Recent Publications

A Sustainable Energy Policy

By Robert B. Nelson

A lot has been written lately about our unhealthy reliance on foreign oil to meet energy demands. Historically, renewable energy, although promising, has not seen that promise fulfilled. This year however, the American Wind Energy Association (AWEA) announced that the U.S. wind energy industry will install about 2,500 megawatts (MW) of new wind power this year, a record amount that will help lower skyrocketing home heating and electric bills by reducing the demand for natural gas.

More than 2% of the nation’s energy supply is now supplied by renewable sources. In contrast, renewable energy accounts for less than one percent of the needed electric supply in Michigan. That percentage may soon change significantly.

On October 25, 2005, three bills were reported out of the Michigan House Committee on Government Operations designed to promote the development of wind energy in Michigan. One of the bills, HB 4647 provides for tax credits for Michigan residents who generate power from small (less than 2 MW) wind turbines between tax years commencing after December 31, 2006 and ending before January 1, 2017. This proposed tax credit would mirror the federal production tax credit that was renewed by Congress as part of the 2005 Energy Act.

The other two bills (HBs 4648 and 4649) permit wind energy systems in all zoning classifications subject to certain requirements. While local governments may debate the propriety of the zoning bills, a major push to promote wind and other renewable energy in Michigan is long overdue. Michigan finds itself playing catch up in the alternative energy arena, despite recent efforts of the Michigan Public Service Commission to promote renewable energy.

The Commission has issued a series of orders designed to implement a renewable energy program in Michigan and on October 18, 2005, the Commission approved eight contracts between Consumers Energy and renewable energy providers. This was the culmination of a four-year effort by Consumers Energy, renewable energy providers and the Commission to develop a meaningful renewable energy program in Consumers Energy’s service territory. More than 75 MW of renewable energy will soon be helping to reduce this state’s reliance on fossil fuels as a result of this program.

The Commission also approved a net metering program for all regulated electric utilities in March, 2005 so that renewable energy projects will be billed only for the net consumption used (the amount used less the amount generated). Despite these efforts by the Legislature and the Commission, Michigan is lagging in the development of renewable energy. What can we do to improve Michigan’s standing in the alternative energy arena? In my judgment, there are two ways to do so:

1. Renewable Portfolio Standards: In states where wind or solar resources are plentiful, utilities are often under mandate to supply a certain percentage of their power from green energy by a certain future date. In fact, 20 states and the District of Columbia have implemented “renewable portfolio standards.” The percentages of renewable energy in the overall electric generation portfolio mandated by these standards ranges from 1.1% in Arizona to 30% in Maine. The deadlines extend until 2019.

Michigan has so far resisted this trend, even though several bills have been introduced in the Legislature to do so. Although the Congress rejected an attempt to establish national renewable portfolio standards in a close vote during debate on the 2005 Energy Bill, much of the argument made by opponents was that states were stepping up to this issue. Michigan should too. The Great Lakes Renewable Energy Association and the Michigan Sustainable Energy Coalition are promoting such legislation. Although greater use of renewable energy will benefit all Michigan citizens, legislation can be drafted that incorporates lessons from other states and will not unduly burden non-participating customers.

2. Voluntary Efforts: In the past, renewable energy initiatives have been largely promoted through federal tax incentives and mandates handed down by state government. Now, there are encouraging signs that the demand for sustainable energy is getting more and more support through voluntary means. Instead of focusing on the individual residential user, more emphasis is being placed on the commercial and industrial sectors.

Douglas Faulkner, acting assistant secretary for Energy Efficiency and Renewable Energy at the U.S. Department of Energy has stated: “The entry of commercial, industrial, and government purchasers into the renewable energy market has resulted in tremendous growth in the development of clean and limitless renewable energy resources.”

Faulkner’s comments were made at the 10th National Green Power Marketing Conference in Austin in October, 2005. While there, the Energy Department’s National Renewable Energy Lab released a report saying that voluntary power purchases accounted for 2,200 MW, which is an increase from 167 MW — 1,000% — over the last five years. The growth has been spurred by national retailers, universities and manufacturers, along with various government agencies.

The Fraser Law Firm has long been identified with the renewable energy industry, whether assisting clients in their pursuit of financing opportunities for wind energy or in assisting in the promotion of solar energy, which Dave Marvin did in the 1970s. We should continue to promote an industry that most American citizens are realizing can make a significant dent in our reliance on foreign oil.

Mr. Nelson practices in the Utilities Law Department at Fraser Law Firm in the Lansing office. He served as Commissioner of the Michigan Public Service Commission from 1999 to 2005. He may be contacted at 517-377-0854 or at rnelson@fraserlawfirm.com.