Clean Energy Keeps the Lights on in Michigan

Splashed across the news these last few months have been warnings from grid operators of an electricity supply crunch this summer in Michigan and other parts of the Midwest, as the grid struggles to withstand the impacts of climate change.

In late April, the Midcontinent Independent System Operator (MISO), the electric grid operator responsible for keeping the lights on whose territory spans much of the Midwest, released the results of its 2022-2023 annual Planning Resource Auction (PRA).* While states like Michigan generally take the lead in ensuring there’s enough electricity to meet demand, the auction serves as a yardstick to measure the energy resources that will “show up” in the coming months. As of now, the region is about 1,230 megawatts (MW) short of commitments to meet projected demand—while a small margin (only about 1.2% short of energy needs), policymakers should nonetheless take it seriously.

*For a deeper dive on the causes of the supply crunch, which MISO has been anticipating for 10 years, see my colleague JC Kibbey’s blog.

But here’s the truth of the matter: this supply crunch is solvable, IF we confront it head-on with smart solutions in the coming months, and with a clean power future in our sights for the longer-term.

Contrary to the fearmongering of the fossil fuel industry, the solution is more clean energy, not less. If done right, renewables, which are some of the cheapest electricity sources available, can deliver so many benefits to Michiganders—clean, pollution-free and affordable energy, safer people and improved health, and a livable climate. We can have reliable power that is capable of meeting the needs of the hottest summer day and resilient enough to withstand climate-induced storms.

Here are tangible steps that regulators, lawmakers, and utilities should be taking to ensure our electricity supply is reliable, affordable and clean, now and into the future.

The short-term solutions

In the next few months, policymakers in Michigan must get serious about deploying solutions to help the state weather this current storm—with a focus this summer on energy efficiency and demand response, followed by getting quick energy storage projects off the ground this fall.

Solution #1: Open a regulatory docket to ensure Michigan’s utilities take advantage of demand response and energy efficiency this summer, protecting energy reliability and the pocketbooks of residents.

Pairing energy efficiency (e.g., customers doing more with less energy) and demand response (e.g., programs that pay energy customers—usually industry—to reduce their energy load during times of grid stress) are effective tools that are commonly relied upon by grid operators when they need a quick solution to manage the grid during peak times.

Michigan’s largest utilities run robust energy efficiency programs (termed “energy waste reduction”) that provide a range of options for consumers to manage their energy costs and help contribute to reducing load, including more efficient lighting, home weatherization, and more efficient appliances. What’s more, energy efficiency is an energy resource—the lowest cost kWh is the one you never have to produce—and Michigan’s utilities are delivering program savings to consumers at a benefit:cost ratio of between 2:1 and 3:1 (see, for example, the latest Consumers Energy energy efficiency report).

Adding to this, demand response has a strong track record of helping MISO’s neighboring regions (such as PJM, the grid operator to the East) weather summer peaks and extreme winter weather—and it’s time for MISO to follow suit. While MISO has 13,000 MW of demand response registered, levels have stagnated over the last decade. Increasing utility and customer participation in MISO’s demand response programs would solve the supply crunch with room to spare.

So, how do we make this happen? Some of the initial building blocks of a demand response plan are coming into place. Michigan utilities are saying they will step up to address issues as needed this summer. Both DTE and Consumers Energy are prepared to ask their large industrial customers who are on voluntary interruptible rates (i.e., a lower energy rate in exchange for reducing energy use when called upon) to curtail use, if necessary, to maintain system reliability. And just last week, a coalition of industrial customers in the MISO footprint petitioned FERC to be able to cut operations as needed to meet peak demand and save costs.

To make these preparations more durable for future seasons (such as this winter), we recommend that the Michigan Public Service Commission (MPSC) proactively open a docket that requires all regulated utilities in the state to file reports detailing the level of energy efficiency and demand response they are prepared to leverage in the next year. This would be a low-lift, but high-impact way of bringing daylight to this issue and providing an opportunity to address near-term problems before they hit Michigan residents.

