MICHIGAN WINS NEW ENERGY GAME, BOOM TO FOLLOW – HOW ABOUT THE NATION?

From an editorial in the Detroit Free Press: “Welcome, renewable energy. Welcome, energy efficiency. Welcome, stability for the big utility companies in Michigan.”

The “welcome” was for passage of legislation instituting a Renewable Electricity Standard (RES) for the state.

Michigan’s new RES requires the state’s utilities to obtain 10% of their power from New Energy sources by 2015.

With crucial legislation pending in the U.S. Senate this very day (see yesterday’s SHOWDOWN ON TAX CREDITS ), Michigan’s triumph is worth noting.

The Free Press editorial described the new law as “…comprehensive legislation…which Michigan desperately needed. As a compromise, it is not perfect, but it is a major feat for a Legislature often given to gridlock on big issues.”

Who’s for sending the U.S. Congress to Michigan for training?

The Senate, gridlocked by partisan bickering over energy for more than a year, will take up the Renewable Energy and Job Creation Act of 2008 (H.R. 6049) as soon as it can clear the financial crisis legislation from its docket, perhaps as soon as today.

The new Michigan law, though modest in its overall requirements, has interesting features that were both crucial to the compromise that got it passed and risky. It gives the state’s 2 biggest utilities 90% of the electricity market.

The accommodation, which the utilities claimed was necessary to accrue a cash flow big enough to develop New Energy assets, won their crucial political support. But that’s an awful lot of financial and resource leverage for 2 utilities to have over a state. The politics of the standard’s passage were harrowing and the compromise was a necessary risk. A political convenience can work out well or have unintended consequences. It takes courage to take the chance.

Is the U.S. Congress paying attention? Is there, for the “drill, baby, drill” crowd, a “compromise” of substance? Is the environmental left, to get vital subsidies for New Energy, willing to take a chance?

The Michigan legislation includes a net metering provision that, combined with small but certain increases in utility rates, could significantly spur consumer interest in small wind and rooftop solar installations.

Even more importantly, the legislation has strong tax credit incentives to drive consumers toward efficient appliance purchases and home and business efficiency upgrades.

Here’s how the Free Press adds up the pluses and minuses of the new legislation: “…the important thing is that Michigan no longer stands in the energy twilight, half-in and half-out on regulation, impervious to renewable energy, indifferent to how crucial efficiency gains are…electricity will become more expensive, but that was going to happen anyway. And as renewable energy sources take hold, the debate can resume on the need to set even bigger goals…”

DTE Energy, one of the 2 big utilities that drove the compromise, already has 42,000 acres awaiting wind installations.

Now all the state needs is for GM to get that plug-in hybrid electric vehicle to market and to make it a good one.

In the wake of the new laws, a Free Press reporter took a look at the state’s 4 major areas of development: Wind, solar, biofuels and energy storage (advanced auto batteries).

The most exciting of the reporter’s findings: Auto industry manufacturers have already started shifting over to New Energy production.

Conclusion: New Energy advocates in Washington, D.C., say this week, maybe today, is the Big Moment for the tax credits. Without Congressional action, they will expire at the end of the year and cause what might be the country’s last booming industries to go south for 2009.

Tell Congress to find the find the courage to risk compromise and vote YES on the Baucus/Grassley amendment and YES on H.R. 6049 at the American Wind Energy Association’s POWER OF WIND or the Solar Energy Industries Association’s Take Action

click to enlarge

State ventures into energy alternatives
Katherine Yung, September 21, 2008 (Detroit Free Press)
and
State plugs in an improved energy plan
Editorial, September 22, 2008 (Detroit Free Press)
and
Sweeping alternative enrgy bill heads to Granholm’s desk; Legislation would also raise utility bills
Chris Christoff, September 18, 2008 (Detroit Free Press)

WHO
Jennifer Granholm, Governor, Michigan; DTE Energy, Consumers Energy; NextEnergy, a Detroit nonprofit

WHAT
Michigan Governor Granholm pushed a Renewable Electricity Standard through her reluctant legislature, a signal accomplishment likely to mark the moment when the state’s economy started to turn around.

