Comments on SB 437
September 30, 2015
To: Chairman Nofs and members of the Senate Energy and
Technology Committee
RE: Senate Bill 437
On behalf of our 60,000 members and
supporters in Michigan, the Sierra Club expresses our opposition to SB 437 (Nofs)
and urges substantial amendments to the bill language to address its
significant flaws. SB 437 would establish a revised integrated resource
planning (IRP) process as a substitute for Michigan’s current renewable energy
and efficiency standards. The IRP process created by SB 437 is intended to fill
in the gaps in its companion bill, SB 438, which would eliminate Michigan’s
renewable energy portfolio requirement and sunset its energy optimization
program. IRP processes, and in particular the utility-driven approach
contemplated by SB 437, are not effective replacements for clean energy
standards. Instead, to achieve clean energy goals, integrated resource planning
needs to be conducted in conjunction with clear standards and incentives.
In Michigan, residents have realized
many benefits of mandated clean energy standards since the passage of Public
Act 295 in 2008. Those enforceable standards created jobs, saved ratepayers money, and
enhanced economic development, while simultaneously protecting the health of
Michigan’s citizens by reducing the use of dirty and costly fossil fuels in our
energy sector. Now is the time to increase Michigan’s clean energy standards,
not to gut them. Our own state agencies, as well as nationally acclaimed energy
experts, have demonstrated that our state can dramatically increase its
renewable energy and efficiency capacity while boosting our economy and
protecting our environment.
Even if Michigan’s current standards remained
intact, or were improved as recommended in Sierra Club’s August 15th
letter to this Committee regarding SB 438, the IRP process in SB 437 suffers
from several flaws. To more fully maximize the benefits of integrated resource planning,
and to ensure a clean energy future, the IRP process must, at a minimum: engage
stakeholders early and in meaningful ways; provide for the fullest possible
consideration of clean energy and energy efficiency technologies; require utilities
to engage in robust modeling; and assess compliance costs with all reasonably
expected future regulations, in addition to applicable laws. In SB 437, the
process falls short on many of these issues. Michigan legislators should amend
or reject SB 437 because it would undermine Michigan’s progress to date and put
our future at risk.
An IRP process alone will not drive energy efficiency
An IRP process can be a strong complement to a robust energy efficiency
program, but it is not an effective replacement for one. In December 2014, the American
Council for an Energy-Efficient Economy (ACEEE) reported a striking difference
in efficiency spending and savings between states with standards and those
without, regardless of whether the state had an IRP requirement in place[1].
The researchers found no statistically significant difference between efficiency
spending or savings between IRP and non-IRP states without standards, while states with efficiency standards
had three times the amount of spending and savings as those without. This
analysis has been borne out in Michigan, where the MSPC estimates that
customers save close to $4 for each $1 invested by the utilities.[2]
Moreover, Michigan’s energy efficiency industry employs more than 46,000 Michiganders, and contributes 2.3
billion to our economy[3],
all while reducing greenhouse gas emissions.
Sun-setting our successful energy optimization
standard puts these savings and this economic
sector at risk. At present, utilities have a strong disincentive to engage in
customer energy efficiency programs, as higher sales of energy lead to higher
utiltity revenues. While SB 437 provides for decoupling of utility profits from
sales, which can neutralize the disincentive for efficiency, decoupling does
not create a financial incentive to save energy that is comparable to the
incentives that exist for investment in new capital assets like powerplants. Neither
will the IRP process create such an incentive.
As written, SB 437 requires that utilities only show that their
submitted IRPs are “least-cost,” without regard to the benefits offered by new
clean energy or energy-efficient technologies. Moreover, under SB 437, the Michigan Public Service Commission (PSC) would only be tasked with evaluating energy savings that are
“technologically” and “economically” feasible at a fixed moment in time[4].
It does not appear to be required to model higher levels of efficiency
investment, nor, with the elimination of the EO program, would it consider any
minimum level of energy efficiency. This contravenes several best practices
that have been identified for the integration and encouragment of
cost-effective energy efficiency measures[5].