It would also be wise for MPSC to double down on its ongoing affordability docket in the coming year. The experience of COVID utility disconnections taught us that many Michiganders are unable to afford their energy bills, even in the absence of a pandemic. While Michigan is unlikely to see the price spikes that are accompanying the supply crunch in Southern Illinois, an ounce of prevention will go a long way and will drive more opportunities and awareness of the need to develop a longer-term affordability paradigm in Michigan rather than just one-off bill payment assistant during emergencies. 

Solution #2: Set a short-term energy storage procurement target.

While it can take several years for a wind or solar project (or, for that matter, a new gas plant) to come online, battery storage is quite nimble and can be deployed relatively quickly. It has also become increasingly cost-effective, having dropped nearly 90% in costs in the last decade. With this context, the U.S. is seeing record-breaking battery storage additions, with close to 4.2 gigawatts (GW) of battery capacity added in 2021 (more than in all preceding years combined), largely to complement the rising levels of renewables.

There are many ways to ensure more battery storage is available to help Michigan ride through peak times, but one option is to take a page from other states and set a battery procurement target through legislation or regulatory action. Michigan’s agencies recommended in the state’s climate action plan (the MI Healthy Climate Plan) policies to deploy 4,000 MW of grid-scale storage by 2040, with a near-term target of 1,000 MW by 2025. We’d suggest adding to this a short-term (Fall 2022-Winter 2023) procurement target specifically tied to peak demand to ensure that storage meet Michigan’s needs in the most cost-effective and strategic manner.

Energy storage will also be a critical solution to balance Michigan’s grid in the long-term as well (more on this below) and should be a central part of any policy package that seeks to advance clean electricity in the state.

The medium-term solutions

Short-term solutions this summer and winter are essential. But we also need to overhaul Michigan’s electric grid in the coming years so that it’s prepared both for the realities of climate change and a clean energy future. This will require thoughtful regulatory reforms, significant investment in renewable resources and energy storage, and investments in transmission and other grid infrastructure.

While this won’t happen overnight, we need to start now.

Solution #1: Enact strong renewable energy policy and speed up MISO’s interconnection queue

Wind and solar are the cheapest energy resources in the U.S., in addition to being the cleanest. This is evident in Consumers Energy’s (one of the largest utilities in Michigan) recent long-term resource plan—the utility came to the conclusion that replacing all of its remaining coal plants with renewable energy is the most cost-effective, clean, and reliable option for its customers. Adding to this, renewables are now out-competing new gas combined cycle plants on economic grounds—at a rate of nearly 2:1. To be sure, the era of cheap gas is over; gas prices are volatile by nature, and in recent months have surged to their highest levels since 2008—a dynamic that is expected to persist.

If the economics alone aren’t enough to convince you, countless studies, from UC Berkeley, to Princeton, to NRDC, find that that renewables are reliable, even as summers get hotter and climate-fueled storms more unpredictable.

Unfortunately, we’re not taking full advantage of the renewable energy opportunity.

First, Michigan must take the policy reins to ensure that enough renewable power is built this decade to help replace the capacity from retiring fossil plants. With renewables now at rock-bottom prices and climate action an urgent imperative, Michigan must enact a strong Renewable Portfolio Standard (RPS)—at minimum the 50% by 2030 RPS recommended in the state’s MI Healthy Climate Plan, complemented by an additional 10% of incentive-based programs for rooftop and community solar and voluntary green pricing. Pairing an ambitious RPS with strong energy efficiency requirements, demand response incentives, and battery storage procurement, would supercharge the value of renewables, allowing every clean MW to go further. In particular, Michigan should consider policies that would co-locate solar with battery storage, which is quickly becoming a cost-competitive option and is capable of managing the periods of grid stress that would otherwise be shouldered by polluting gas peaker plants.

Second, we must remove barriers to renewables projects. There is nearly half a GW of solar and wind projects in the development process and slated to come online in Michigan in the next year. But there are far more that are waiting for approval to connect to the grid before they can start construction. As of this writing, there are over 15 GW of wind, solar, battery storage and hybrid projects poised to come online in the Michigan zone of MISO alone, awaiting approval in what is known as the “generation queue.” While it is typical that some projects in the queue never make it to completion (based on historical data, about 75% for solar and battery storage and 25% for wind are completed), if even 10 GW of that new development were to come online in the next few years it would put Michigan in a strong position to weather both the current capacity crunch, and the retirements of more uneconomic fossil plant that will inevitably take place in the next 2-5 years.

