Proposal 3:
Key Questions and Answers
Putting thought into action
September 2012
Proposal 3, known as the 25% by 2025 (25x25) ballot initiative, would amend
the state’s constitution by requiring electricity providers to obtain by 2025 at
least 25% of their electricity from renewable energy sources. A constitutional
amendment of this nature raises numerous technical, legal, social, and economic issues. The following questions and answers highlight some of these
topics.
Costs and Rates
QUESTION: How does the cost of existing conventional
generation compare to renewable generation in Michigan today?
Answer: Renewable generation is considerably more expensive than
existing generation.
Forecasts or projections of prices, demand, and other factors in the energy industry fluctuate considerably. And despite the extensive analysis that goes into
forecasting by government and industry experts, the numbers are often not
consistent with the actual values due to unforeseen factors and the inherent
complexities. Public Sector Consultants was asked by the Clean Affordable
Renewable Energy for Michigan Coalition to document and compare the cost
of producing power by Michigan’s two largest electric companies to the cost
of renewable energy sources in Michigan. Exhibit 1 illustrates the results of
this analysis and documents the known costs of electricity sources in the state.
‹‹ Conventional represents the average cost to produce power from
Detroit Edison and Consumers Energy’s existing generation, including
coal, natural gas, nuclear, and hydroelectric plants, as applicable. It includes all current costs to generate power, including capital and operating costs. It does not include purchased power used to serve the utilities’
customers—only the utilities’ own generation.
‹‹ Conventional with Purchased Power represents the av-
erage cost of Detroit Edison and Consumers Energy to supply power to
serve customers in Michigan. Like the figure for “conventional,” it includes costs for generating electricity but it also includes purchased power
and transmission costs. And it is based on the approved costs in the utilities’ most recent rate cases.
‹‹ Renewable represents the average price of all renewable energy proj-
ects that are or will be in service by the end of 2012. Only projects with
pricing available are included. We have taken into consideration the federal production tax credit (PTC) by including it in the cost, as applicable to
the particular technology, because it is a direct subsidy. The PTC is shown
as an add-on to the Renewable bar in Exhibit 1.
Proposal 3: Key Questions and Answers
For both conventional and renewable sources, the amounts
shown do not represent the full cost of delivering power.
Notably, transmission costs and losses are not included for
either renewable or conventional production in the analysis
despite being an important cost component. Transmission
costs are an important consideration for renewable energy
because enhanced transmission capacity is often needed
to connect new generation and handle the intermittency of
wind energy. Transmission is included in the “Conventional with Purchased Power” amount shown.
EXHIBIT 1. Cost of Existing Renewables Compared to
Existing Conventional Generation in Michigan
Renewable is
at least 67%
higher than
conventional
Conventional
Conventional with
Purchased Power
Renewable
$0
$20
$40
$60
$80
$100
$120
$/MWh
SOURCE: Public Sector Consultants Inc., using data for conventional generation cost obtained from Detroit Edison Company and Consumers Energy Company rate cases filings and Annual Report of Electric Utilities, 2011, April 2012, based on MPSC Form P-521. Certain items augmented by data provided by utilities. Data on “conventional with purchased power” is from the MPSC’s cost of service studies
in case numbers U-16472 (Detroit Edison) and U-16794 (Consumers Energy). Data on renewable energy cost (without production tax credit) obtained from MPSC, Report on the Implementation of P.A. 295
Renewable Energy Standard and the Cost-Effectiveness of the Energy Standards, February 15, 2012.
NOTES: Conventional generation amount is the weighted average of Detroit Edison Company and Consumers Energy Company cost of producing electricity using their existing generation. The cost represents the 2011 actual busbar cost of electric generating facilities divided by generation output net of plant use. It includes the capital, operating, and maintenance costs, including return on investment, depreciation of assets, fuel, taxes, insurance, etc. It does not include transmission service or purchased power expenses.
