Michigan governor outlines some energy priorities for the state

Michigan’s electricity costs are somewhat high compared to its Midwest neighbors due to its lack of coal production for power generation, but there are various avenues that the state can pursue to add new sources of clean and affordable power generation, said Gov. Rick Snyder.

Republican Snyder, whose Twitter handle is “onetoughnerd,” which is the slogan he used in his 2010 gubernatorial campaign, outlined a series of energy initiatives and ideas in a Nov. 28 message to state residents. Snyder’s background is in accounting, with a stint at computer giant Gateway

Among other things, the governor said energy needs to come at an affordable price to businesses and homes. “Our prices are near the national average, but most states have lower prices,” he wrote. “In fact, Michigan’s electricity prices are the highest in the Midwest. That’s actually normal for Michigan, because our neighbors have more coal resources than we do and existing coal plants are hard to beat on cost. But of more concern is the fact that Michigan’s energy prices have been on a fast rise over the last few years.”

When Michigan revised its energy law in 2008, under then-Democratic Gov. Jennifer Granholm, it didn’t realize it was on the cusp of a major economic downturn. “That meant fewer factories were running machines, and fewer people were flipping light switches on,” Snyder wrote. “We lost about 10 percent of our electric power demand, and the remaining 90 percent had to shoulder additional costs. Then Environmental Protection Agency (EPA) rules about coal plants started kicking in, requiring our utilities to spend about $3 billion so far on new environmental controls to keep key coal plants running and to shut others down. That happened at the same time we were doing the smart thing and diversifying into renewable energy. That meant we were building nearly 10 percent new supply in renewable energy on one hand while losing 10 percent of our demand on the other hand. You can’t do all those things in four short years and not have rates go up.”

Snyder said that energy choices must always recognize a responsibility to protect Michigan’s environment. “Michigan’s natural gas production has never once had an incident where groundwater was polluted from hydraulic fracturing, even though we’ve been doing it for decades,” he noted. “That’s in part because Michigan has strict regulations on drilling and wastewater management. Those regulations have been no-regrets decisions. We have many successful companies that have safely produced oil and natural gas in Michigan, while protecting Michigan’s waters. That’s a great example of how Michigan has made protecting the environment a key part of our energy decisions in the past, and why it must be one of the pillars on which we make our decisions in the future.”

Snyder says energy efficiency is a priority

One priority is to enhance energy efficiency in Michigan. “I have asked the Michigan Public Service Commission (PSC) to reinvent our existing energy efficiency programs to reduce paperwork and costs while increasing actual improvements,” Snyder said. “Already, the PSC has found ways to allow collaboration between smaller municipal utilities and cooperatives, which saves even more money.”

In 2013, the PSC will look at how to implement “geo-targeting.” That means making smarter energy investments – spending on energy efficiency instead of new infrastructure in areas with reliability problems caused by high local demand, Snyder said. “There are some great examples of possible places where this can be deployed – places like Ferndale in southeast Michigan, where increasing demand has been straining the existing substations but it’s hard to find a place to put another one,” he said. “And this week, the PSC will release its report on energy efficiency, noting a number of existing ways these efforts are lowering our bills and recommendations of how we can do more.”

On the energy production side of the equation, Michigan produces natural gas. “It has a lot of places where natural gas can be stored,” Snyder said. “And it has pipelines built to help move that natural gas. That’s a great advantage and an opportunity for the state of Michigan to do a little of its own economic gardening.”

Snyder said he has asked the state Department of Natural Resources (DNR) and PSC to work together to see if the state can partner with private industry to develop a Strategic Natural Gas Reserve for Michigan. “It’s a simple concept – the state of Michigan owns many natural gas deposits,” he noted. “When a private company brings those into production, the state can either take its share in money or in natural gas. Until now, we have chosen to take the money. But if the state owns gas, and the state owns storage, it could make sense for us to store that gas and sell it later, when we could get a better price. We will look for private companies to partner with us in developing storage.”

CO2 pipelines to aid in oil recovery also targeted

“Any changes that we make will be built upon the legacy of innovation already present in Michigan’s energy sector,” Snyder wrote. “For years, experts thought some of our old oil wells had reached the end of their lives, unable to produce any more. But it turns out that if you can get enough pure carbon dioxide into those wells, these wells can be productive again, and the carbon dioxide stays below the ground. A multi-generational family company in Michigan has successfully brought this new, exciting technology to our state. Bob Mannes, the head of Core Energy LLC, figured out that the carbon dioxide emissions from a local ammonia plant could be used to produce oil in Michigan. The experiment has been a success and is a great example of a win-win for the environment and the economy of Michigan.”

Snyder said he is asking the state Legislature to enact a law that will grant CO2 pipelines the same legal standing as other pipelines in Michigan to make sure state laws are ready for this new industry. Among other things, CO2 pipelines would be helpful to dispose of CO2 from coal-fired power plants – if CO2 capture and sequestration ever becomes a viable option for Michigan’s coal-fired power plants.

Snyder also pointed to issues with the state’s power transmission system. “Michigan’s electrical ‘superhighways’ – its transmission system – are a tale of two peninsulas,” he added. “In the Lower Peninsula, the reliability of our electrical superhighway is excellent. It’s a tremendous asset, and we need to make sure our businesses and citizens understand the value of reliability. But in the Upper Peninsula, it’s very different. There, we have nearly 12 ‘yellow alerts’ a year – meaning that all it takes is for one more thing to go wrong and everybody’s power could be out for days.”

