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Maintaining Michigan’s Clean Energy Momentum

How to Continue Growing Green Industries in the Great Lake State

SOURCE: AP/Carlos Osorio

Michigan Gov. Rick Snyder (R), above, can keep clean energy industries humming in the state with the right policies.

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The 2010 midterm elections ushered dozens of new climate science deniers into statehouses and the U.S. Capitol. Michigan may buck this trend, however. Freshly inaugurated Gov. Rick Snyder (R) supported clean energy policies during last year’s race. He bested very conservative primary opponents despite a strong conservative resurgence throughout the Midwest. Snyder described himself as a “good green Republican” as he won the statehouse by a substantial margin, handily defeating Democrat Virg Bernaro in the general election. Michigan could turn out to be a clean energy bright spot in a disappointing election season if Snyder stays true to his campaign.

Keeping his green promises will take some work, but he can build on Michigan’s recent success with the right steps. By tightening up mandates, using creative financial tools, and encouraging utilities to keep up the good work, Snyder will show he’s serious about maintaining Michigan’s clean energy momentum.

“One tough nerd”

Snyder sold himself as a political outsider. He ran as “one tough nerd” and highlighted his experience as president and chief operating officer of Gateway Computers, as a venture capitalist in southeast Michigan, and as the first chair of the Michigan Economic Development Corporation. But he also consistently emphasized his commitment to clean energy and conservation: He issued support for alternative energy development—particularly for advanced battery manufacturing—and said that he wants to make Michigan a leader in clean energy jobs.

The Michigan League of Conservation Voters made Snyder their first-ever endorsed Republican gubernatorial candidate. And he’s a member of the board of trustees of the Michigan Chapter of the Nature Conservancy—a position he often stresses to underscore his green credentials.

Granholm—a tough act to follow

Snyder had good reason to campaign on a clean energy platform. Gov. Jennifer Granholm, his predecessor, showed determined leadership investing in clean energy technologies and production facilities early on to revive Michigan’s economy. As Granholm explained, Michigan is creating clean energy jobs “because people are going to make this stuff”—batteries, electric cars, solar panels, wind turbines—and they’re making it in Michigan. “If you get the right policy in place, you send the right market signals, you will create jobs,” she said.

Her plan is working, which leaves Gov. Snyder with a tough act to follow. Clean energy jobs and businesses are steadily growing in Michigan thanks to hefty investment and the state’s strong manufacturing legacy. These new jobs cannot offset the 850,000-plus jobs the state has lost over the past 10 years. But they are a big help to a state suffering from the second-worst unemployment rate in the United States.

Sixteen advanced battery companies located or expanded in the state in 2010, reflecting nearly $6 billion in total investment with a potential to create 62,000 new jobs. The state’s solar industry attracted $4.1 billion in public and private investment over the past three years, which brought the number of Michigan solar jobs up to 6,300—the fourth highest in the nation.

Wind energy is also growing, with several manufacturers recently announcing plans to build next-generation turbines and castings in Michigan. This includes URV’s turbine castings foundry, likely the first foundry built in the United States in 40 years; Astraeus’ advanced high-volume turbine manufacturing hub; and most recently, Northern Power System’s commercial-scale turbine assembly plant, slated to be the first constructed in the state.

Immediate obstacles

Nevertheless, Snyder will face several big hurdles right off the bat that could push Michigan’s clean energy transformation off track. First, conservative Republicans won huge gains in local races, taking back the state House and gaining a supermajority in the Senate. Many of the newly elected legislators are reluctant to embrace clean energy and conservation programs, and they could use their majorities to force Snyder to the right.

Second, Snyder has offered up few policy details so far. This leaves some local observers to question his dedication to clean energy and conservation.

Third, paying for Michigan’s continued diversification is no easy task. Gov. Granholm leveraged a healthy dose of American Recovery and Reinvestment Act, or ARRA, funds and state tax incentives to lure clean energy manufacturers to Michigan. But recovery dollars will run out soon, and the state is already operating on a bare-bones budget after nine straight years of declining revenues and steep spending cuts.

Like other states, Michigan will have to find creative ways to fund clean energy manufacturing and development, and continue to work closely with the business community to make the most of sparse state development funds.

Initiatives to continue growing Michigan’s clean energy industry

Despite these challenges, clean energy presents one of the best opportunities to diversify and strengthen Michigan’s economy going forward. Snyder should use his strong bipartisan support to enact or extend the following initiatives to grow Michigan’s clean energy industry:

  • Strengthen Michigan’s energy efficiency mandate.
  • Find creative ways to finance Michigan’s clean energy transition.
  • Promote user-end efficiency and clean energy installments.
  • Say “no” to clean coal.
  • Set the recovery record straight.
  • Let the agencies do their job.
  • Develop a Central Cities initiative that encourages vibrant urban development.