Conventional with purchased power amount is the weighted average of Detroit Edison Company and Consumers Energy Company production cost of service based on MPSC-approved costs. It includes all
production costs, including purchased power and transmission service.
Renewable cost is the weighted average levelized cost of all renewable energy contracts submitted to the MPSC with per-unit pricing available. Pricing of some contracts not available. In addition, the
amount includes the federal production tax credit for wind energy of $29.20 per megawatt-hour and $14.60 for biomass and landfill gas, as deemed applicable. The PTC is based on current credits of $22 per
megawatt-hour and $11 per megawatt-hour for biomass and landfill gas adjusted for inflation, levelized, and grossed up for taxes. See also MPSC, “Michigan Utility Scale Wind Farms,” updated June 2012,
for project commercial operation dates.
The cost of renewable energy to meet the renewable portfolio standard (RPS) is declining, particularly with several
wind energy projects that are expected to go into service
this year. Exhibit 2 plots individual renewable projects and
the costs for conventional generation at Detroit Edison and
Consumers Energy. Only renewable energy projects with
publicly available pricing submitted to the Michigan Public
Service Commission (MPSC) are included. Some of the
higher prices shown were renewable projects implemented
before or shortly after the passage of Michigan’s current
energy plan, PA 295, and there has been a downward trend
in pricing overall. See the table following Exhibit 2 (page
4) for a full listing of renewable energy projects and related
pricing. As in Exhibit 1, we have included in the cost the
federal production tax credit, as applicable, for renewable
projects. Note that the PTC for wind, currently set at $22
per megawatt-hour, expires at the end of 2012 but applies
to projects that went into service prior to that date. If the
credits are not extended by Congress, this may affect the
purchase cost and viability of future projects.
2
Prepared by Public Sector Consultants Inc.
Proposal 3: Key Questions and Answers
EXHIBIT 2. Conventional vs. Renewable Energy Costs
$200
$/MWh
$150
$119
Renewables
average
$100
Renewable
$50
Conventional
$0
SOURCE: Public Sector Consultants Inc., using data for conventional generation cost obtained from Detroit Edison Company and Consumers Energy Company rate cases filings and Annual Report of Electric Utilities, 2011, April 2012, based on MPSC Form P-521. Certain items augmented by data provided by utilities. Data on “conventional with purchased power” is from the MPSC’s cost of service studies
in case numbers U-16472 (Detroit Edison) and U-16794 (Consumers Energy). Data on renewable energy cost (without production tax credit) obtained from MPSC, Report on the Implementation of P.A. 295
Renewable Energy Standard and the Cost-Effectiveness of the Energy Standards, February 15, 2012.
NOTES: Conventional generation amounts represent Detroit Edison Company’s and Consumers Energy Company’s actual costs of producing electricity using their existing generation. The cost represents
the 2011 actual busbar cost of electric generating facilities divided by generation output net of plant use. It includes the capital, operating, and maintenance costs, including return on investment, depreciation
of assets, fuel, taxes, insurance, etc. It does not include transmission service or purchased power expenses.
Conventional with purchased power amount is the weighted average of Detroit Edison Company and Consumers Energy Company production cost of service based on MPSC-approved costs. It includes all
production costs, including purchased power and transmission service.
Renewable cost is the levelized cost of renewable energy contracts submitted to the MPSC with per-unit pricing available. In addition, the amount includes the federal production tax credit for wind energy of
$29.20 per megawatt-hour and $14.60 for biomass and landfill gas, as deemed applicable. The PTC is based on current credits of $22 per megawatt-hour and $11 per megawatt-hour for biomass and landfill
gas, adjusted for inflation and levelized and grossed up for taxes. See also MPSC, “Michigan Utility Scale Wind Farms,” updated June 2012, for project commercial operation dates.
This is a simplified analysis of the cost of producing
power from different sources. Therefore, several points
are important when reviewing the graph and underlying
information:
‹‹ The per-unit costs for utilities’ existing conventional
generation is not an “apples to apples” comparison to
per-unit contract prices for renewable energy projects.