Even accounting for the fact that these are variable energy resources, this is—conservatively—enough electricity to power more than 3 million homes, and more than 3x what is needed to make up the current capacity shortfall across the Midwest.

Part of the delay in greenlighting these projects is MISO’s lethargic interconnection queue. While lack of transmission capacity is causing some of that delay (see Solution #2 below), inefficiencies in MISO’s interconnection process are also to blame. Michigan has a leadership opportunity here; similar to leading the multi-state governors letter to MISO supporting its long-range transmission plan last year, Michigan could take lead in demanding that MISO reform and accelerate its interconnection process.

Clean energy is homegrown, local energy that Michigan can rely on, not subject to the mounting risks of putting all of our eggs in the fossil power plant basket.

Solution #2: Break the transmission gridlock in the MISO region

Transmission has been a buzzy word in electric policy circles the last few years, and for good reason—the high-voltage power lines that transport electricity from where it’s generated (often in rural areas) to population centers where the demand is (often in cities) are key to unlocking clean energy and ensuring it can deliver on its promised benefits—lower energy prices and more reliable power.

Robinson Meyer of the Atlantic has famously called transmission the “ability to domesticate lightening and hurl it across the continent.” Cool, right?

Unfortunately, transmission bottlenecks are squandering opportunities for states like Michigan to realize the true value of participating in a regional grid—preventing us from taking full advantage of that domesticated lightning. While ample capacity exists across MISO to meet demand, the grid operator is limited in how much power it can move between its Southern and Northern regions. Indeed, transmission build-out in the U.S. has been relatively stagnate for several decades. But we need to now get a move on. In order to decarbonize the grid fully, we must triple our transmission infrastructure in the next 3 decades.

It’s abundantly clear that the staggering cost declines in wind and solar will be for naught without significant new investments in transmission to help connect the states and market regions and ensure that our increasing supply of clean electrons can find a home.

The good news is that MISO has proposed a transmission build-out which would provide $37 billion in benefits to the northern MISO region (which includes Michigan) and support 53 GW of wind, solar, and stand-alone and hybrid battery projects. But that’s just the first step. After that initial tranche is approved in July, it’s critical that MISO promptly take the next step to move forward on the next slate of projects. Again, this presents a leadership opportunity for Michigan to continue to engage with MISO in clear and firm ways, ensuring that, with each successive transmission plan the grid is becoming more prepared to rise to the challenge of ambitious state clean energy goals.

These are just a few of the solutions that Michigan could be deploying to ensure a stronger, cleaner, more reliable grid in the longer-term. While not covered in detail in this blog, another key need is to evaluate the state’s siting processes for not only transmission lines, but also for energy storage and wind and solar, given well-documented challenges siting renewables in the state.

The Path Forward for Michigan

Renewable power is reliable, safe, and cost-effective.

Unfortunately, as the realities of the climate crisis set in and the economic and human tolls of our continued reliance on fossil fuels become clearer, fearmongering on the renewable energy transition from the fossil industry and its enablers becomes louder and more cynical by the day. The MISO supply crunch is just the latest example of this.

They want us to believe that, when faced with adversity, we have no other option than falling back on coal and gas-fired power. But fossil fuels are the problem, not the solution. We must break out of this vicious cycle by investing in Michigan’s clean energy future.

The nature of a “transition” is that there is work to be done. We will need to roll up our sleeves in both the short and medium-term to ensure that the clean energy opportunity is fully realized. Thankfully, we have the tools—both with respect to technology and policy action at the legislative and regulatory levels—at the ready to ensure the transition is successful and that Michiganders see real benefits in this paradigm shift from the fossil-centric power grid of the last century to a clean energy future.

Clean energy keeps the lights on. Now let’s get out there and prove it.