The Benefits of PROPOSAL 3: Taking Control of Our Future

If you have any intention to vote in this upcoming election you are probably confused, frustrated, or angry at this point in the game. Political advertising - especially for the six Michigan ballot proposals - has reached an all-time high and all-time low at the same time, so it's hard to watch and for some even harder to know what to do.

You can blame much of this on the Citizen's United case, in which the U.S. Supreme Court basically ruled that corporations are people and spending money is part of free speech. It opened the floodgates for misleading, vitriolic, and largely unattributed political advertising.

Now corporations & special interests realize it's much easier to get bigger changes to the legislative climate by simply collecting signatures, place a measure on the ballot, and take your changes in the court of public opinion. A seasoned politician told The Review in 2010, “Give me a million dollars and I can get anything on the ballot for you and, if you give me $3 million, I can get it passed.  That might well be true; but let's agree it's a really bad way to make laws.  At the state level major utility companies are outspending proponents of Prop 3 by three to one. 

We have six ballot proposals in front of us on November 6^th and below we weigh in on Proposal 3, which would require Michigan utilities obtain 25% of the electricity they sell from renewable sources, which are identified as wind, solar, biomass and hydropower, by 2025.   For the other five proposals, take a glance at the Vox Politic Voter Guide and hang in there and say your prayers - this stage of the game will all be over in a few days.

Apart claims to the contrary from opponents, Prop 3 would limit utilities to rate increases of 1 percent annually to comply with the 25 percent renewable energy mandate.  Plus the standard could be delayed by one year if the 1% maximum increase becomes impossible to meet. Currently the legislature has limited the regulatory power of the Public Service Commission - the entity responsible for overseeing utility rates set by monopolies such as DTE & Consumers Energy - and the utilities can impose rate increases at their discretion, with the PSC left to either ratify or challenge the rate increases months after they've been placed into effect.

Consumers Energy is spending $600 million currently to build wind farms, while also spending $2.9 million to fight Prop 3. Presently the Michigan legislature sets energy policy and a 2008 law is on the books requiring Michigan to obtain 10% of its energy from renewable sources by 2015; and a recent state report indicated most utilities would meet the 2015 clean energy standard; but proponents of Prop 3 assert the 10% mark does not go far enough. Indeed, the 25% standard would give Michigan one of the nation's most aggressive clean energy mandates, along with eleven other states that have renewable energy mandates of 25 percent or higher.

Michigan ranks fairly low in the tables when it comes to outcomes of our energy policy. Despite the so-called 'cost effectiveness' of our 'coal first' strategy, we have one of the 10 highest averages in the nation when comparing commercial costs per kilowatt-hour of electricity - a fact partially reflected in Hemlock Semiconductor's decision to locate its expansion in Tennessee. Michigan is already a State that is expensive and behind the curve when it comes to energy.

BIG PROBLEMS WITH COAL

Coal has been Michigan's predominant source of power for the past 50 years, even though there are no coal deposits in the state. Michigan gets its coal from mines in Wyoming, Montana and West Virginia. Additionally, Michigan has one of the nation's oldest fleets of power plants; electricity rates here are above the national average and higher than those in surrounding states; plus we lag behind other Great Lakes states on renewable energy. According to government data, among the 8 Great Lakes states, only Ohio has less installed wind energy capacity than Michigan.

In 2012, Michigan obtained 59% of its electricity from coal. The rest came from nuclear (26%) and natural gas (11%) and renewables (4%). Importing coal costs Michigan utilities more than $1.7 billion annually, according to the Federal Energy Information Administration.

Despite the fact that solar panels only produce energy when there is sunlight and wind turbines produce power about 35-40% of the time, a 2012 study by the government's National Renewable Energy Laboratory concluded that the U.S. with existing technologies could obtain 80% of its electricity from renewable sources by 2050.

Michigan has already come fairy close to meeting its 10% standard, though that was originally met with equal skepticism by the same community who opposes the current ballot initiative. The problem is nearly half of the total renewables that Consumers Energy are reselling to meet the goal is purchased form out of state. Combine this with the cost of coal, which is purchased from Kentucky and Wyoming, and you can see our current strategy is actually a net exporter of our State's wealth.

Finally, the pure & simple reality is that coal is not a renewable resource. Everyone who wishes to burn the cleaner, Western US version is clamoring for the same finite supply. It's extraction costs will rise as supplies dwindle, raising the cost of electricity produced in the process by this method.

Facts, Opinions & Points to Ponder on Proposal 3

Mitt Romney and opponents of Prop 3 have claimed that $90 billion of stimulus money was invested in green companies, half of which went out of business, which is a gross overstatement. Of nearly three-dozen recipients of loans under the Department of Energy's loan guarantee program, only three are currently in bankruptcy. Moreover, the loan-guarantee program only consists of $16 billion out of $90 billion in green projects - money that went to energy efficiency and high-speed rail and a number of other things; so the money that's gone to failed projects is less than 2 percent.

