It's game on over boosting Michigan's requirements for renewable energy.
A new coalition that includes the state's two largest energy companies and leading business associations is launching an offensive to combat a pending ballot proposal that would amend the Michigan Constitution and require 25 percent of electricity to come from renewable sources by 2025.
The Clean Affordable Renewable Energy For Michigan coalition is taking on Michigan Energy Michigan Jobs, a group that includes renewable-energy businesses, labor unions, environmental interests and the American Wind Energy Association. Michigan Energy Michigan Jobs has gathered the 322,609 signatures it needs to place the new renewable standard on the ballot and is continuing to collect more, as the required number of signatures needs to be validated by the state.
"We are extremely confident that we will reach our goal of 500,000 signatures by the July 9 deadline," said Mark Fisk, a spokesman for the Michigan Energy Michigan Jobs campaign and partner with Byrum & Fisk Advocacy Communications.
He said "the response on the ground has been terrific" and "for most citizens this really is a no-brainer."
The ballot proposal would raise Michigan's renewable energy standard beyond that set by 2008 law, which requires utilities to derive 10 percent of their energy from renewables by 2015.
Robert Allen, president of a Rochester Hills company that produces metal solar roofing shingles, said the higher standard would mean more business and more new jobs for renewable energy companies like his Luma Resources LLC. He said the majority of his current shipments of solar shingles are to California, Colorado and New Jersey - states with a higher renewable portfolio standard, or RPS, than Michigan.
But the opposing campaign says the ballot proposal is a costly idea that could be detrimental to many Michigan businesses.
"We are for renewable energy, but there is a law on the books that is working right now and establishing a new goal, and putting it into the constitution is the wrong approach," said Megan Brown, spokeswoman for the campaign and senior account executive at Truscott Rossman, the campaign's communications and public relations firm.
Michigan utilities are building wind farms and taking other steps to meet the current 10 percent-by-2015 RPS. Jeff Holyfield, executive director of media relations and communications services at CMS Energy Corp., said that standard was set after nearly two years of analysis and discussion and any consideration of raising it "should wait until after 2015, when that 10 percent goal has been met."
He and others said that, assuming the proposed new mandate is met primarily through wind energy, as is happening with Michigan's current RPS, it could cost at least $12 billion to build 3,100 additional turbines that would cover half a million acres of land and be capable of generating 5,000 megawatts of additional electricity.
Under the ballot proposal, electricity rates could increase no more than 1 percent annually to pay for compliance with the new renewable standard.
Holyfield said that cap "ignores economic reality" and that "the 1 percent annual increase won't cover the cost of meeting this mandate."
Gov. Rick Snyder hasn't taken an official position yet on the ballot proposal, but he "has raised questions and concerns about moving to yet another number and 10 years down the road when - while good progress is being made - we haven't yet completed or seen the full results or impacts of Michigan's current renewable portfolio standards," said Snyder press secretary Sara Wurfel, in an email to Crain's. "He also has raised issues with a lack of comprehensive federal energy policy and what may be needed to make investments economically feasible and meet Michigan's energy needs."
Holyfield said if approved, the utilities would likely challenge the cap in court. And if the cost of meeting the mandate "is all passed on to the customers, they're going to be looking for relief. If it's all passed on to the utilities, we're going to be looking for financial relief," he said.
Fisk said the 1 percent cap protects consumers and is "very achievable" for the utility companies. He said experience in some other states shows renewable resources, particularly wind, can reduce electricity prices.
The ballot proposal says annual extensions for meeting the new RPS could be granted, but only to the extent necessary for an electricity provider to comply with the rate cap.
Opponents say placing an energy mandate in Michigan's constitution sidesteps the responsibility and ability of Michigan's Legislature to set policy and limits flexibility to manage the state power landscape.
"To go to the constitution and basically mandate energy policy in the constitution fundamentally seems wrong," said Alejandro Bodipo-Memba, senior media representative for DTE Energy Co.
Fisk said getting the higher standard through the Legislature would engender major utility company pushback and "would be a difficult if not impossible proposition," thus the route of a constitutional amendment to increase the RPS.
"We view this as a jobs initiative," he said. "The main reason to increase the renewable energy standard in Michigan is to prevent our state from falling further behind in the clean energy race."
Proponents say the higher RPS could mean $10 billion in investment and an estimated 56,000 jobs, in operations and maintenance, construction and manufacturing of equipment.
There are some 30 states that have renewable portfolio standards, many of which are higher than Michigan's, and several other states have nonbinding goals.
Michigan's neighbors vary; for example, Minnesota's and Illinois' standards are 25 percent by 2025. Wisconsin is 10 percent by 2015, and Indiana's RPS is 10 percent by 2025.
Ohio's standard is 25 percent by 2025 from alternative energy sources, with at least 12.5 percent coming from renewables and the rest from renewable or other energy sources like co-generation, nuclear power and clean coal, according to information from the National Conference of State Legislatures.
The Michigan Environmental Council is among supporters of the ballot proposal. It will "continue the momentum created by Michigan's existing renewable energy standard, which has reduced Michigan's dependence on out-of-state fuels," created renewable energy manufacturing jobs and "is providing electricity at costs well below even the rosiest projections when the current law was passed," said council communications director Hugh McDiarmid Jr., in an email to Crain's.
A Michigan Public Service Commission report earlier this year noted prices for renewable energy contracts showing downward trends and being lower than the cost of building new coal-fired plants.
But Holyfield said that cost to customers has to be evaluated based on the service provided by a generation source. A typical wind unit might serve customers about 30 percent of a day, while a traditional coal-fired power plant is available "95 to 98 percent of the time," he said.
"The whole issue is that baseload traditional power plants, and renewables, are not interchangeable. Renewables can play a larger role in the state's overall power mix, but you still have to have the baseload power plants, you still have to have a balanced energy portfolio to make sure you can serve customers and meet their needs," Holyfield said.
Others lined up against the measure include the Michigan Building and Construction Trades Council, the Michigan Chamber of Commerce, the Detroit Regional Chamber, the Small Business Association of Michigan and the Michigan Manufacturers Association. In a press release last week, Mike Johnston, MMA vice president of government affairs, said that "it's dangerous to cement energy policy in the state constitution, especially when this proposal will cost billions to implement, raise electric bills and make Michigan manufacturers less competitive."
Proponents of the ballot proposal say Michigan could lose engineering and manufacturing talent to other states with thriving alternative-energy sectors, and that if Michigan waits until 2015 to enact new policies, business investment in Michigan's renewable energy industry will dry up.
Both coalitions say they plan to wage aggressive campaigns that could include advertising, editorial board visits, and other voter outreach and forums.
Neither side will say how much money they are raising or what they expect to spend, but those who watch Lansing say the fight could be expensive. "Given the level of competition, you could be spending six, seven million dollars on each side of the issue, or more," said Bernie Porn, president of polling firm Epic-MRA Corp.
Copyright 2012 Crain Communications. All Rights Reserved.
(Originally published June 25, 2012, by Crain's Detroit Business.)