Michigan governor sets 30-40% renewables, energy efficiency goal

Louisville, Kentucky (Platts)--13Mar2015/417 pm EDT/2017 GMT

Michigan must meet 30-40% of its energy needs by 2025 with renewables and energy efficiency, with natural gas also playing a key role in replacing the state's reliance on coal-fired generation, Governor Rick Snyder said Friday.

During a long-awaited speech by the two-term Republican governor, Snyder also offered tacit support for retaining Michigan's 2008 electric choice law, which caps competition at 10%. But he did not call for raising the cap or eliminating choice altogether, as rival groups conversely advocate.

In Michigan's current energy arena, "there is a big problem, and to be blunt, it's coal," he said. "We're one of the top coal users in the country and coal has a lot of challenges. The long-term future will be moving away from coal."

But such a separation is not likely to come easily or overnight in a state that still relies on coal for 54% of its power. Coal's share of the Michigan market dwarfs the runner-up -- nuclear power, with 17%, followed by natural gas on 13%, and renewables with about 10%.

By 2025, coal is forecasted to decrease to 34% of Michigan's energy mix, Snyder said, and nuclear will stay about the same.

"The real question," he added, "is what happens to the other pieces."

The state's existing 10% by 2015 renewable portfolio standard is scheduled to expire at the end of this year. Newly filed bills in the Republican-controlled Legislature would freeze the RPS at that level and repeal a requirement that utilities use energy efficiency to reduce energy use by 1% annually. Snyder has a different approach.

His goal -- Snyder did not formally propose a new RPS requirement -- is based largely on his strong support for energy efficiency, which he referred to as "energy waste reduction."

"If you look at the greenest sources of energy, which would be waste reduction and renewables, by 2025 between 30% of our energy and 40% of our energy can come from the cleanest sources, which are renewables and elimination of our energy waste," he said.

However, renewables cannot supply all of Michigan's energy needs, he said, "because you have a baseload question," as wind farms and solar arrays operate at far lower capacity levels than more traditional energy forms such as coal, nuclear and natural gas.

This is where gas, potentially the wild card in Snyder's energy equation, comes in.

"Natural gas is a great answer" to the baseload dilemma, he said. "We're a natural gas state in Michigan and we should be proud of that. We're one of the lowest-cost states" for gas.

If gas proves to be more expensive than renewables over the next decade, the growth of renewables/energy efficiency could be in the 40% range, he said.

But, "if gas is less expensive than renewables, it could be in the 30% range."

--Bob Matyi, newsdesk@platts.com
--Edited by Keiron Greenhalgh, keiron.greenhalgh@platts.com

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