Employing new grid technologies can weave together renewable and storage energy sources large and small, reducing the need to build additional old-fashioned,centralized, fossil-fueled plants. (Graphic: Powertown)

Now that Governor Rick Snyder, state Senate and House Republicans, and Democrats in both chambers have each outlined their proposed next steps for Michigan’s energy future, it’s time for a serious conversation about the choices we’re facing, the assertions we’re hearing, and the best ways to deal with them.

Heard most around the Capitol is concern about a projected shortfall in reserve capacity—the standby power utilities must maintain in case a big power plant suddenly fails or legions of air conditioners push our power supply to the limit on hot days.

That alleged shortfall, said to roughly equal the power from three very large coal plants, has the attention of the Michigan Public Service Commission. The agency is looking closely at it—and the remedies the state’s two largest monopolies, DTE Energy and Consumers Energy, prefer. Both utilities filed briefs, and the public comment period for this very technical proceeding is now closed.

But the utilities’ filings—and the tenor of conversations among many Lansing lawmakers—indicate that the utilities want to build more big, centralized, gas-fired power plants. Yet given the remarkable technological progress that’s occurred in the industry since the last time Michigan fired up a new fuel-burning  generation station, that is likely shortsighted.

Utilities, lawmakers, and regulators need to reduce their focus on “base load.” While many say the only way to build energy capacity is to build ever-more base load, that argument is fading because of how the grid actually works, how it is changing, and what it is rapidly becoming.

We’ll always need a rock-solid, unshakably constant supply of power. But today there are other ways to do that besides merely burning more fossil fuel.

New distributed energy technologies, new grid control systems, and new demand-side energy services should be part of what has been an under-informed, truncated conversation about meeting Michigan’s future electricity needs.

These long-touted technologies have arrived, are generally proving to be less expensive than predicted, and are changing the way electricity is generated, managed, marketed and distributed.

These technologies facilitate better management and balancing of ever-shifting energy demand—from homes, offices, stores and factories—with ever-shifting supply—from coal, gas, nuclear, hydro, wind and tiny amounts of solar. Operated in smart ways, these technologies can drastically cut the need for reserve capacity from pricey, new central power plants.

Building a new, gas-fired “peaker” plant that might operate 400 hours a year to keep the AC on for the hottest days is a crude, expensive and increasingly primitive approach. Worse, given the operational and technological changes many utilities are now deploying, new central plants would likely have a limited useful lifetime. That’s the worst kind of reserve capacity: expensive and unneeded.

New distributed technologies—energy sources within the grid itself, not at some central location—can smooth out energy demand peaks and valleys, steady the output of variable generators like solar and wind, provide the support needed to make sure the power is ultra-clean and steady, and make the grid more stable and resilient—two qualities we sometimes miss these days.

This new tech also protects ratepayers from paying twice for the same backup power—once when a plant is built and becomes part of the utility’s rate base; and again when it’s fired up and charges for its power at many times wholesale, even retail, rates.

Fortunately the capabilities, performance, and costs of the new, distributed technologies are quickly improving.

Energy storage—long thought too expensive because batteries were so pricey—is now more economical for meeting demand spikes than building and operating natural gas peaker plants, when counting the “extras” it provides—particularly the ability to power up instantly to meet a demand spike. With the steady improvements in battery technology; the steady fall in prices thanks to new, advanced manufacturing techniques and new chemistries; and the economies of scale as more companies manufacture more batteries; the economics of distributed energy storage will soon be compelling.

Note well: These are the same arguments proponents made for wind and solar power a decade ago—and those then-nascent technologies have since outperformed even the most optimistic proponents’ projections.

As more wind and solar generation come online, their variability—along with always-variable demand—will require new control systems and energy services to harmonize and smooth loads—something the transmission grid has done easily so far, with the current, relatively low amounts of both. 

Of course, energy efficiency remains the proven, all-time champion for dealing with rising demand. It’s simple: the cheapest and most dependable energy is the energy a customer never needs or uses, and that’s exactly what efficiency measures provide—sometimes at less than one-third the cost of generated power.

The next step in efficiency—pro-active energy management systems, ranging from high-tech residential thermostats to campus micro grids—already help some smart utilities shift loads from heavy to light demand periods, eliminating the need for more peaker plants by getting rid of the peaks. Such “demand-side energy efficiency” is crucial for ratepayers, because it is the best, cheapest way to comply with EPA’s Clean Power Plan regulations, which will soon set emission reduction standards for Michigan’s overall electric system.

Recall that, in 2008, our utility sector was pressing hard to build no less than ten new coal-fired power plants in Michigan. But not a single one was built. As coal plant opponents repeatedly predicted, the projected growth in demand used to justify $15 or 20 billion worth of new coal plants never showed up.

What happened? Industry continued to figure out ways to use less energy; so did commercial operations and homeowners. Utility energy optimization programs, required by enlightened state lawmakers, accelerated the trend, producing better than three-to-one payoffs in lower utility costs. Those programs cost just a penny or two per kilowatt-hour saved—a quarter or third of the cost of generation.

At the same time, wind power’s price fell by more than half, making it very competitive with new gas plants. The same thing is now occurring with solar power, even in far-north, cloudy Michigan. Both demonstrate just how powerful renewable technology now is.

So, like it or not, our power system is evolving more quickly every day. New demand-side and supply-side technologies are, and increasingly will, allow grid operators to meet capacity requirements with more precision, less cost, and no need for a big build-out of new gas plants.  

Failure to take these trends into account when making long-term investment decisions is irresponsible and imprudent, will likely push up energy prices unnecessarily, and could leave behind big, unused power plants, slowly rusting away at our expense.

Michigan can learn from other states that are focusing on distributed energy and demand management as the most cost-effective way to meet electricity demand. Those states are casting off old thinking, reforming their energy vision, and redesigning their power systems using planning collaboratives that bring the best energy expertise to the table to assess technologies, services and future trends.

Why can’t Michigan do the same?

Skip Pruss is a founding principal of 5 Lakes Energy, a Lansing-based energy consulting firm. Jim Dulzo is the Michigan Land Use Institute’s senior energy policy specialist; reach him at jimdulzo@mlui.org.

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