First, the accounting of conventional generation owned
by a regulated utility differs from a renewable energy
contract. For example, utilities’ cost of conventional
generation includes all current costs to generate power,
including capital and operating costs. The renewable
energy purchased power price may not necessarily account for all of these expenses and represents the levelized costs over the life of the project. The conventional
generation amount represents the actual costs for 2011,
and these costs may fluctuate from year to year based
on several factors such as fuel costs, unit efficiency,
plant retirements, and new capital expenditures such as
environmental control equipment. Second, the conventional generation includes costs associated with both
newer and older power plants that make up the utility’s
3
Prepared by Public Sector Consultants Inc.
Proposal 3: Key Questions and Answers
$/MWH
Conventional
Detroit Edison
Consumers Energy
Detroit Edison Conventional with Purchased Power
Consumers Energy Conventional with Purchased Power
Renewable
Elk Rapids
Zeeland
Scenic View Dairy*
NANR Lennon
L’Anse Warden*
Blue Water Renewables—Smith Creek
Northern Oaks
Stoney Corners*
Gratiot County
Michigan Wind II
Garden I
Blissfield
Harvest Wind II
Lake Winds
WM Renewable Energy - Pine Tree Acres
DTE Thumb Wind project
Tuscola Bay Wind
Fremont Community Digester
$/MWH
w/ PTC**
Type
In-service date
n/a
n/a
n/a
n/a
Coal, nuclear, natural gas, and hydro
Coal, natural gas, and hydro
Mixed
Mixed
Varies
Varies
Varies
Varies
$121.31
151.40
136.30
151.87
113.54
113.60
151.59
136.20
123.60
123.20
135.40
130.08
127.58
139.20
136.99
93.00
90.10
153.95
Hydro
Landfill gas
Biomass
Landfill gas
Biomass
Landfill gas
Landfill gas
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Landfill gas
Wind
Wind
Biomass
2009***
2009***
2009–2010***
2010
2010-2011
2011
2012
2008-2012
2012
2012
2012—Expected
2012—Expected
2012—Expected
2012—Expected
2012—Expected
2012—Expected
2012—Expected
2012—Expected
$56.2
76.4
68.61
74.43
$121.31
122.20
121.70
137.27
98.94
99.00
122.39
107.00
up to 94.40
94.00
106.20
100.88
98.38
110.00
122.39
61–64.00
60.90
139.35
* Weighted average for multiple project phases.
** The federal Production Tax Credit of $29.20/MWh for wind energy and $14.60/MWh for landfill gas and biomass are included.
*** Prexisting project prior to PA 295. Date refers to effective date of contract, not actual in-service date.
NOTE: Experimental Advanced Renewable Project (customer-owned solar installations) not shown on graph.
generation fleet. Some of these facilities are fully depreciated assets. In contrast, the renewable energy
projects shown are for individual projects, the majority
of which were placed into service fairly recently.
‹‹ Production tax credits for renewable energy projects
are included, as deemed applicable based on the generation type, size, and in-service date. Any subsidies
for conventional generation are not known or reflected
in the cost.
Question: Will Proposal 3 increase electricity
costs?
Answer: Yes.
As a new government mandate, Proposal 3 would increase
the level of capital investment by and risk to the utility industry. The industry would be required to make a multibillion-dollar investment in new generation to meet the mandate imposed by Proposal 3. These costs will ultimately
be borne by utility ratepayers. Proposal 3 is also expected
to increase the need for transmission upgrades and may
raise operating costs, all of which would be passed on to
ratepayers.
Without any renewable portfolio standard, utilities invest
in new generation if and when it is needed to maintain reliable electric service—as well as making regular, ongoing
investments in infrastructure to replace aging equipment
and meet government mandates such as environmental requirements. These investments are subject to need and prudence reviews by regulators. An RPS mandate can change
that paradigm, requiring utilities in some cases to build or
purchase renewable energy even if it is not needed to meet
customer demand for electricity. This is a potential issue
under the current RPS but may have a greater impact on
rates as the RPS level is increased, particularly given the
more limiting definition of qualifying renewable resources
under Proposal 3. In addition, mandates of this kind may
lead to greater leniency from regulators in terms of the
utility’s cost recovery because the utility was operating
under the mandate.