Let’s look at these in more detail.

Strengthen Michigan’s energy efficiency mandate

Michigan’s clean energy and energy efficiency law, 295 PA 2008, requires utilities to realize energy savings of 1 percent of total annual retail electricity sales from the preceding year, from 2012 to 2015, after a ramp-up period that began in 2008.

The new efficiency targets represent a significant achievement but there is still much room for improvement. Many neighboring states—Indiana, Illinois, Ohio, Minnesota—now require utilities to realize annual energy savings of 2 percent or more in coming years. Because Michigan’s 1 percent energy optimization law is a floor, not a ceiling, Snyder could urge the Michigan Public Service Commission, or MPSC—the regulatory agency for public energy, communication, and transportation services—to allow utilities to exceed the 1 percent savings. This would push utilities to achieve efficiency savings on par with other states without requiring additional legislation to increase the savings target.

Similarly, Michigan should lift the cap on how much money utilities can spend on energy efficiency measures. Michigan utilities currently can only spend 2 percent of their total 2008 retail sales revenues on efficiency programs. Other states allow unlimited spending on efficiency measures. Minnesota sets higher spending targets instead of caps, for instance, and its utilities have invested more than twice as much to realize energy savings.

While 295 PA 2008 is somewhat ambiguous when it comes to efficiency spending, it also appears to give the MPSC authority to grant exemptions to the hard cap. Under this interpretation, Snyder could direct the MPSC to permit and advise utilities to spend more than 2 percent of their annual revenue on energy efficiency under existing rules.

Find creative ways to finance Michigan’s clean energy transition

Michigan’s daunting fiscal challenges are exacerbated by dwindling federal support. Gov. Granholm successfully used tax incentives to lure specific businesses to Michigan. But with ARRA funds ending soon there isn’t much money left to spend. And though Snyder seemingly endorsed the use of incentives to bring alternative battery companies to the state, he also promised not to rely so heavily upon tax breaks as a development tool, arguing that targeted tax cuts pick winners and losers and are not an efficient use of sparse state funds.

To be sure, fiscal realities may force the state to issue far fewer business tax breaks going forward. But Snyder shouldn’t pull the rug out from under Michigan’s nascent clean energy industry. Rather, the new administration should make it a priority to see that what money is spent on tax breaks is spent effectively.

Development grants and tax cuts should come with strings attached. Recipients should be required to prove their intent to meet state and national goals for innovation, cost reduction, job creation, retention of intellectual property, or other competitive benchmarks. This will help lawmakers better evaluate the success state aid programs and get the biggest possible bang for the state buck.

The Snyder administration must also use new financial tools to attract and support clean energy development. Snyder, a successful venture capitalist and tech financer, is already skilled at finding creative ways to drive capital into clean industries. Ann Arbor SPARK, a nonprofit business innovation firm Snyder co-founded in 2005, has experienced enormous success connecting startups with local development funds, and encouraging big-name innovators like Google AdWords, Advanced Photonix Inc., and Barracuda Networks to do business in southeast Michigan. SPARK’s projects led to $147 million in new investment and 2,118 new job commitments in 2009 alone—successes wrought by a clear understanding of the importance of technology in the modern global economy and the key role private-public partnerships can play in building this success.

Snyder has already appointed SPARK CEO Michael Finney to head up the Michigan Economic Development Corporation, which is a key indication that he intends to apply the SPARK model to the statehouse—a model that should prove highly effective in courting clean energy firms and helping Michigan’s tech enterprises expand, compete, and thrive.

One place Snyder might look for public investment is the InvestMichigan! Growth Capital Program. The investment program makes growth capital investments in small Michigan enterprises that meet certain basic criteria in order to retain and attract innovative small businesses. The State of Michigan Retirement Systems and Municipal Employees Retirement System of Michigan already invest money on behalf of their pensioners in InvestMichigan!, and these organizations could make the decision to invest a larger share. Their investment would give additional clean tech businesses and other growth-oriented firms a boost without requiring new legislation to boost public investment.

Promote user-end efficiency and clean energy installments

Globally, feed-in tariffs are the most widely used policy for accelerating renewable energy deployment, particularly for solar generated electricity. While feed-in tariffs reduce investment risk and the cost of clean energy development overall, according to an expansive National Renewable Energy Laboratories study, they are still sparsely used in the United States—and legislative proposals to establish feed-in tariffs have languished in the Michigan state capital.

