Modeling shows efficiency, carbon trading could play major role in Michigan’s Clean Power Plan compliance

Michigan energy officials released a pair of reports Monday showing that a stronger commitment to energy efficiency and trading carbon credits with other states would be an affordable compliance strategy for the Clean Power Plan.

While Michigan has taken a “pencils down” approach to a compliance strategy since the U.S. Supreme Court stayed the rules in February, Gov. Rick Snyder’s administration released the results of two studies on the state’s best path forward.

While the Clean Power Plan goes before a federal appeals court this week, state officials say changes are due, regardless of the outcome.

“The models have given us insight into energy choices we’ll have to make, carbon rule or no carbon rule,” said Valerie Brader, executive director of the Michigan Agency for Energy.

Initial findings from December showed Michigan is already on track over the next decade to comply with the federal carbon standards.

Brader said expanding the state’s ability to see energy efficiency savings beyond a 1 percent mandate that currently exists “is absolutely key to our energy future.” She added that a higher commitment to efficiency — Snyder has supported 1.5 percent through 2025 — would save ratepayers more than a business-as-usual scenario.

“This is absolutely vital to control Michigan’s energy costs in the future,” she said. “It is saving us literally billions of dollars.”

A second insight from the reports is that interstate trading of carbon credits “is good for Michigan,” Brader said.

“Early compliance can be parlayed into an economic advantage when trading occurs,” she said.

Additionally, Michigan would likely benefit from taking a less-costly mass-based approach to reducing carbon emissions rather than a rate-based approach, the models show.

One of the state’s models was done for free by Resources for the Future as part of a program through the National Governors Association. The state paid $250,000 for the second analysis done by Synapse Energy Economics, Inc.

How much natural gas?

While the federal rules remain in limbo — and the state has not taken a position on the court challenges, even though Attorney General Bill Schuette has joined opponents — Brader and Michigan Public Service Commission Chairman Sally Talberg said Monday the state should be planning its future generation mix for reliability and other environmental rules as coal plants retire.

Brader said a mix of new natural gas plants and renewable energy would likely need to come online in the coming years, with exact percentages in flux based on the price of natural gas.

However, clean energy experts say the state continues to plan an over-reliance on natural gas generation.

“Not only does this analysis ignore that federal tax credits make wind and solar energy resources some of the cheapest options available for new generation, but also the future Michigan’s energy agency lays out could ultimately lead the state towards a risky overreliance on natural gas, if the assumptions made related to natural gas prices, future power plant retirements and new-builds, and compliance strategies by Michigan and other Midwest states hold true,” said Sam Gomberg, lead Midwest energy analyst for the Union of Concerned Scientists, in a statement.

“Other studies show that greater investment in renewables and energy efficiency resources — instead of a rush to natural gas — is a smarter, less risky way to meet our power needs and curb global warming emissions. Yet the level of renewable energy developed in this analysis fails to reflect their full economic potential,” he said.

Gomberg added that the findings are consistent with “most credible Clean Power Plan analyses” that show compliance is achievable and affordable, even in states that are formally challenging the rules.

Oral arguments on the rules are scheduled to begin on Tuesday.

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