4
Prepared by Public Sector Consultants Inc.
Proposal 3: Key Questions and Answers
The cost of renewable energy generation at today’s prices
in Michigan is considerably higher than the cost of utilities’ existing (albeit older) generation plants. For example,
the cost of Detroit Edison’s generation in 2011 was 5.6
cents per kilowatt-hour1—less than two-thirds the cost
of renewable energy contracts submitted to the Michigan
Public Service Commission (9.1 cents per kilowatt-hour).2
When the tax credit and other costs attributed to renewable
energy are factored in, the price difference is even greater.
Question: Will rates increase?
‹‹ What cost components below are included in the 1%
calculation?
™™ Transmission upgrades
™™ System integration costs to account for intermittent resources
™™ Environmental or “wear and tear” costs from
ramping of existing generation to handle fluctuations in output from intermittent resources
™™ New facilities such as natural gas peaking units or
storage capability that may be needed to maintain
adequate power supply
Answer: Yes, but it is not clear by how much.
‹‹ Of all cost components included, how does one isolate
The ballot language states that “compliance with the clean
renewable electric energy standard shall not cause rates
charged by electricity providers to increase by more than
1% in any year. Annual extensions for meeting the standard may be granted, but only to the extent demonstrated
to be necessary for an electricity provider to comply with
the foregoing rate limitation.”3 But this language raises
many questions, the answers to which may affect rates.
‹‹ Could amounts over the 1% be recouped by the util-
For example:
‹‹ What is the baseline against which the 1% is calcu-
lated? In other words, how is the determination made
as to what rates would have been without the 25%
requirement?
‹‹ Who determines the 1% threshold? The legislature?
The MPSC? Many Michigan utilities—municipal utilities, for example—are not currently under rate regulation by the MPSC.
the costs attributed to Proposal 3—instead of a cost
increase caused by some other factor (e.g., increased
environmental regulation, increased price of fuel
source)?
ity in later years (with interest) as long as the annual
amount charged to customers does not exceed 1%?
‹‹ If an extension is granted to utilities under this provi-
sion because the utility is unable to comply with the
standard without exceeding the 1% limit, will ratepayers still pay for the utilities’ compliance costs and investments to date?
In contrast to the certainty of the current energy plan, PA
295, which was enacted in 2008, Proposal 3 leaves many
questions about rate levels and compliance unanswered.
This is cause for concern because there have been unintended consequences associated with rate caps in other
states despite good intentions by policy makers to protect
consumers.
1
Detroit Edison Company, Annual Report of Electric Utilities, 2011, April 18,
2012, based on MPSC Form P-521. Certain items augmented by data provided
by Detroit Edison Company. This represents the 2011 actual busbar cost
(cumulative cost to the point at which power leaves the generating station) of all
Detroit Edison electric generating facilities divided by its generation output net
of plant use. It includes the capital, operating, and maintenance costs, including
return on investment, depreciation of assets, fuel, taxes, insurance, etc. It does
not include transmission service or purchased power expenses.
2
The weighted average levelized cost of contracts submitted to the Michigan
Public Service Commission for all types of renewable energy sources is 9.12
cents per kilowatt-hour. See Michigan Public Service Commission, Report
on the Implementation of the P.A. 295 Renewable Energy Standard and the
Cost-Effectiveness of the Energy Standards (February 15, 2012), at 24-25. The
renewable energy contract prices do not reflect the federal production tax credit.
It is important to understand that these points of reference do not represent the
full cost of producing and delivering power to customers.
3
From ballot proposal to add new Section 55 to Article IV of Michigan
Constitution. Michigan Energy, Michigan Jobs, 2012. Available:
http://mienergymijobs.com/Proposal.aspx. (Accessed 8-15-12.)
