Higher consumer prices are often cited by fossil fuel interests to oppose state renewable energy targets, but what about when they actually lower utility bills?
That’s the case in Michigan, where utility DTE Electricity has asked regulators to let it cut monthly residential electricity rates, citing fast-falling wind energy costs as it works to comply with the state’s 10% by 2015 renewable portfolio standard (RPS).
If the Michigan Public Service Commission (PSC) approves DTE’s filing, not only will millions of customers save $15 million per year, but state legislators will get a powerful new reason to expand the current RPS after it is reached and expires at the end of 2015.
Cut Obsolete Surcharges, Cut Customer Costs
Ironically, killing a monthly surcharge on renewable energy will enable DTE to cut consumer costs. The surcharge was added to residential power bills when the RPS was enacted in 2009, and was reduced to 43 cents from $3 in 2014.
DTE originally collected the surcharge to cover expected costs from meeting the RPS, but falling wind costs have rendered it obsolete. “This plan reflects DTE Energy’s long-term commitment to provide clean and affordable energy to our customers,” said Irene Dimitry, DTE Energy Vice President.
Assuming DTE’s request is approved, the surcharge will disappear from the bills of its 2.1 million electricity consumers in January 2016. Michigan’s other major utility, Consumers Energy, eliminated its 53-cent renewable energy surcharge in July 2014. Both utilities also say they will meet the 10% renewables goal by the end of this year.
Cheap Michigan Wind Revs An Economic Engine
Declining wind energy costs aren’t limited to Michigan, even if the state is seeing better-than-average cost reductions. A 2014 report from the Department of Energy found certain power purchase agreements (PPAs) for wind energy were clocking in at $25 per megawatt-hour (MWh), and the US Energy Information Administration just projected wind power would be cheaper (on average) than any other type of generation except the most efficient natural gas technology by 2020. (Of course, that doesn’t take into account the extra costs of natural gas known as “externalities.”)
That trend is clear in Michigan. Earlier this year, the state PSC reported the cost of wind power in Michigan had fallen by half since 2008 to half the price of coal at $47–$53 per MWh of generation. North American Windpower cites recent in-state wind contracts at $43 per MWh, both significantly lower than coal and nuclear, which range between $108–$133 per MWh.
But best of all, wind power has been an economic driver in the state. The American Wind Energy Association (AWEA) reported 1.5 gigawatts (GW) total capacity installed in Michigan at the end of 2014. DTE noted the economic impact of its 1 GW wind capacity in the regulatory filing, saying “these projects have created about 1,400 jobs across Michigan, primarily in the construction sector.”
What Happens After 2015?
All these benefits naturally lead back to the ongoing fight over RPS targets across the country. While clean energy targets were repealed in West Virginia and made voluntary in Kansas, they’ve been defeated for economic reasons in Texas and North Carolina.
Michigan’s RPS only runs through 2015, and a similar fight is simmering over what happens after this year. Governor Rick Snyder said he favors expanding the RPS earlier this year, while Republican state legislators have suggested weakening or ending it entirely.
Consumers and DTE have shown boosting renewables can boost the economy, but they’re not alone. In 2013, the state PSC reported Michigan could hit 30% renewables by 2035 without reliability or cost concerns, and in 2012 economists estimated a 25% Michigan RPS would create $10 billion in new investment and more than 56,000 jobs.
So here you go, Michigan policymakers: Heed the data and accelerate toward a clean energy economy or slow progress for fossil fuel handouts. Tough call.
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