This is Part 4 of our ongoing coverage of the MPSC solar work group. See the entire series here.

Representatives from DTE Energy and Consumers Energy express little enthusiasm for expanding the use of customer-generated, jobs-producing, clean solar energy.

LANSING—Representatives of Michigan’s two largest utilities, DTE Energy and Consumers Energy, made their first presentation to the state’s solar work group—40 energy experts looking for ways the big companies might expand their tiny, customer-based, rooftop solar-power pilot programs, which are set to expire in late 2015.

The work group, which includes DTE and Consumers staff, solar business advocates, and Michigan Public Service Commission staff, will report to MPSC’s commissioners in June, and could recommend new utility programs to help the state catch up with the strong, nationwide surge of rooftop solar development that is leaving Michigan behind.

But the companies’ joint presentation expressed little enthusiasm for expanding the use of customer-generated, jobs-producing, clean solar energy. 

MPSC launched the work group after both utilities indicated they wanted to drop, not expand, their customer-based solar pilots—which use lotteries to select participants because the programs are routinely swamped with applicants.

The March 18 presentation by DTE Energy’s Todd Lohrmann and Consumers Energy’s Keith Troyer, however, indicated neither company has changed its mind about moving away from small-scale, customer-based solar generation. DTE’s Solar Currents and Consumers’ Experimental Advanced Renewables Program (EARP) pilot programs pay premium rates to customers who win the applicant lottery, install their own solar systems, and produce clean energy.

The two discounted a different approach for setting rates for customer-generated solar power, called Value of Solar, introduced at the last work session by a former utility executive. They did not argue whether VOS methodology would pay too much for rooftop solar, but dislike its avoidance of the traditional rate-setting methods the work group learned about from an MPSC presentation earlier in the same meeting.

“We believe all rates should be based on what it costs to produce the power,” Lohrmann told the group. “That is where we are: basing them on known, quantifiable costs, and making sure they are fair to all ratepayers.”

They added that their companies believe renewable energy makes sense when it’s cost effective.

Pointing to how inexpensive wind power became over the past five years as utilities responded to Michigan’s “10 percent renewables by 2015” mandate, the utility representatives said customer-based solar power remains unattractive because, they believe, it drives up rates. Many solar advocates reject that claim, pointing to the money rooftop solar saves for utilities, including fuel, distribution infrastructure, and hot-day peak power costs.

Both expressed interest in a new way to finance solar development, called community solar, which allows utility customers to buy shares in someone else’s project and earn credits toward their electric bills.

When pressed about what kind of solar development their companies could support, Lohrmann said DTE strongly prefers “volunteer” programs, such as his company’s Green Currents, which sells blocks of renewably generated power at slightly higher rates. Consumers’ Troyer said his company is listening and learning at the work group and couldn’t commit to anything.

The companies’ briefing followed an in-depth explanation by MPSC’s Steve McQueen of how the agency sets electric rates for residential, commercial, and industrial customers, and by the agency’s Jesse Harlow, who explained how the utilities recover the costs of their mandated renewable projects.

Big Wind, Tiny Solar

Lohrmann and Troyer also ticked off numbers well known to many Michigan clean energy advocates. 

Lohrmann said DTE has developed or contracted for about $2 billion worth of renewables—amounting to 900 megawatts of Michigan-made energy from wind farms, biomass facilities, and solar arrays. The utility’s renewable power production has grown from 1.4 percent in 2008, when the state enacted its 10 percent renewables mandate, to 9.6 percent today.

That includes about 13 megawatts of solar power either installed or planned for 19 company-owned projects and 600 customer-owned rooftop systems.

DTE also has about 28,000 customer-volunteers signed up for its slightly higher Green Currents rate.

“We’ve learned a lot about solar,” he said, “about its technology, its value to us and to our customers. But solar does have costs, too.”

But those costs are falling sharply, allowing DTE to cut its rates to new solar providers by almost half.

Troyer said Consumers has or will spend about $3 billion building or contracting for 500 megawatts of renewable energy. The firm has contracts with 14 renewable energy companies, and 430 customers have or will soon install rooftop systems via EARP, eventually providing 6 megawatts. The company expects that 9.9 percent of its power will come from renewables in 2015.

Wind is Consumers’ top renewable, followed by biomass plants, hydroelectric power, landfill gas, incinerators, and solar.

“We are adding about one megawatt of customer solar a year,” he said. Unlike DTE, the company has not built its own solar power installations. Like DTE, Consumers’ EARP has sharply reduced rates it pays for customer-based solar power, reflecting falling solar panel and installation prices.

Consumers also offers its Green Generation program, with a higher, voluntary rate for customers that want to support renewables generation. Troyer did not say how many customers participate.

Together, the companies’ current and projected solar generation adds up to slightly more than 20 megawatts—about 3 percent of the output of a single, medium-sized, coal-fired power plant.

Is the Price Right?

Although both company representatives offered little encouragement to Value of Solar advocates, several points revealed common ground.

The companies believe—as has long been the case—that electric rates should be based solely on what it costs to provide service, customers should only pay for services they receive, and rates for a service should not be tied to its value. They add that customers with solar panels should pay for generation, transmission, and distribution costs of any utility power they use, and be paid for their solar power based on how much expense it helps the utility avoid.

VOS advocates agree with those points. Where they differ is in including other kinds of “avoided costs” that they say are real and, if not included in rate calculations, amount to reverse subsidies—paid for by panel owners but not credited to them by utilities.

The utility representatives also discussed other ways to figure rates for solar power, and favor tying them to fossil fuel prices: The higher they are, the more valuable solar power becomes. However, they cautioned, that also means when fuel prices fall, so should solar rates. 

They said they like voluntary renewables programs because customers can choose their generation mode, while customers who don’t care about the issue are protected.

The representatives also compared utility-owned and third-party-owned community solar plans—touching on economies of scale, maintenance costs, billing methods, and tax challenges and benefits. The companies agreed their pilot solar programs had taught them how to operate more efficiently and eliminate some customer concerns about how programs are managed.

Jim Dulzo is the Michigan Land Use Institute’s senior energy policy specialist. Reach him at jimdulzo@mlui.org. This is Part 4 of our continuing coverage of the MPSC solar work group.

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