Look at those coastal and offshore assets! (click to enlarge)

WHEN
The new RES: 10% by 2015
Passage: September 18, the end of a long campaign by Governor Granholm and her political allies.

WHERE
The state of Michigan has instituted an RES and intends to develop New Energy.
Michigan is 14th among states in wind energy potential.
Harvest Wind Farm near Pigeon is Michigan’s 1st wind installation. It sells to one customer, Wolverine Power Cooperative.

WHY
The law:
- guarantees DTE and Consumers Energy 90% of Michigan’s electric market with the other 10% going to competing utilities.
- Critics say ratepayers will pay more; DTE and Consumers Energy say they must limit competition to finance new power plants and New Energy insallations.
- Governor Granholm advocates New Energy for the economic growth and jobs it will bring to the state.
- Ratepayer bills are expected to go up 2.5%/year ($2 for a $75/month bill) + a $3 flat fee for New Energy development (primarily wind).
- Businesses’ and many school districts’ rates will drop.
- Consumers will get state income tax credits for new, energy efficient appliances (refrigerators, washing machines, etc.) and efficicency building improvements (insulation, windows, etc.).
- Utility regulation eases: Power companies can raise rates before the Michigan Public Service Commission approves but PSC can block hikes if necessary.
- Net-metering will allow individual residential and commercial customers to feed their own renewable power onto the grid.
Wind:
- Ort makes gearbox covers and other parts for wind turbines. In the last 8-to-10 months, it took on debt to invest $5 million in new wind/solar equipment, now ~35% of Ort's business.
- Michigan has 27 wind energy suppliers but no turbine manufacturer.
Batteries:
- Detroit's Big 3 automakers and the state are trying to bring in lithium-ion battery production. Continental AG and Compact Power, the suppliers competing for the GM Volt contract will each build production facilities in Michigan if selected.
- Battery developers like A123 Systems Inc. do R & D work in Michigan.
Soklar:
- Michigan has 2 major solar industry suppliers, Hemlock Semiconductor Corp. and Dow Corning Corp., and a major thin film solar panel manufacturer, United Solar Ovonic. It has offered Hemlock tax breaks to build a factory but Hemlock is hesitant because of the state’s energy costs.Hemlock customer Evergreen Solar Inc., is building a solar panel materials plant in Midland.
Cellulosic ethanol:
- Michigan wants to be a leader in cellulosic ethanol made from wood chips, switchgrass and other nonfood agricultural crops. (It has 5 corn-based ethanol plants and 4 biodiesel plants.)
- Only 4 states have more timberland than Michigan and it is #1 in the amount of new annual unharvested forest growth.
- Mascoma Corp. of Cambridge, Mass., will build a $250-million cellulosic ethanol plant in the Upper Peninsula (to open in 2012 and employ 50), one of the U.S.’ 1st commercial-scale cellulosic ethanol plants.

In Michigan, where the production line was first perfected, Stan Ovshinsky perfected the thin film solar mass production facility. (click to enlarge)

QUOTES
- Free Press Editorial: The renewable energy goal -- 10% by 2015 -- is on the light side compared to what other states have done, but lawmakers were able to fend off some of the most egregious loopholes…A late addition to the bills, net-metering -- which will allow individual residential and commercial customers to feed their own renewable power onto the grid -- is a solid plus…The biggest win for customers, though, comes in an energy efficiency program that is designed both to stretch the state's power sources further and to help keep costs down at the household level…”
- Dan Radomski, vice president of industry services, NextEnergy: "Our manufacturing base maps better to wind than anything else…"
- Robert Milano, President, Ort: "Michigan has potential…But the mentality has to change. You have to be aggressive. You have to be competitive."