A wind turbine under construction in Michigan in 2008.

Dennis Pennington / Michigan State University

A wind turbine under construction in Michigan in 2008.

Michigan researchers criticize ‘absurd’ out-of-state RPS study

Researchers and policy experts in Michigan are criticizing an out-of-state organization’s report released last month claiming the state’s Renewable Portfolio Standard has prevented 24,000 jobs from being created and caused $15 billion in lost income statewide in 2013.

Strata Policy, a Utah-based think tank based on the “principals of liberty and free markets,” has released four reports this year finding similar results from enacting renewable standards in Michigan, Ohio, North Carolina and Kansas.

All of the reports say such laws have prevented thousands of jobs from being created and cost households thousands and states billions in lost income. Critics say the reports are being used to justify policy changes against renewable standards in various states.

Strata Policy researchers are affiliated with Utah State University’s Institute of Political Economy, an academic research center that does the reports which are then “picked up and boiled down into consumable communications pieces” by Strata, according to Strata’s executive director, Ryan Yonk.

Academics in Michigan, where the most recent report was released in September, are calling the reports’ methodology bunk and suggest there is a hidden agenda behind Strata’s work.

“Basically, I don’t believe any of it,” said Thomas Lyon, the Dow chair of sustainable science, technology and policy at the University of Michigan’s Ross School of Business.

“It’s just such a simplistic little methodology. In some ways it’s interesting because it’s illustrative of how the public doesn’t have enough sophistication to distinguish between good research and bad research. This looks like research, it’s done by someone with a Ph.D. and it has some equations. But if you ask a good, quality econometrist does it stand up to scrutiny — it’s just kind of absurd in its simplicity.”

The Strata report cites work done by researchers at the University of Michigan who have looked closely at the state’s RPS.

But Lyon said the implications for spreading such research are much greater than simply one faulty study.

“This is important because the public needs to learn how to get smarter about interpreting pseudo research. The same thing happens in the climate debate,” Lyon said. “[Strata] is using the same simple modeling from state to state wherever they think an RPS may be vulnerable, does an empty little analysis and tries to influence public policy with it.”

Yonk, one of the authors of the study who is also an economics professor at Utah State, disputes criticism that the Michigan and other states’ RPS reports are inaccurate or misleading.

Earlier this year, Strata published a formal response to criticisms from the American Wind Energy Association and Sierra Club about a Strata report on the costs of wind energy. In its response, Strata derided those groups for criticizing its findings based on their own interests.

“What we’re looking at is policy change before and after you do it. It attempts to control for other things going on in the economy and to isolate out what the changes are in the macroeconomic economy,” Yonk said. “I would dispute the notion that it’s attributing all of that to this one policy decision.”

As for influencing policy, Yonk said the team’s goal is to “get information to policymakers so they are able to make their decisions. Those belong to individual state legislatures. Our goal is to get additional and better information to them about what that policy can be so they can decide.”

Michigan lawmakers are debating whether to extend the state’s renewable portfolio standard, which is set to level off at 10 percent at the end of the year. In general, lawmakers on both sides of the aisle agree that Michigan’s RPS has been successful — but Republicans that control the legislature want to eliminate the mandate because they believe renewables can compete on their own with fossil fuels.

Yonk testified before Ohio and Kansas lawmakers earlier this year — where renewable standards are in jeopardy — to hold up his group’s research in opposition to the policies.

Yonk said the research team is interested in looking more closely at how RPS extensions might affect state economies, but at this point there is not enough empirical data to give an answer.

The Michigan report, however, gives a clear policy recommendation: “Any state currently deliberating on implementing a new RPS, or strengthening an existing one, should heed these results as a warning of their harmful effects. Finally, states should refrain from following the fad of enacting such costly regulations, in spite of the policy’s political palpability or expediency.”

Member organizations of RE-AMP, which publishes Midwest Energy News, have advocated in favor of extending or increasing Michigan’s RPS. Midwest Energy News is also cited as a source in the background section of the Strata report.

‘It’s just kind of meaningless’

Yonk said in an interview that the Strata researchers were performing a “macroeconomic growth model” that tracks states with an RPS and those that don’t, “lining them up in event time and the same number of months before and after, and tracking the growth pattern in states with an RPS and states without.”

He said the study accounts for positive economic effects, such as investment and job growth.

The Michigan report says that states with an RPS have seen industrial electricity sales drop by nearly 14 percent; real personal income has fallen by nearly 4 percent; and “RPS is correlated with an increase of 10 percent in a state’s unemployment rate.”

For Michigan, the study claims, that means a real personal income loss of $15.1 billion in 2013 (or $3,830 per family) and a loss of 24,369 jobs that would have otherwise been created.