This has to change in a way that is protective of the environment and wallets, he said. “The first step is to get enough backup transmission in place so that we can end all yellow alerts,” Snyder explained. “The Midwest Interconnection System Operator (MISO), which runs our region’s electrical highway system, recently fast-tracked approval of some lines that will address this reliability problem. Our state agencies have already pledged to help speed up siting and construction of those projects in an environmentally sensitive way.”

The next step is making sure there is a major power generating source in the UP, so the region isn’t entirely dependent on long transmission lines for power. Snyder noted that Wolverine Electric Cooperative and We Energies have finalized a new venture that will install hundreds of millions of dollars of new pollution prevention equipment and keep the coal-fired Presque Isle power plant in Marquette in the UP operating. “Because of this deal, Michigan has a key building block in place to ensure the reliability and power supply we need,” Snyder added. “We will also retain a key contributor to the UP’s tax base and 170 Michigan jobs. Moreover, We Energies’ customers in Michigan and Wisconsin who were facing increases in costs to solve this problem will pay less, not more, to fix this problem. Wolverine Power Cooperative and We Energies deserve to be commended for bringing this deal to fruition. In particular, Wolverine is increasing its commitment to Michigan’s economic future, and it is making the right decision.”

Of note is that Granholm in 2009, due to greenhouse gas concerns, issued orders that effectively killed several new coal-fired power projects in the state, including an extra unit for the Karn-Weadock plant site planned by Consumers Energy. Snyder didn’t mention any desire to help revive any of those plans.

Snyder said the state needs to make sure that new sources of power – whether they are natural gas, wind, or biomass – have a superhighway that can get their power to the places that need it. “To do this, we need to explore connecting Michigan’s peninsulas electrically,” he added. “Right now, there is a small electrical connection, and we have had to spend money making sure the peninsulas don’t short each other out. We need a robust connection that gives us the potential to reduce the cost of moving power around in both places and creates opportunities to improve supply as well. That is why I am encouraged by the recent actions of MISO. It is studying the costs and benefits of a strong interconnection. It is also looking at whether Michigan should partner with other states and provinces as part of a larger solution.”

Michigan fights abandonment of natural gas line

Michigan also needs the ability to efficiently and safely move natural gas. “Right now, there is a proposal before the Federal Energy Regulatory Commission to abandon a pipeline that supplies one-third of Michigan’s natural gas,” Snyder wrote. “I have opposed that, as have many legislators, the PSC, MISO, and Consumers Energy. We will continue to fight any proposal that limits Michigan’s energy future and are hopeful that in the near future, we can find a cooperative solution that will ensure Michigan’s gas supply reliability.”

Michigan wants to work with the federal government and make sure that Michigan’s plans for the future fit with where the country is going. Unfortunately, there is a current “hodgepodge” of conflicting policies, Snyder said. Examples include:

Nuclear energy – The federal government started out doing the right thing: building a long-term solution for nuclear waste at Yucca Mountain in Nevada. But then the federal government switched courses and abandoned those plans, requiring state utilities to store waste near the Great Lakes. “While such storage doesn’t pose imminent threats, no one would say that the Great Lakes shoreline is a better place for nuclear waste than the Nevada desert,” Snyder wrote. “We badly need a national, thoughtful approach to this issue.”

Electrical reliability – The federal government has done the right thing by encouraging regional cooperation in operating the electrical grid and setting good standards for reliability, the governor wrote. “But now MISO has warned that the timeline of the EPA rules for coal plants create some real risks to our reliability – meaning that massive outages become more likely. I know people disagree about the new EPA rules for coal plants, but I think we can all agree it’s not in the best interest of the environment or the country to risk massive outages to get there at a breakneck pace. We need the federal government, through cooperation between its own agencies, to broker a solution to this problem.”

Natural gas – A recent presidential order recognized the benefits of natural gas as a reliable, affordable, clean and domestic part of the U.S. energy future. “The President got this right and we need him to follow through,” said Snyder, a member of the opposing party. “We need timelines that will let us look seriously at transitioning existing plants to this fuel, a commitment to pipeline infrastructure and a stable, environmentally protective set of regulations that allow companies to create a business plan built around new natural gas supplies. Michigan has done what it can in leading the way on this issue. We will do whatever we can to help our federal partners develop and implement a consistent strategy in short order.”

Until state officials see more of what the nation’s energy policy will be, and what its effects are on Michigan, it would be a mistake to again change the state’s energy framework, Snyder wrote. “In 2015, we will be in a better position to know what effects federal policies are having on our reliability and on the markets for electricity, he wrote (the next Michigan gubernatorial election is in 2014). “We will have reached our 10 percent goal for renewable energy, and will have well-established efficiency programs, so we will be in a good position to set higher goals in both these areas. We will need solid information about the effects of our policies and the energy marketplace to make good decisions. This coming year, I will invite the Legislature and Michigan citizens to tell me what information we will need to fairly evaluate our energy policies, and we will embark on an effort to collect and analyze those facts. Then, by 2015, we will all be able to implement new decisions about our energy framework that will enhance Michigan’s adaptability, reliability, affordability and environment.”

The Snyder administration will convene a series of public participation opportunities, which will be co-chaired by the Chair of the state PSC, John Quackenbush, and the head of the Michigan Energy Office, Steven Bakkal. These opportunities will offer a chance for both written and oral submission from legislators and the public on energy issues. “In addition to the areas of efficiency, renewables and choice, the identification of any additional areas that should be part of later decision making will be encouraged,” the governor wrote.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.