With essential improvements, and the preservation of our
energy optimization program, an IRP process could be step in the right
direction. In its current form, however, SB 437 and its companion legislation will
negatively impact a cost-effective measure that has decreased customer rates
and reduced energy waste.
Creating “flexibility” does not require the repeal of renewable
energy standard
Some supporters of SB 437 and SB 438
justify their proposal with an ideological opposition to mandates, and view
this legislative package as restorative of market forces. These bills place
Michigan’s energy future solely in the hands of the IRP process by invoking a
need for flexibility. It is worth noting that utilities are not players in a
free market; they are government-granted monopolies that enjoy guaranteed
profits. It is not unreasonable to require them to reduce waste and invest in
clean power.
The current renewable
energy standard – which requires utilities to generate at least 10 percent of
their electricity from renewable sources – can hardly be said to limit
flexibility. Moreover, it has been a boon for our economy and residents. Since
it was enacted in 2008, it has driven down the cost of generating power and delivered $2.9 billion[6] in
new investments in Michigan. It’s also been a big job creator; our
state added 3,600 clean-energy jobs in 2014 alone.[7]
The fossil fuel
industry, on the other hand, received $502 billion in overall subsidies from
U.S. taxpayers in 2012, according to a report from the International Monetary
Fund. In comparison, the renewable energy industry (excluding biomass) received
$24 billion in federal support in 2012, less than five percent the
subsidization of fossil fuels. In
addition, the International Monetary Fund recently reported that fossil fuel
pollution costs the world $5 trillion annually in public health and
environmental problems. Pollution costs are externalized from the market and
are another form of fossil fuel subsidization, balanced out by costs to
people’s health and degradation to our natural resources. For example, right here in Michigan a 2011 report from
Environmental Health and Engineering, Inc. showed that particulate matter
pollution (PM2.5) from Michigan’s nine oldest coal plants are costing $5.4
billion a year in public health costs.
Under SB 437 and SB 438, the renewable portfolio standard (RPS) would be replaced
with an IRP which
does nothing to correct the over-subsidization of fossil fuels or to internalize
pollution and public health costs into electric generation costs. The IRP should be complemented by an RPS, especially since renewables are cheaper[8] than
new conventional power generation. An IRP alone will not result in substantial progress
toward renewable energy development.
SB 437 and SB 438 fail to appreciate the dangers of
climate change
Combined, SB 437
and SB 438 make for a dangerous proposal that takes Michigan in the wrong
direction when it comes to protecting our state from climate disaster. Climate
disruption caused by greenhouse gases from human sources is an urgent threat to
our everyday lives and our future, and its impact is already being felt in
Michigan. Climate disruption is about more than warmer temperatures – it’s
about disrupting the basic weather patterns that affect almost everything in
our lives - our water supplies, how we grow our food, the kinds of diseases we
deal with, and the ability to keep our families safe.
We can already see
the effects of climate disruption all across America: unprecedented droughts
and wildfires in Western states, record-breaking heat in the Southwest and
Midwest, Hurricane Katrina and Superstorm Sandy, extreme winter weather in
traditionally warm states, and melting glaciers in Alaska and Montana. Extreme weather events are becoming more
frequent, harming people, their economic well-being, their health, their homes,
and their futures. Right here in Michigan, we’ve seen cherry and apple crops
completely devastated due to abnormal and extreme weather patterns exacerbated
by climate disruption. The time to fight climate disruption is now, but
enacting SB 437 and SB 438 would contribute to more climate disasters.
Sierra Club
members call on our elected leaders to combat climate disruption by moving
Michigan beyond fossil fuels and towards true clean energy sources like wind,
solar, and energy efficiency. According to a Yale study from last year, 61% of
Michiganders believe climate change is happening, 76% believe we should
regulate carbon pollution, and 60% support increasing our state’s renewable
energy standard. The message is clear:
Michiganders oppose the legislative package of SB 437 and SB 438 and want clear metrics for renewable energy and efficiency
instead.