According to Strata’s website: “The data from our study opens a critique about the real costs to organizations, individuals and families and highlights how Michigan’s RPS impacts the current economy and ratepayers today, and if not repealed, how these mandates will impact the future.

“We are aware the pro-RPS mandate lobby would not take this negative news without a fight. The industries with a financial interest in maintaining the RPS mandates stand to lose millions of dollars in government subsidies and market access. They are somewhat predictably countering our conclusions with their own data (which deserves scrutiny given its source and motivation) and doing whatever they can to discredit us as academics. We stand by our data and the conclusions.”

Lyon and others criticize the approach as being too simplistic for suggesting that the RPS is solely responsible for negatively impacting Michigan’s and the country’s economies.

“The study basically attributes everything that is happening in the economy to RPS,” said James Clift, policy director for the Michigan Environmental Council. “Therefore, since the economy went into a recession in 2008 due to the sub-prime mortgage market collapse at the same time many states were investing in RPS, RPS must be responsible for what happened in the economy. No attempt appears to have been made to compare what happened in states without RPS during the same period.”

Julie Metty Bennett, senior vice president at the Lansing-based Public Sector Consultants, said the study would have been more helpful if it directly compared Michigan with other states with and without and RPS.

“Without knowing what Michigan did compared to the average state, it’s just kind of meaningless,” she said. “And this is giving them the benefit of the doubt that they accurately measured the impacts of the RPS.”

Public Sector Consultants has done studies on Michigan’s energy industry, including looking at how the state may address future capacity shortfalls.

“It’s hard to have a reaction (to the report) because it’s hard to know exactly where the numbers came from. How can you argue with it? They don’t publish coefficients or other state details. The conclusions feel a little hard to justify but I can’t necessarily debunk it either,” Metty Bennett said. “The fact is, the RPS went into effect at a time when we were about to go into the Great Recession.”

Specifically, the Strata study used a “state coincident event” methodology that indexes economic conditions of all states before and after a given point in time, according to the report. It’s “one of the most commonly used approaches for indicators of the larger macroeconomic economy,” Yonk said.

Lyon responded that while that may be useful for investors responding to stock prices fluctuating within hours or seconds, it doesn’t apply to economic changes years before and after a law is passed.

“The idea [behind the methodology] is to take that narrow window where you assume nothing is changing and the focus is on one thing that did change. That window is usually plus and minus a day,” Lyon said. “They’re taking a window of plus and minus 48 months. It’s just completely inappropriate to make that analogy.

“This report says they’re looking over a period of eight years and assuming nothing has changed over that time. It’s completely ludicrous on its face.”

Then consider the time frame of the Strata study: The state’s economy tanked roughly 15 months before the RPS was enacted in 2008, Lyon said. The report looks at economic conditions over a span of 48 months before and 48 months after the RPS was enacted.

“They just muddled the causality completely,” Lyon said.

Follow the money?

In addition to the report’s methods, others have accused Strata Policy of political motivations based on the level of transparency surrounding the group’s funding.

For example, Randy Simmons, another author of the Michigan study, spent five years as the Charles G. Koch Professor of Political Economy at Utah State.

In March, the Wichita Eagle cited research from the Center for Public Integrity that “Utah State is the fifth-biggest recipient of money from Koch-linked foundations among all colleges since 2012, taking in $170,000.”

“Utah State illustrates this complex web of pseudo think tanks and front groups that are very opaque in their funding,” said Lyon, who studies the influence of power-sector spending on politics. “You can’t tell where the money comes from or who’s behind it. There are a lot of these little think tanks around the country, carving out ideologically biased studies and hiding their sources of funding. It’s just disturbing.”

Yonk responded: “Strata’s funding mechanism comes from a variety of sources — from foundations to government contracts to private individuals. What we work to do is put together a research agenda and go out and raise funds around the research we’re trying to do. We have a set of questions we want to ask and we’ll look for those to join with us and fund it. The research is independent and funders don’t have influence or knowledge of it.”

Troy Oldham, a spokesman for Strata, declined to identify any of the organization’s funders.

“Out of respect to donor privacy, we do not disclose our funding sources and support organizations,” he said via email.

How did the RPS affect the economy?

Unfortunately, Lyon said, there has not been a rigorous and detailed study of the macroeconomic impacts of Michigan’s RPS.

One way of looking at costs to individuals, he said, is through the surcharges that utilities were allowed to apply to customers’ bills. The maximum utilities could charge were $3 for residential customers and $187.50 for industrial ones.

The state’s two largest utilities — Consumers Energy and DTE Energy — eventually phased out or significantly lowered those surcharges because there was no justification for them.

A 2014 study from the National Renewable Energy Laboratory on the costs and benefits of RPS programs throughout the country found the rate impact for Michigan customers varied from 1 to 4 percent based on their usage.

Studies this year from the University of Michigan’s Energy Institute and the Michigan Conservative Energy Forum also make the economic case for expanding the state’s RPS due to declining costs and investment potential.