Even so, last year, Consumers Energy, Michigan’s largest utility, voluntarily started a pilot feed-in tariff program. Through its Experimental Advanced Renewable Program, Consumers Energy promised to buy back excess power produced by participants’ solar photovoltaic systems at a fixed rate. Consumers Energy’s pilot is capped at a very modest 2,000 kilowatts, enough to power 250-300 homes. But it demonstrated that there is significant public interest in feed-in among its customers. So many people applied to participate that the program filled up in less than two weeks.

Michigan’s second-largest utility, DTE Energy, introduced a voluntary user-end pilot program last year as well. Customers who installed a solar power system and enrolled in DTE’s Solar Currents program received an upfront rebate of $2.40 per watt, based on the capacity of their system. DTE also pays solar current customers 11 cents for every kilowatt hour produced by their solar system over 20 years. With other federal tax credits, DTE will subsidize up to 80 percent of the installed cost of a solar PV system.

In return, DTE receives the rights to any renewable energy credits allocated to that renewable generation by the Michigan Renewable Energy Certification System. It then uses the credits to meet its renewable portfolio standard requirements. Under the state’s renewable portfolio standard, utilities must purchase or produce 10 percent of the energy they generate from renewable resources by 2015.

Snyder should highlight these existing creative initiatives, and he should encourage utilities to continue experimenting with distributed generation programs like feed-in tariffs to generate more electricity from small energy sources installed at homes, businesses, and industrial facilities. Additionally, he should push utilities to use all means to replace aging energy infrastructure with clean energy generation at a greater scale.

Say “no” to new coal

Then-Gov. Jennifer Granholm placed a de facto moratorium on new coal-fired power generation in 2009. She put plans for seven plants on hold and directed the state’s Department of Environmental Quality to seek "all feasible prudent alternatives before approving new coal-fired power plants in Michigan." The move prompted utilities to cancel most of the proposed generators—Consumers Energy pulled back plans for a new advanced coal facility, citing declining energy demand in the state—and the state denied permits for the rest.

Snyder is already facing a big fight on coal. And additional fights are sure to arise throughout his administration. The Holland Board of Public Works was denied an air permit to build a much larger coal plant, appealed the decision, and won. Electrical supplier Wolverine Power also was denied a permit and its case is pending in another circuit court. Wolverine Power is asking both that its permit denial be overturned and that Granholm’s executive order on coal-fired plants be declared unconstitutional.

Snyder issued support for building new coal-fired plants on the campaign trail “if it’s clean coal replacing old coal,” even though “clean coal” remains unproven for global warming pollution. But the new administration started off on the right foot, immediately appealing Circuit Judge Jon Van Allsburg’s ruling that overturned Holland’s permit denial.

Snyder should support the moratorium and look to other generation options. The cost of new coal is high—particularly in Michigan where the shrinking population and poor economy makes building new coal generation very expensive for customers. The Wolverine Power plant is expected to push electricity rates up by at least 60 to 80 percent, a significant expense in a county where the median family income is far below the national average. By keeping the de facto moratorium in place, Snyder also gives utilities additional incentives to pursue cleaner power generation, including renewables and natural gas.

Set the recovery record straight

Newly elected conservatives in the House of Representatives want to rescind unspent recovery funds. They claim the Recovery Act doesn’t work and wastes taxpayer money. This move would be a disaster for Michigan’s fragile economy and clean energy efforts, which have benefited enormously from Recovery Act grants and loans.

Snyder must urge congressional leaders to oppose cutting these investments in clean energy and infrastructure. He should also speak directly with members of the Michigan congressional delegation who wish to cancel unspent recovery funds and push them not to vote for cuts that would hurt their state. Representatives Fred Upton (MI-6), Dave Camp (MI-4), Candice Miller (MI-10), Mike Rogers (MI-8), Dan Benishek (MI-1), and Bill Huizenga (MI-2) all support the “Pledge to America,” which includes a provision to rescind recovery spending.

Snyder needs to set the record straight when it comes to the auto industry as well. The federal assistance to the auto industry under Presidents George W. Bush and Barack Obama saved thousands of Michigan jobs. And it allowed General Motors and Chrysler to get back on track. The government has recouped the majority of its investment in GM’s rescue, which turned out to be a bargain thanks to GM’s impressive comeback. GM is already adding jobs, manufacturing competitive products, and producing clean energy cars of the future—including the Chevy Volt, the North American International Auto Show‘s and Motor Trend‘s Car of the Year.

Snyder recognizes the auto companies have made an impressive turnaround and that “the role of manufacturing and the auto industry in Michigan’s future is critical.” He needs to keep spreading this message, explaining to GOP leadership that their attacks on federal assistance are attacks on Michigan jobs and an insult to American car makers who are helping turn the U.S. economy around.

