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Wed October 10, 2012
5 things to know about Proposal 3: 25 by '25
Renewable Portfolio Standards (RPS) promote the use of renewable energy by requiring that a minimum percentage or amount of energy sold in a state come from sources like wind, solar, biomass, or hydropower.
There are currently 29 states with some sort of RPS in place. Michigan is one of them.
Michigan’s current standard, passed by the legislature in 2008, calls for 10 percent of retail electricity sales to be derived from renewable sources by 2015.
Proponents of Proposal 3 say that standard does not go far enough. They seek to amend Michigan’s Constitution to require that 25 percent of retail electricity sales come from renewable sources.
While Michigan is on track to meet its 2015 goal, it still relies primarily on fossil fuels to power the state. In 2010, about 59 percent of Michigan’s electricity came from coal, 26 percent from nuclear power, 11 percent from natural gas and 3.6 percent from renewable energy, the U.S. Energy Information Administration found.
Opponents of the measure, including Michigan’s largest electric utilities, Consumers Energy and DTE, say the move to more renewables would simply cost too much money.
Proponents argue that the move will not only cost less in the long run, but also create jobs in Michigan.
They point to a provision in the amendment that would prevent electric utilities from raising rates by more than one percent in any given year as they attempt to comply with the standard.
Cost comparisons from the coalitions for and against the proposal are contentious and vary significantly.
What you should know:
The Citizens Research Council of Michigan has done an analysis of all six ballot measures. The following "things to know" were gleaned from their report on Proposal 3.
The CRC is a non-partisan, non-profit, independent research group.
1) Proponents are saying Proposal 3 will create jobs
A provision in the amendment calls for the legislature to enact laws “to promote and encourage the employment of Michigan residents and the use of equipment manufactured in Michigan in the production and distribution of electricity derived from clean renewable electric energy sources.”
The CRC mentions that the amendment could reduce the amount of money leaving the state through the purchase of coal. This money might be used to develop the manufacturing capabilities of Michigan's clean energy sector.
Michigan is home to nearly 200 solar and wind supply chain companies (over 50 of which supply to both industries) with more than 4,000 jobs tied to the wind industry and 6,300 to the solar industry. Clean tech is the state’s fastest growing sector, with $10 billion in announced clean energy development investments in the pipeline. The state ranks fourth in the nation for number of jobs in the solar industry and first for clean energy patents.
2) Meeting renewable standards will likely depend on wind power
In recent years federal subsidies have led many states to focus their renewable efforts on wind power. These tax incentives, coupled with Michigan’s wind resources, especially in and around the Great Lakes, means that electric utilities will likely be relying on wind to meet the 25 percent renewable standard.
One concern for utilities is that the Renewable Electricity Production Tax Credit (PTC), the spur for many new wind projects, is set to expire on December 31, 2012.
Another concern, notes the CRC report, is the siting of wind turbines:
The proposed amendment requires that the compliant clean renewable electric facilities must be located in Michigan or "within the retail customer service territory of any electric utility"...the location decisions for windmills have split many rural communities in recent years. If additional locations are needed to garner the energy needed to produce 25 percent of the total from renewable sources, the ability of local residents to provide input on the locations could be set aside.
3) Smaller utilities may have trouble coping
While Detroit Edison and Consumers Energy comprise just over 70 percent of market share in Michigan, there are a number of smaller utilities in the state that may have trouble generating the 25 percent required to meet the new standard.
From the CRC:
These entities are not large energy producers, but often purchase energy from others. The ability to purchase renewable electricity will depend on surplus electricity being available from Michigan generators of that power. The potential premium charged for that energy will threaten the financial position of these entities, and may in the end threaten their existence.
4) Michigan would be entering uncharted territory with regard to constitutional issues
Proponents of the amendment contend that the influence of large utilities in Lansing prevents any new, meaningful legislation on renewable energy.
If Proposal 3 passes this November, Michigan would be the first state to incorporate a renewable energy standard into its constitution.
Further, the amendment would mark a first in the history of Michigan’s Constitution. According to the CRC report, “Michigan does not have any provisions in its Constitution that compel persons or businesses to engage in activities or perform tasks.”
This may cause some confusion the CRC notes. Still to be decided are how renewable electricity sales would be monitored and what would happen in the event of noncompliance. Future legislation--and possibly another constitutional amendment--will be needed to resolve these issues.
Some worry that the amendment would essentially muddy the Constitution. They argue that specific policies be promoted through legislative means and that the Constitution be reserved for protecting basic rights and providing a framework for government.
5) Prices are likely to increase, no matter what happens in November
In recent years, excess energy capacity from reduced economic activity, advances in fracking technology for natural gas, and federal subsidies for wind turbines have led to cheaper electricity.
The CRC notes that no matter what happens in November, prices are likely to increase.
Opponents of the proposal note the high costs of building renewable facilities, but as the CRC points out, Michigan's aging coal plants will need to be replaced or retrofitted to keep them in compliance with federal regulations.
Michigan Radio's Rebecca Williams will have more on Proposal 3, including a breakdown of what it might cost.
- Jordan Wyant, Michigan Radio Newsroom
Politics & Government