5
Prepared by Public Sector Consultants Inc.
Proposal 3: Key Questions and Answers
Constitutional Change and
Renewable Energy Definition
Question: 30 states—including Michigan—have
a renewable portfolio standard, but no state has it
in its constitution. Should Michigan be the first
and only state to constitutionally mandate a
renewable portfolio standard?
Answer: No.
A state’s energy policy should be flexible and responsive to
changing technological and market conditions. Because of
this, state energy policy belongs in statute—where it can
be amended and updated to reflect advances in technology
or new market conditions, as well as contain the detailed
practical language that guides both government and stakeholders on implementation.
Colorado, Washington, and Missouri enacted renewable
energy standards through ballot initiatives, which are
sometimes confused with a constitutional amendment.
These ballot initiatives created statutory renewable standards. Colorado’s law has already been amended twice by
the state legislature to account for economic and technical
advances.
A state’s energy policy should be based on research and
analysis. Michigan currently has an energy plan that was
adopted by the legislature in 2008—PA 295. The process
that led to Michigan’s current plan—in-depth research,
system modeling, public vetting, implementation strategy,
and thorough legislative review—resulted in a comprehensive set of interrelated reforms designed to spur investment
in clean energy and other technologies, create jobs, maintain reliability, and provide affordable rates for consumers.
The state’s current RPS of 10% by 2015, like other features
of the 2008 energy plan, is being monitored annually and
is subject to review and adjustment.
A state’s energy policy should be
flexible and responsive
to changing technological
and market conditions.
In contrast, Proposal 3 contains no plan for implementation, leaves many important questions unanswered, and
could only be changed by another constitutional amendment. This lack of planning combined with the difficult
process for making adjustments makes this risky for
Michigan, particularly given the potential reliability and
economic impacts at stake.
Question: How does the definition of
renewable energy in Proposal 3
compare to the other states that have a
renewable portfolio standard and Michigan’s
current 10% RPS?
Answer: It would be the most restrictive definition
of renewable energy in the nation and it conflicts with
Michigan’s definition under the current RPS.
The definition of what qualifies under an RPS is important
because it has cost, legal, and other implications. Under
Proposal 3, four renewable energy types will count toward
the 25% requirement: wind, solar, hydropower, and biomass. With the exception of Illinois, all other states allow
at least one other form of renewable energy to count toward
their RPS—geothermal energy is the most common option included in other states. Many other states also include
landfill gas (methane), municipal solid waste (incineration),
and fuel cells. Although Illinois permits only those four
sources, utilities may count out-of-state sources toward the
requirement if in-state sources are not cost-effective.4
Proposal 3 mandates that sources come from in-state
or, for multi-state utilities, within the utility’s service territory.5 This in-state restriction limits the ability of Michigan utilities to take advantage of imports of
lower-cost wind energy from other states. It also raises legal questions under the federal commerce clause.
Moreover, Proposal 3 conflicts with the definition of renewable energy under Michigan’s current 10% RPS.
Specifically, Proposal 3 is more restrictive by not explicitly
including geothermal, landfill gas, energy optimization
credits, and advanced cleaner energy credits toward the
10% RPS.6 Exhibit 3 compares Proposal 3 to the current
10% RPS, PA 295.
4
Database of State Incentives for Renewables & Efficiency, Illinois: Renewable
Portfolio Standard. Available online: http://www.dsireusa.org/incentives/
incentive.cfm?Incentive_Code=IL04R&re=0&ee=0. (Accessed 8-15-12.)
5
PA 295 also contains such a restriction.
Proposal 3 may also conflict with the current RPS because hydro-electric is
included under the 25x25 definition but is limited under PA 295.
6
6
Prepared by Public Sector Consultants Inc.
