The following is a contributed article by Laura Sherman, President of the Michigan Energy Innovation Business Council.
All across the country, companies have been embracing renewable energy. In 2018, U.S. companies contracted to use a total of 8.5 GW of renewable power, triple the amount in 2017, according to Bloomberg New Energy Finance.
While the boom in corporate renewable energy procurement has been going on for a few years, the trend keeps setting new records. A recent Wood Mackenzie study found that in 2018, companies like General Motors, Facebook and AT&T bought over six gigawatts of renewable capacity, the highest amount in one year yet.
A look at maps of where these deals happen, however, shows that the coasts dominate. Michigan had only 3 deals in 2018, as did neighbor Ohio, far below similarly sized states like Virginia (7) and North Carolina (14), according to data from the Renewable Energy Buyers Alliance.
Fortunately, the Midwest has some of the best renewable resources in the U.S. We’re also home to companies that are the economic engine of the country –— many of whom have made commitments to purchase renewable energy.
Michigan serves as a good case study of this issue of unmet corporate demand for renewable energy.
We, the Michigan Energy Innovation Business Council (Michigan EIBC), the state's association for companies working in solar power, wind, electric vehicles, energy efficiency and other advanced energy industries, as well as corporations interested in purchasing renewable energy, have found that if all the companies in the state that wanted to invest in renewables could do so, it would increase the amount of electricity generated by wind, solar and other renewables by about 25% on an annual basis.
Michigan corporations, schools and municipalities are already taking advantage of the initial "green tariff" programs offered by Michigan’s investor-owned utilities. To unlock more of the demand, it will take improvements to these proposals and innovations from the utilities to give corporate consumers more access to competitive sources of renewable power.
The topic is particularly timely because right now, Michigan regulators are considering how DTE Energy, the state’s largest electric utility, will meet its customers’ needs over the next five, 10 and 15 years through its integrated resource plan (IRP). DTE’s IRP will have a huge impact on the extent to which Michigan companies can join the corporate renewable purchasing trend.
This is not to say that companies in Michigan have ignored renewables. The two biggest investor-owned utilities in the state, DTE and Consumers Energy, have recently developed “green tariffs” specifically aimed at large customers, in which these customers “subscribe” to receive a certain amount of their energy from new wind and solar projects being developed by the utilities. For example, General Motors has used Consumer Energy's green tariff to match energy used at two of its industrial facilities in Flint with a wind farm in Tuscola County. GM, Ford, the University of Michigan and the Detroit Zoo are all examples of notable institutions that have signed on to DTE’s tariff.
But we know from talking to our members that many more deals like this could be struck. Most of the Fortune 500 companies that are headquartered in Michigan have adopted targets to reduce emissions, install renewable energy and/or improve energy efficiency. These include not only GM and Ford but also Whirlpool, Dow Chemical, Kellogg, Stryker Corp. and BorgWarner.
Michigan EIBC made a conservative count of several Michigan companies that have declared goals of increasing their reliance on renewable energy and found that they have a combined 2 million megawatt-hours of unmet demand for renewable energy. In 2018, the entire state of Michigan generated 8 million MWh from renewables, excluding hydroelectric power.
What is stopping companies from making more renewable purchase deals? Part of it is because the green tariffs from the utilities are relatively new, and most corporate customers are still exploring whether they can use these programs to meet their sustainability goals while also receiving competitively-priced energy. However, there are also improvements that could be made to the green tariff programs to make them attractive and affordable for potential subscribers.
Excess costs: MIGreenPower
In its proposed IRP, DTE says it plans to build a little over 700 MW of renewable power capacity in the near-term. But depending on the popularity of the utility’s green tariff program, MIGreenPower, the amount of new renewables built could be anywhere from about 166% to 208% higher — the IRP proposes that depending on MIGreenPower subscription levels, the utility may build anywhere from 465 to 715 MW of additional renewable power.
So getting the details right on the green tariff program and making sure it is appealing to corporate customers will influence how much wind and solar DTE needs over the next several years.
The MIGreenPower program must charge customers a price for renewable energy that will be appealing enough to encourage them to sign up but also fully cover the costs of the program, so costs are not shifted onto other customers.
However, the proposed IRP underestimates how much power capacity DTE will need over the next several years. Exactly how this happened is complicated, but is explained in testimony from 5 Lakes Energy Partner Douglas Jester, submitted on behalf of Michigan EIBC and the Institute for Energy Innovation.
The short story is that DTE needs to have a certain amount of power capacity available for the next decade to reliably serve its customers, and in the IRP, the utility said it had no capacity need for the next decade. But Jester questioned the numbers used in the resource plan, and found that DTE does indeed need new capacity in the next decade.
As a result of this underestimation, the MIGreenPower program costs more for customers than it should.
How? When a corporate customer purchases renewable energy through MIGreenPower, the customer pays per-kilowatt hour fees representing the costs of the solar and wind energy being purchased (as well as the program’s marketing and administrative costs). The customer also receives a credit representing the traditional power not used by DTE because the utility has these solar and wind projects instead. Essentially, the more DTE avoids having to build or run power plants and other electricity system infrastructure, the cheaper it is for the customer to participate in MIGreenPower.
But DTE’s proposed IRP claims the utility does not need new capacity for a decade, making the avoided costs fairly low (because there are not many new power sources that would be avoided, under DTE’s analysis). Corporate customers who sign onto MIGreenPower thus get less of a credit and have to pay more to go green.
Again, these kind of renewable purchasing programs for large corporate customers are relatively new for Michigan, especially compared to other states where these deals have been going on for years. The MIGreenPower program will undergo a biennial review starting in April 2020. The corporate purchasing landscape is also shaped by Consumers Energy’s own large corporate green purchasing program, which will be revised and reviewed by the Michigan Public Service Commission starting in October 2019.
Finding the right balance to enable corporate customers to buy renewable energy at competitive prices will make Michigan a leader in the region.