Let the agencies do their job

Snyder’s first executive order split the Michigan Department of Natural Resources and Environment back into separate Natural Resources, or DNR, and Environmental Quality, or DEQ, departments. The departments were separated under Republican Gov. John Engler to lessen the DEQ’s enforcement power. Gov. Granholm rejoined them as the Department of Natural Resources and Environment, or DNRE, in 2009.

Snyder’s motive for the split is unclear. But he should give the departments the funding and support they need to make rules and enforce their environmental laws so they can protect the health and safety of Michigan residents. This means protecting whatever funding Snyder can—a difficult but important task, considering the state’s tight budget—and giving the departments room to make rules and regulations to protect the state’s vast natural resources. Snyder has indicated that the state suffers from overregulation, which could greatly complicate environmental enforcement efforts.

Snyder’s appointments to head the separate departments are also difficult to read. He appointed Dan Wyant, the former Department of Agriculture director under both Engler and Granholm, as DEQ chief. And he tapped Rodney Stokes, current chief of the DNRE’s Science and Policy Office, to the DNR post.

Stokes’s appointment was celebrated by the environmental community. Wyant, on the other hand, may find it difficult to separate his new environmental protection and enforcement priorities from his agricultural background. Environmentalists are also encouraged to see Snyder appoint state Sen. Patty Birkholz—a well-respected conservative with a strong conservation background—to head up the Office of the Great Lakes. But as Lisa Wozniak, executive director of the Michigan League of Conservation Voters, pointed out, "Without adequate funding, new leadership and new departments mean nothing.”

Develop a Central Cities initiative that encourages vibrant urban development

Michigan has become the poster child for urban decentralization and disinvestment. Detroit has shrunk to less than half its Cold War population peak. People have spread further and further apart. Consequently, Detroit’s fraying infrastructure is poorly tended across the city. Providing city services over so large an area comes at a huge expense to the ever-shrinking tax base even though the suburbs still rely heavily on city infrastructure—an arrangement that is often fraught with contention. Snyder is right to note that young people are fleeing Michigan in droves and that the state’s struggling central cities are partially to blame.

Working to revitalize Detroit is a daunting challenge but the next administration can take several steps to begin moving Michigan’s largest city back in the right direction. For one, Snyder can throw his support behind the light rail project slated to break ground in downtown Detroit next year. The 9.3-mile Woodward Light Rail Project is nowhere close to the comprehensive public transportation update the city needs. But it will send a strong symbol that Detroit is finally getting serious about alternative transit while potentially attracting millions of dollars of needed investment along the rail line.

Clean energy also can play a critical role in Detroit’s renaissance. Bringing clean energy industries to Michigan won’t bring back Detroit but it will bring jobs back to southeast Michigan; offer new opportunities to the next generation of scientists, engineers, and entrepreneurs; and give young people a reason to stay in the state—another one of Snyder’s campaign goals.

Clean energy is already helping to revitalize Detroit’s manufacturing industry—particularly as the big three auto companies begin to build electric vehicles. General Motors shipped out the first model of the Chevy Volt, its new plug-in hybrid electric vehicle, from a Detroit assembly line in December. GM invested $366 million in the Detroit-Hamtramck plant to produce the Volt and it announced it would hire 1,000 additional engineers and researchers in Michigan over the next year to develop the next round of electric vehicles.

Ford Motor Co., for its part, invested $550 million retooling its Michigan assembly plant to produce efficient and clean energy vehicles instead of large SUVs. It reopened the plant as a “symbol for the transformation of Ford.” Clairvoyant Energy and Xtreme Power announced they would reopen Ford’s shuttered Wixom assembly plant to build solar panels and energy storage systems. The reopening is currently on hold, however, pending U.S. Department of Energy approval of their federal loan application.

Again, attracting new businesses will be increasingly difficult as development funds run out. Even so, the Michigan Land Institute points out that Detroit still has significant assets in its favor. Talent is more easily relocated than manufacturing plants are, and Detroit already has a well-developed industrial infrastructure. Meanwhile, Detroit’s neighborhoods are progressively becoming founts of ingenuity and self-reliance. Tapping into local creativity and pride to remake Detroit’s image as a green, global city will help to bring new talent to the city—a challenge, at least, that Rick Snyder realizes he must take on.

Michigan 3.0

Rick Snyder says he wants to reinvent Michigan into Michigan 3.0. He’d like to bring the state into the “Era of Innovation” that “transforms our society into a vibrant force of entrepreneurs and innovators that can compete in the global economy.” Clean energy presents one of the best opportunities for innovation and reinvention in Michigan. Snyder should embrace research, deployment, and manufacturing in clean energy and efficiency in order to realize his ambitious vision.

Kalen Pruss is the Administrative Assistant for Speechwriting at American Progress.

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