Sierra Club’s Policy Recommendations
The IRP process established by SB 437
cannot, on its own, provide for a clean energy future in Michigan. It is not a
sufficient substitute for Michigan’s current renewable energy standards or
energy optimization program. We reiterate our recommendations for those
mandates from our August 15th letter regarding SB 438 here because
they relate to SB 437 as well:
·
Increase Michigan's renewable energy
standard to 30% by 2030, as the Public Service Commission and Energy Office
have reported is readily achievable.
·
Increase Michigan's energy
optimization standard from 1% to 2% annually.
·
Remove the existing spending cap on
Michigan's energy efficiency program.
·
Ensure that "clean" or
"renewable" energy is not redefined to include anything that emits
greenhouse gasses or creates radioactive waste such as fossil fuels, nuclear
energy, or energy from incinerating wastes.
·
Ensure that
electric ratepayers are able to produce their own energy, either to use for
themselves or sell back to a utility company at full retail price, not a
wholesale or lowered price.
·
Remove the existing cap on net
metering and all other regulatory barriers to distributed generation.
In addition, we offer the following
specific recommendations on SB 437:
·
The Public Service Commission should
evaluate IRPs based on the reasonableness of costs and rate impacts in
consideration of the benefits offered by new clean energy and energy-efficient
technologies and give its fullest consideration to those technologies, rather
than evaluating utility IRPs simply on the basis of “least-cost.”[9]
·
The Public Service Commission and
utilities should consider environmental compliance costs with all reasonably
expected future regulations, not only those formally proposed or published in
the Michigan Register or Federal Register.[10]
·
The IRP process should provide for
early and meaningful stakeholder engagement, both in the Public Service
Commission’s development of statewide parameters for IRPs and the utilities’
planning process, rather than providing only for responsive comments and
contested case hearings (respectively).[11]
·
Require use of levelized cost-curves
for demand-side resources, including energy efficiency, that are comparable to
the levelized cost curves for supply side resources.
·
Utilize credible load forecasts by
requiring load modeling to address a range of possible load forecasts, not just
the most likely forecast (e.g. a high-growth and low-growth forecast as
alternatives to the reference case).
·
The IRP should be constructed in a
way that internalizes environmental pollution and public health costs. These
costs are currently externalized from the energy market and get passed onto
individuals, health institutions, and others impacted by environmental
pollution.
·
Require utilities to use and document
simulation models that evaluate the cost and risk of multiple possible resource
portfolios under numerous future scenarios before arriving at a plan.
For these reasons, we urge you to
vote NO on SB 437, or if it goes forward, to amend the bill to strengthen the
IRP process in the ways enumerated in this letter. Votes pertaining to this
bill will be included in the Sierra Club’s legislative scorecard.
Sincerely,
Mike Berkowitz
Legislative and Political Director
Sierra Club
Michigan Chapter
[1] http://aceee.org/blog/2014/12/irp-vs-eers-there%E2%80%99s-one-clear-winner-
[2] Michigan Public Service Commission, 2014 Report on the
Implementation of P.A. 295 Utility Energy Optimization Programs, November 2014.
[3] Michigan Energy Innovation Business Council and 2013
Michigan Workforce Agency Energy Cluster Analysis
[4] SB 437, page 26, ll. 23-25.
[5] State and Local Energy Efficiency Action Network,
Using Integrated Resource Planning to Encourage Investment in Cost-Effective
Energy Efficiency Measures, September 2011.
[6] http://awea.files.cms-plus.com/FileDownloads/pdfs/Michigan.pdf
[7]
http://cleanenergyworksforus.org/wp-content/uploads/2015/03/2014_Q4_Report_FINAL.pdf
[8]
http://cleantechnica.com/2015/06/09/cheap-michigan-wind-energy-set-save-consumers-15-million-annually/
[9] See SB 437, p. 28, ll. 11-13.
[10] Id. at 26-27, ll. 26-27, 1-5.
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