Proposal 3: Key Questions and Answers
EXHIBIT 3. Comparison of Current 10% RPS (PA 295) to Proposal 3
Current 10% RPS (PA 295)
Proposal 3
Solar
Yes
Yes
Wind
Yes
Yes
Hydro
Some (only for existing and increased output from
existing dams; pumped storage excluded)
Yes
Yes
Yes
Biomass
Landfill gas
Yes
?*
Geothermal
Yes
No
Some (only for existing or increased
output from existing facilities)
No
Renewable credit from advanced
cleaner energy**
Yes
No
Renewable credit from energy
optimization
Yes
No
Municipal solid waste
SOURCE: Public Sector Consultants Inc.
* Landfill gas could presumably fall under the biomass category. However, PA 295 treats them separately so it is not clear how this would be handled under Proposal 3.
**Advanced cleaner energy is gasification, industrial cogeneration, coal-fired electric generation with carbon capture and sequestration,
and electricity generation facility or system that uses technology not in commercial operation as of effective date of PA 295.
QUESTION: Does energy efficiency count under
Proposal 3?
Answer: No.
Based on the ballot language, energy efficiency would not
qualify toward the 25% renewable energy requirement,
which is unfortunate since energy efficiency is a lowcost option. The utility energy efficiency programs under
Michigan’s 2008 energy plan, PA 295, cost 1.6 cents per
kilowatt-hour saved. In comparison, the average cost of renewable energy contracts submitted to the Michigan Public
Service Commission for the state’s current RPS is 9.1 cents
per kilowatt-hour—making energy efficiency more than
five times less expensive than renewable energy options.
The current RPS allows utilities to use energy efficiency
to meet the RPS, but Proposal 3 lacks such flexibility even
though energy efficiency has significant environmental,
economic, and job benefits.
Technologies and Siting
Question: Which of the identified
technologies—wind, solar, hydro, and
biomass—would be utilized to reach the 25%
requirement?
Answer: Primarily wind.
Wind energy is expected to be the primary source that
would be used to meet the 25x25 mandate given Michigan’s
renewable resource potential and the costs of various technologies. Solar, biomass, and hydroelectric are more expensive than wind in Michigan, making them less attractive options.7
7
See, for example: Energy Information Administration, Annual Energy
Outlook, 2017 Levelized Costs AEO 2012 Early Release (January 23, 2012),
and Michigan Public Service Commission, Report on the Implementation of the
P.A. 295 Renewable Energy Standard and the Cost-Effectiveness of the Energy
Standards (February 15, 2012). Note that pumped storage facilities and new
hydroelectric dams do not count toward Michigan’s current renewable portfolio
standard in PA 295 of 2008.
7
Prepared by Public Sector Consultants Inc.
Proposal 3: Key Questions and Answers
Question: Where will turbines be located?
Jobs
Answer: Not clear.
Michigan currently has several hundred operating wind
turbines and will need to build many more to reach the
current standard of 10% renewable energy by 2015. Based
on current technology, this proposal would require an additional 3,100 wind turbines beyond what is needed to meet
the 10% RPS and take approximately 500,000 acres of
land—approximately 6 times the area of the City of Detroit,
or 17 times the City of Grand Rapids. Stated differently,
this number of turbines would equate to each county in
the state having 40 large turbines (assuming equal distribution). It is fairly certain, however, that the wind turbines
will not be evenly distributed in every county. The proposal does not include a plan identifying possible locations
for such an increased number of turbines in Michigan, but
it is expected that they will be placed in the areas with
the best wind resources, available land, and other favorable
characteristics for siting. The windy portions of the state
are primarily along the coasts of the Great Lakes, with the
“best” locations offshore in the Great Lakes themselves.
All of the counties recently identified by the state’s Wind
Energy Resource Zone Board as having high potential for
wind energy development border the Great Lakes.
Question: Will Proposal 3 impact local control
over the siting of wind energy projects?
Answer: Potentially, yes.