Earlier this year, the Michigan Public Service Commission reported that the state’s RPS law resulted in $2.9 billion in new investment to bring nearly 1,500 megawatts of renewable energy online. The energy employment cluster also grew from 6,775 jobs in 2005 to 8,200 jobs in 2013 and is expected to grow 7.1 percent by 2020, according to the MPSC.

Julie Baldwin, renewable energy section manager at the MPSC, said the state’s RPS “has been very successful. We have over 1,500 megawatts [of renewables] actually generating now and the pace has dramatically increased. I would call that very successful and significant. It’s a policy that has worked well. We’ve certainly showed that our state can do it and renewables have value and they are not as expensive as everyone thought they would be pre-2008.”

Ultimately, though, Lyon said there hasn’t been a silver bullet that accurately measures the income and employment impacts of the state’s RPS.

“People make errors on both sides of the argument,” he said. “Advocates will come out and say the RPS will create all these jobs because of all these investments in green industries. Those projections are often very shallow and really simplistic things that don’t take into account the fact that there may be some job losses in some sectors while gains in others.

“Advocates will only typically tell you about jobs created, opponents will only tell you about the jobs that will be lost,” Lyon said. “Neither side will do a very good job analyzing it.”

4 thoughts on “Michigan researchers criticize ‘absurd’ out-of-state RPS study

  1. These reports from Strata are not only absurd. They are not very good. The ones I have seen are chock full of sloppy errors and non-sequiturs.

    The real facts are also emerging. Renewables have created tens of thousands of new jobs in Ohio and Michigan, and many other states. Both wind and solar are now cheap enough that they are pushing fossil fuels out of the way even though they are under attack. (Ohio’s siting law is a problem, but with a little luck it is one which will prevent John Kasich from becoming a national political figure).

    In Ohio Clean Energy is producing more jobs and economic development than fracking, the favored child of the Republicans. Ohio’s natural gas has expanded almost ten times, but is still only a fraction of our consumption.

    Michigan and Ohio are twins as far as renewable potential goes. Both states have huge onshore wind potential, and both states have enough solar potential that it is cost-effective today, if you compare the price of solar to the cost of peak power – something which the utilities do not do, and which obscures the economic value of solar to the advantage of nuclear and fossil fuels.

    The two states have very different regulatory issues. But these perverse attacks from the fossil industry are easy to refute – if you can get the ear of anyone in power who cares about being shown right or wrong in the future.

  2. If windfarms are such job and value creators, then there is no need for a federal tax credit, roughly 30%. If it makes sense, it should be able to stand on its own. Gov’ t mandates and tax incentives distort proper allocations. If we could mandate wealth, every country would be rich.

    I especially take offense at Lyons comment “..In some ways it’s interesting because it’s illustrative of how the public doesn’t have enough sophistication to distinguish between good research and bad research.”

    Thanks for telling us how stupid we are professor and how we really just need to let the wonderful people run our lives.

  3. Yet another example of how the Koch’s will hide behind their money, buy educational institutions and legislators, bride our educators, (who do seem to be rather cheap prostitutes). Wind and solar are inevitable folks and the Koch’s should take their billions and buy more art collections to hoard and yachts to race and bogus tainted wine. After all they got their money the old fashioned way, lies and stealing and corrupting our political system and off the lives of us Americans their dirty oil and coal hurt for generations.

  4. Ned Ford. You are mistaken in thinking utilities do not compare solar pricing to peak power prices. A typical way to evaluate the cost impact of adding a resource to a utility’s system is to run a multi-year hourly dispatch model of the “base case” system and then run it again with the new resource “mix”. Since solar produces power on-peak, any difference in total system energy cost between the cases will be due to the offset of peak power by the solar output.

    Where solar really falls short when analyzed correctly, is the fact that the time periods that solar panels produce their highest output does NOT correlate well with peak demand on the utility system, despite what ill-informed activists might claim. It only takes a small amount of solar penetration in a given part of the grid to push the remaining peak of the load profile later and later into the evening, eventually resulting in additional solar having ZERO impact on lowering the remaining peak demand.

    This fall-off in solar contribution to serving peak load starts rapidly. As little as 1-2% of system nameplate capacity being solar will push the remaining peak 1 hour later. (depending on where in the country you are) 20-25% nameplate solar pushes the remaining peak late enough that any additional solar provides zero contribution to meeting peak demand. These inconvenient facts are why energy storage is so important to large scale solar deployment on the grid. Unfortunately, storage costs and useful life are still a VERY long way from economically solving this issue, regardless of what the ill-informed might believe. Elon Musk is brilliant and the upcoming ‘gigafactory’ will certainly help drive down battery costs but the storage hype is still far, far ahead of the storage reality.