DTE Energy Co. CEO Gerry Anderson believes the state of Michigan and his company has a good plan to build sufficient renewable energy resources in the state over the next five years.
Anderson said in an interview with Crain’s that a ballot initiative, whose language was approved this week, that would double the current mandate for renewable energy in the state is the wrong way to go and should only be used as a last resort if legislation fails.
“Energy policy is complex, and a ballot initiative is a bad idea” for many reasons, he said. “The best place to do that is through legislation. … We did that twice (in 2008 and 2016).”
Consumers Energy Co., Michigan’s other major investor-owned utility, also contends it has a sound plan to further develop renewable energy and also does not need a “legal mandate to do the right thing for our customers, Michigan and our planet,” company spokeswoman Katie Carey told Crain’s.
But a group calling itself Clean Energy, Healthy Michigan has begun to collect signatures to put on the ballot a constitutional amendment to extend the state’s renewable energy standard to 30 percent by 2030.
Michigan’s current target, set by state law in late 2016, is 15 percent of electricity sales by 2021. A 2008 state energy law set a 10 percent mandate for renewables that was met in 2015.
“We want to expand renewable energy in a way that will promote economic development, create more jobs, continue to clean up our environment and promote better public health,” John Freeman, executive director of the initiative, said in a statement to the media. “And of course save businesses, homeowners and farmers money.”
Anderson said a 30 percent mandate could result in higher rates for customers because it removes investment flexibility that has been present in the state’s past two energy laws.
While Anderson said he hasn’t done the math to predict how costly speeding up investments on renewable energy would be for DTE — while the company at the same time plans to spend $1 billion, on a new gas-fired plant to replace three coal-fired plants scheduled to close by 2023 — he knows there will be additional costs.
“A mandate to add 15 percent would lead to rate increases that people would find unpalatable,” Anderson said.
Under the ballot initiative, however, utilities would be prohibited from charging residential customers more than an average of $2 per month to cover costs to add renewable energy production.
But what Anderson criticized most strongly about the ballot push is who is pushing it.
The initiative is being partially funded by California billionaire environmentalist Tom Steyer and his NextGen America nonprofit. Steyer has also promoted through TV commercials an effort to impeach President Donald Trump.
“To have someone come in who is a known billionaire, who is active in other political issues, who is a lightning rod, to say well, all right, what you are doing isn’t fast enough … is going to introduce partisanship and a fractious environment where we don’t need it. … People will take sides and it will hurt the cause” of environmentalism, Anderson said.
Steyer, who made his wealth as the founder of the Farallon Capital investment firm and co-founder of OneCalifornia Bank, has supported similar ballot initiatives around the country.
At least 18 other states have a renewable standard higher than Michigan’s 15 percent by 2021 law, Freeman said. And in 2013, a report by the Michigan Public Service Commission concluded the state could comfortably hit a 30 percent renewable energy target in the next decade.
Anderson said it is technically possible to increase renewable energy production to 30 percent, but not without increasing electric rates on customers to unreasonable levels.
“I have never said it is impossible to reach 30 percent. We very likely will do it, but we need flexibility that the ballot initiative doesn’t provide,” Anderson said.
If DTE had been required to invest and build an annual, predetermined amount of renewable energy starting in 2009, just when the economic recession hit, Anderson said DTE would have spent $150 million more per year on wind and solar projects.
“It hardwires outcomes and timing,” he said. For example, the cost of wind power after the recession in 2010 and 2011 was 12 cents per kilowatt hour.
“It was very expensive, but we knew cost of wind would come down,” he said. “We invested some, but the bulk of investments went to 2014 when the cost was 5 cents per kilowatt hour. We got a better deal. We used smarts to invest at the right time.”
Anderson said he believes solar prices will also come down in the next several years and DTE wants to invest in “large blocks” of solar at that time.
“The ballot says do the same amount every year. That does away with flexibility,” he said.
But Freeman said utilities would have sufficient flexibility to meet the renewable portfolio standard targets under the ballot initiative.
However, the proposal would require providers to generate 18 percent of their supply through wind, solar and other renewable energy sources by 2022, 21 percent by 2024, 24 percent by 2026, 27 percent by 2028 and 30 percent by 2030.
Anderson said the state’s 2016 energy law also requires Michigan utilities to develop “integrated resource plans” that shows how companies plan to produce electricity in the future.
“We will lay out our plan this year” that will show heavy investments in renewable energy, Anderson said.
In a statement, Consumers said it plans to file a long-term electricity strategy with state regulators by June. The IRP will explain how Consumers plans to meet electricity needs with a combination of traditional power sources and renewable energy.
“We retired more coal plants than any other investor-owned utility in 2016, and have less than 23 percent of our energy mix coming from coal today,” Consumers spokeswoman Carey said in an email to Crain’s. “We are already making major investments in renewable energy, and we will continue to do so in the coming years.”