Local units of government currently have authority over
the siting of wind turbines. The siting of turbines has been
controversial in many areas of the state, and developers
have had mixed results in attempts to locate wind turbines. Local opposition has effectively stopped a number
of projects, while other projects have proceeded. To site
the thousands of new turbines required to reach the 25%
requirement, the issue of state authority over zoning might
need to be addressed. This issue will primarily impact
townships—since the land required to site large numbers
of turbines is not available or acceptable within most cities.
As for offshore wind siting, the state is already vested with
siting authority in the Michigan portion of the Great Lakes.
Question: Will Proposal 3 create jobs?
Answer: Possibly, but the actual numbers are not
clear.
Statements about the jobs and economic impact of this proposal are based on a series of assumptions about the future
that may or may not occur. For example, the financial viability of wind energy and job estimates may assume that
the federal PTC, which expires at the end of 2012, will be
reauthorized.8 Job estimates also vary based on assumptions about the sourcing of various wind turbine components and related services. Another issue with many job
estimates is that they are not “net” jobs created. In other
words, they do not reflect any potential job losses from
higher business costs and/or business relocation out of
state due to potentially higher utility rates resulting from
implementation of the mandate. Nor do they consider the
jobs created by alternative investments, whether conventional generation or energy efficiency measures.
It is also important to understand how job estimates are
presented by the media and others to the public. For example, the Michigan Environmental Council recently announced a new study by MSU researchers and suggested
that over 74,000 “jobs” would be created in Michigan as
a result of Proposal 3.9 In the report, however, these are
defined as “job years.” A “job year” is defined in the report
as “full employment for one person for 2080 hours in a 12
month span.”10 It is a one-year job multiplied by the number
of years the wind turbine is assumed to exist. This is best
illustrated by noting that the report’s estimated 22,660 operations and maintenance jobs for utility-scale wind projects (subset of overall impacts) was calculated by multiplying 1,130 jobs by the 20-year life of a turbine.11 Confusing
job years with jobs—even if intended to explain results to
lay audiences—distorts the actual findings.
8
Navigant Consulting Inc., Impact of the Production Tax Credit on the U.S.
Wind Market (December 11, 2011). Available online: http://www.awea.org/_cs_
upload/learnabout/publications/reports/12538_3.pdf. (Accessed 8-15-12.)
9
Press release for Michigan Environmental Council, MSU study: Projected
Job and Investment Impacts of Policy Requiring 25% Renewable Energy by
2025 in Michigan: “At least 74,495 jobs will be created by clean energy ballot
proposal. More than $10 billion in new investment on the line” (press release).
Available online: http://www.environmentalcouncil.org/newsroom/pressRelease.
php?x=95. (Accessed 8-30-12.) See also full study, Benjamin Calnin, Charles
McKeown, and Steven Miller, Projected Job and Investment Impacts of Policy
Requiring 25% Renewable Energy by 2025 in Michigan (August 10, 2012), p. 5.
Available online: http://www.environmentalcouncil.org/mecReports/MSU_Jobs_
Report_25x25.pdf. (Accessed 8-15-12.)
10
Ibid., p. 4.
11
Ibid., p. 6.
8
Prepared by Public Sector Consultants Inc.
Proposal 3: Key Questions and Answers
Studies that have been conducted at the national level can
serve as a point of comparison to Michigan job estimates.
For example, the U.S. Department of Energy cited industry
estimates in August 2012 that the wind sector nationally
employs 75,000 American workers, including manufacturing workers throughout the supply chain, as well as engineers and construction workers who build and operate the
wind projects.12 Also, Navigant Consulting’s 2011 study, on
behalf of the American Wind Energy Association, found
that wind-energy–supported jobs nationally will drop by
nearly half, from 78,000 in 2012 to 41,000 in 2013, if the
PTC is not extended.
changes in wind energy output, can also create reliability
challenges.
Electric Reliability
No publicly available studies have examined how Proposal
3 might affect the reliability of the electric system in
Michigan.14 National and regional studies have suggested
that 20–30% wind energy by the 2024–2030 time frame
in the United States is operationally feasible assuming
substantial new investment in transmission facilities and
other operational changes.15 However, these studies did not
examine the local reliability impacts of concentrating the
generation resources in Michigan, as would be required
under Proposal 3.
