a failure to accurately measure the cost of solar and other renewable resources. The utility's starting point assumed current resource scenarios, keeping the retirement dates for some of its older coal plants at 2030 and 2040, even when those plants are less economic than alternatives, say witnesses.
But the utility said its solar cost data was shared with stakeholders last fall, and none of those groups raised concerns at the time.
"None of the intervenors suggested an alternative set of cost data that met the [Michigan Public Service Commission] filing requirements," DTE spokesperson Randi Berris told Utility Dive in an email. "The IRP process is complex and the modeling reflects that. The modeling software used by DTE is very commonly used across the industry and has robust capabilities."
The software is common, agreed Lucas, but the larger problem wasn't the software itself, but rather the predetermined inputs.
"It's not uncommon for some of the cost data to be a little bit outdated," he said. "Sometimes it takes utilities six months to a year to do the analysis and there's inevitably some degree of aging in the data. But the fact that they selectively chose to use some older data when newer data was available and the fact that they didn't make it as robust of an effort to incorporate the near term price declines in solar, those are two things that stand out."
"DTE's IRP projections are more specific in the near-term five year time frame when battery storage technology and costs are not sufficient to meet our requirements."
Spokesperson, DTE Energy
Through those scenarios, the levelized cost of solar was overstated by 39% — at $69.48/MWh, rather than the more accurate $50.09/MWh, Lucas testified. Further, the company didn't include scenarios that modeled solar plus storage as an alternative to meeting peak capacity needs.
"DTE's IRP projections are more specific in the near-term five year time frame when battery storage technology and costs are not sufficient to meet our requirements," said Berris. The utility "has proposed various solar and storage pilots in the near term to improve understanding of how these technologies can be used to serve customers' energy needs reliably." Its IRP is "purposely flexible" to accommodate future cost improvements, she added.
But assuming the utility's old, uneconomic peaker plants could best meet future capacity without considering the potential cost benefits of solar plus storage is a glaring omission, said Lucas. In his analysis, he found several of the utility's peaker plants "suffer from high outage rates that worsen during high usage periods," such as summer months when that additional load is needed.
"Some of these units that date back to the ‘60s and 70s," he said. "And to just assume that they would continue to run for 20 more years without a more critical look I thought was problematic. ... and that's where a properly optimized system could … find out if there's a cost effective way of replacing them with something cleaner."
Ignoring third party options
The utility's resource plan also lacked third party options, including a failure to account for renewable resource capacity required under the Public Utilities Regulatory Act (PURPA).
Instead, the utility proposed full ownership of all the assets under its IRP. Witnesses pointed out that this was particularly ironic in the context of a July MPSC order that called for the utility to analyze third party finance options in its plan, though the order came after the utility had already filed.
"This is supposed to be the place where modeling is done, where optimization is done, where you're supposed to explore all options for prudently providing power to your customers."
Michigan Senior Energy Analyst, NRDC
"DTE has a track record of building renewables at costs competitive with or lower than third party developers," said Berris. "Furthermore, once long-term costs are considered, utility ownership provides benefits to customers — similar to the benefits of owning a car after it is paid off, versus leasing a car."
But stakeholders say this is a further example of the utility not fully fleshing out its resource options, and potentially shielding customers from full cost benefits.
"This is supposed to be the place where modeling is done, where optimization is done, where you're supposed to explore all options for prudently providing power to your customers," Michigan Senior Energy Analyst at Natural Resources Defense Counsel Ariana Gonzalez told Utility Dive. "And to not look at third party is not fulfilling that requirement."
"I've seen utility commissions reject resource plans for far less."
Senior Research Analyst, UCS
Another "weird choice" by the utility was its emphasis on the voluntary green pricing program, which has premiums, so it ends up costing customers more than if the utility would have just included more cost-effective renewables into its portfolio, said Gonzalez.
The city of Ann Arbor took issue with this decision as well, noting the utility's "over-reliance on voluntary programs perpetuate energy injustices and inequalities throughout DTE's service territory, especially as it relates to who is able or not able to access clean energy programs," in its testimony.
Environmental groups (the Michigan Environmental Council, NRDC and the Sierra Club), clean energy groups (the Environmental Law & Policy Center, the Ecology Center, SEIA, UCS, Vote Solar and the Michigan Energy Innovation Business Council), the city of Ann Arbor and a number of other groups are recommending the commission reject DTE's IRP.
"DTE is confident in its modeling," said Berris. "The company submitted four scenarios of various renewable energy configurations to provide a good foundation for discussion to achieve the best possible outcome for affordability, reliability and the environment."
But witnesses say the plan is inconsistent with modern energy planning, and the commission will likely agree.
"I've seen utility commissions reject resource plans for far less," said Daniel. "So I think the [MPSC] should take a long, hard look at this. And I'm hopeful that they come to the same conclusion that I do, that DTE needs to go back to the drawing board."