Michigan Utility to Independent Generators: We Don’t Need You Right Now
By Andy Balaskovitz
A major Michigan utility says it doesn’t need new generation from renewable energy developers, and it shouldn’t be forced to pay for it.
Michigan has become the latest battleground over a decades-old federal law known as the Public Utilities Regulatory Policies Act, or PURPA.
The law essentially requires utilities to buy power from small, independent producers when doing so will save money for ratepayers.
In multiple states recently, that’s opened the gates for a flood of utility-scale solar projects, which can now routinely sell power at utilities’ avoided cost rate — defined as the incremental cost a utility pays for not generating the electricity itself. Utilities have begun to push back, lobbying for state and federal reforms.
Michigan regulators spent months reviewing how much independent producers should be paid and in November settled on a new, lower rate. One of its largest utilities, though, argues even that number is too high.
Consumers Energy told regulators in December that it doesn’t project a need for new generation capacity in the next decade, and that as a result it should be allowed to sign PURPA contracts at an even lower rate. Developers say they couldn’t build projects with such low compensation.
Solar and clean energy advocates have also scoffed at Consumers’ projection, which assumes the company will continue to operate four coal-fired units through 2030. Critics also note that Consumers plans to build 625 MW of its own wind and solar, even though the Michigan Public Service Commission hasn’t formally approved those plans. Meanwhile, the utility projected growing capacity need as recently as September 2016.
In November, the MPSC approved new avoided cost rates for Consumers, which has 33 PURPA contracts in place across its service territory. The rates hadn’t been updated for about two decades. It also ruled that if the utility’s capacity needs are met for the next decade it could enter PURPA contracts at a far lower “planning resource auction” rate.
The commission suspended its ruling on Dec. 20 based on formal opposition from hydroelectric and biomass owners. The same day, Consumers filed a motion asking that its PURPA rate be reset to the lower figure, and since then at least three developers have objected, saying those lower rates would jeopardize upwards of 800 MW worth of solar projects. Michigan had roughly 100 MW of solar capacity installed statewide at the start of the year.
“These issues need to be resolved quickly. There is a market for renewable energy that’s being paralyzed here,” said Margrethe Kearney, staff attorney for the Environmental Law and Policy Center. “That is going to damage the market and disadvantage ratepayers who want more renewable energy.”
California-based Cypress Creek Renewables says Consumers is stalling 700 MW and $3 billion in investments in Michigan “over the next few years.” And Geronimo Energy filed testimony stating 70 MW worth of plans are on hold.
Six other utilities have pending cases before regulators to set PURPA avoided cost rates, including DTE Energy, which is also seeking permission to build a nearly $1 billion natural gas plant to make up for generation lost by retiring coal units. Critics of that plan say new PURPA contracts could help make up for the capacity shortage.
“It means people want to come to Michigan and build solar at a cost that is lower than (the price) DTE and Consumers could do it,” Kearney said, even though not all of that capacity is likely to be built. “That’s a good sign of a healthy market.”