Question:
Wind energy is an intermittent
resource, meaning that it is highly variable in output
and difficult to predict its availability ahead of time.
Will the reliability of electricity be impacted
when the wind does not blow?
Answer: Potentially, yes.
Increasing the amount of renewable energy to the level
contemplated by Proposal 3 could lead to reliability challenges and other problems managing the electric system.
Findings from a Massachusetts Institute of Technology
(MIT) symposium found that “as renewable capacity has
increased, the intermittent nature of wind and solar generation, that is, both variable and unpredictable, has led to
operational difficulties and unintended consequences for
emissions and economic efficiency.”13
Areas with high levels of wind energy, including Texas, the
Midwest, and the Pacific Northwest, have faced reliability
and operating challenges from increased amounts of wind
energy. Reliability issues can arise when electricity usage
is high and there is little wind (e.g., hot summer day), or
when usage is low and it is windy (e.g., nighttime or spring
day when there is excess generation and storage options
are limited). Unanticipated events, such as outages of other
power plants or transmission lines, coupled with dramatic
12
See http://www.doe.gov/articles/energy-report-us-wind-energy-productionand-manufacturing-surges-supporting-jobs and http://www.awea.org/newsroom/
pressreleases/Annual_Report.cfm citing American Wind Energy Association
Annual Report. See also Navigant Consulting study (December 2011).
Massachusetts Institute of Technology, The MIT Energy Initiative’s Symposium
on Managing Large-Scale Penetration of Intermittent Renewables, Findings In
Brief (Boston: MIT, April 20, 2011). Available online: http://web.mit.edu/mitei/
research/reports/intermittent-renewables-findings.pdf. (Accessed 8-15-12.)
13
Areas with high levels of wind
energy have faced reliability
and operating challenges from
increased amounts of wind energy.
It is important to carefully examine the potential reliability
impacts of proposed energy policies, as was done as part
of the research for Michigan’s current energy plan. Such
analysis should also account for the reliability impacts of
combining Proposal 3 with new EPA regulations affecting many coal plants in Michigan and other parts of the
Midwest.16
14
Although not full reliability assessments, transmission companies presented
transmission plans in 2009 in response to the Wind Energy Resource Zone
Board’s estimates of wind energy potential in specific areas of the state.
15
See, e.g., several studies: National Renewable Energy Laboratory, prepared
by EnerNex Corporation, Eastern Wind Integration and Transmission Study
(Knoxville, Tenn., January 2010, revised February 2011). Available online:
http://www.nrel.gov/wind/systemsintegration/pdfs/2010/ewits_final_report.pdf.
(Accessed 8-15-12.)
U.S. DOE, Office of Energy Efficiency and Renewable Energy, 20% Wind
Energy by 2030: Increasing Wind Energy’s Contribution to U.S. Electric Supply,
DOE/GO-102008-2567 (Washington, D.C.: EERE, July 2008). Available online:
http://www1.eere.energy.gov/windandhydro/pdfs/41869.pdf. (Accessed 8-15-12.)
Midwest ISO, Regional Generation Outlet Study (November 19, 2010).
Available online: https://www.midwestiso.org/Library/Repository/Study/RGOS/
Regional%20Generation%20Outlet%20Study.pdf. (Accessed 8-15-12.)
16
See, for reference, North American Electric Reliability Corporation (NERC),
Potential Impacts of Future Environmental Regulations: Extracted from the 2011
Long-Term Reliability Assessment (Atlanta: NERC, November 2011). Available
online: http://www.nerc.com/files/EPA%20Section.pdf. (Accessed 8-15-12.)
9
Prepared by Public Sector Consultants Inc.
Putting thought into action
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connected, and dedicated research and program
management firm, with specialties in governance and
regulation, health care, education, energy, and environmental
policy. PSC is committed to providing objective research
and sound solutions to the public and private sector.
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