The reality is that Prop 3 will spark $10.3 billion in new investments and launch new clean energy businesses right here in our state. Michigan State University estimates moving Michigan to a 25% by 2025 renewable energy standard will create 94,000 Michigan jobs that cannot be outsourced. There are 8000 parts in a wind turbine and all of them can be made in Michigan. Instead of importing coal from other states and oil from the Middle East, we can build a clean energy industry right here in Michigan.

Presently we get over half of our electricity from coal, all of which is imported from other states. Michigan sends $1.7 billion a year - and the jobs it creates - to other states.

Moreover, Prop 3 will not require us to use less coal. In fact, we probably will continue to use more coal because while Prop 3 might reduce the proportion of energy produced by these plants, it will not put any existing sources in mothballs anytime soon. We need the power generated by coal-fired plants to keep our electrical distribution systems full and stable.

But Prop 3 will probably mean we do not build any more coal-fired plants in Michigan. Unless anyone wants to sign up for building the “last typewriter factory in America”, let's agree this is probably a good thing.

The Illinois Power Agency found its renewable energy standard enabled “significant job creation and economic development opportunities.” 30 other states, including Ohio, Minnesota and Illinois, have adopted measures similar to this initiative. And every state that has adopted higher clean energy standards has seen their energy costs shrink after initial implementation. In some states this is as much as 35% lower than the current commercial rates in Michigan.

Utility companies are using scar tactics to claim Prop 3 would cost utilities and rate payers $12 billion to meet the standard, drive-up electric rates (even though by law they could do so no more than 1% per year) and also require the construction of as many as 3,100 wind turbines.  But large utilities could buy renewable energy from independent energy companies - as long as it is generated in Michigan - or adjacent areas served by a Michigan utility. Utilities do not generate income on the sale of electricity per se, but earn revenue by building or upgrading facilities and passing those costs, plus a mark-up that can range up to 11 percent, on to ratepayers.

While the ads for Proposal 3 focus on windmills, it would cover all forms of renewable energy. Hemlock Semiconductor produces over 25% of the world's silicon. A Michigan clean energy standard would help their business. Similarly, Dow Chemical does not currently market their new solar shingles in Michigan, where they are made, because there are no real energy initiatives to adopt the technology, like there have been for every other conversion from one major energy technology to the next.

Proposal 3 would also allow us to refocus on hydroelectric power, giving a boost to skilled tradesmen who would work on the ms and associated infrastructure to the recreational users who benefit from the offshoots of dams, reservoirs and the like.

The Constitutional Question

Many critics and several energy & legal experts support the renewable energy mandate, but object to having it written into the state constitution. Proposal 3 would make Michigan the first state to put such a mandate into the constitution.

“I think 25% renewable energy by 2025 is achievable, but I prefer it not be built into the constitution, says Robert Nelson, who served the Michigan Public Service Commission from 1999 to 2005. “I think that putting it into the constitution is a big mistake; no other state has done that.”  Indeed, the constitutional issue is the particular conundrum for this proposal.

But according to James Clift, policy director for the Michigan Environmental Council, “It took 10 years to get the legislature and utilities to agree to a modest 10% renewable energy standard. Placing this mandate in the constitution would create jobs, force stubborn utilities to shift toward cleaner sources of energy, curb energy costs over the long term and put Michigan among the nation's leaders in renewable energy.”

Indeed, former Republican governor William Milliken - the state's longest serving governor - recently announced his support for Prop 3, noting the standard “warranted the long-term certainty of constitutional protection.”

A Michigan Public Service Commission report found the cost of renewable energy is less than new coal power. Other states that adopted similar initiatives did not experience significant increases in utility costs for consumers and the Illinois Power Agency found its renewable energy standard played a “dramatic role in reducing electric energy prices” and saved $176 million in the state.

Michigan's proposal explicitly states utilities cannot raise electricity prices related to the cost of generating renewable energy by any more than 1 percent per year.  And a recent economic study funded by the Michigan Environmental Council said Prop 3 would add 50 cents per month to the average residential electric utility bill. This figure was derived by calculating renewable contract costs and subtracting savings from a reduced use of carbon-based fuels and power plants.

Proposal 3 is Right for MI

There is a saying that “the king of the next revolution will never be the prince of the next one.”  Basically, what this means is that no one will ever vote themselves out of business.  

In this case, it is easy to see why the existing utilities are lined up against Proposal 3.  It basically puts a long-term cap on their future, while new technologies and more modern energy markets are created. 

They are well positioned; however, if they play along with the new rules instead of trying to fight it or “fake it,” like they are with out of state renewables purchases.

Though it would have been better if it would have come from the legislature, as a series of easily enactable laws,

Proposal 3 is a no-brainer.   Supporting this ballot initiative is the smartest thing you can do for this State's future energy competitiveness, securing our economic future, adding jobs, limiting rate hikes, and protecting the incomparable value of our environmental resources.