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Michigan Energy Forum - April 4, 2013
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Michigan Energy Forum - April 4, 2013

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Governor Snyder has begun a process to deliver comprehensive energy policy recommendations by December 2013. How we address energy policy has broad impacts on climate, economic competitiveness, ...

Governor Snyder has begun a process to deliver comprehensive energy policy recommendations by December 2013. How we address energy policy has broad impacts on climate, economic competitiveness, employment and job skills, environment, and health. What should be our major policy focus within Michigan? Can we find the right balance given divergent opinions? Our expert panel will discuss implications for goal setting, strategies, new technologies, and the legislative process.

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  • First contract signed under RES: $116/ MWhMost recent contract: $52/ MWHThese are not speculative cost estimates, but real, executed long-term power purchase agreements.New wind in Michigan is less than half the cost of new coalNew wind + efficiency in Michigan is cheaper than any fossil fuel generation option, including gas
  • In 2008, when the RES law was passed, the reality was that turbines topped out at about 80 meters tall. This meant that optimum wind production zones were limited to isolated locations (shown as pink on the map)By 2012, technological advances allowed 100 meter towers, greatly expanding the locations where wind was economically feasible.What else does that extra height get you?And here’s the amazing thing: 100 meter towers are cheaper than the 80 meter towers were in 2008!
  • Why are we here? In a special message on energy and the environment delivered by Governor Snyder last November, he tasked us with gathering and developing information that will ready Michigan to make good energy decisions. Governor Snyder asked us to gather, review and develop information related to energy efficiency, renewable energy, and electric choice, as well as noting additional areas that may be worthy of further analysis.We have a website, michigan.gov/energy, where we would like all interested parties and members of the public to submit written responses to list of developed questions. There are approximately 100 questions on the website and you are invited to answer as many of those questions as you like. The governor’s office has stressed the importance of written feedback in this process, so we encourage you to visit the website to answer some of those questions anytime between now and April. Following the close of the website we will be reviewing the submissions to determine which areas need additional analysis and begin the development of a report which is due to the Governor in late 2012. We expect to release a draft of that report for public review and comment around the October or November timeframe.For the next few minutes, we’ll outline just a little background on energy efficiency, renewable energy and electric choice. Next we will move on to some scheduled presentations on those same topics from a few of our stakeholders. Following the presentations we may have a short break and the remainder of our time here will be reserved for those in attendance to speak on these topics listed above. If you would like to speak later this afternoon and have not already filled out a request form identifying your contact information and area of interest, we’d ask that you visit the welcome center to fill out a form at your convenience. Moving ahead, we’ll cover Michigan’s current energy optimization targets as outlined in Public Act 295 of 2008.
  • Why are we here? In a special message on energy and the environment delivered by Governor Snyder last November, he tasked us with gathering and developing information that will ready Michigan to make good energy decisions. Governor Snyder asked us to gather, review and develop information related to energy efficiency, renewable energy, and electric choice, as well as noting additional areas that may be worthy of further analysis.We have a website, michigan.gov/energy, where we would like all interested parties and members of the public to submit written responses to list of developed questions. There are approximately 100 questions on the website and you are invited to answer as many of those questions as you like. The governor’s office has stressed the importance of written feedback in this process, so we encourage you to visit the website to answer some of those questions anytime between now and April. Following the close of the website we will be reviewing the submissions to determine which areas need additional analysis and begin the development of a report which is due to the Governor in late 2012. We expect to release a draft of that report for public review and comment around the October or November timeframe.For the next few minutes, we’ll outline just a little background on energy efficiency, renewable energy and electric choice. Next we will move on to some scheduled presentations on those same topics from a few of our stakeholders. Following the presentations we may have a short break and the remainder of our time here will be reserved for those in attendance to speak on these topics listed above. If you would like to speak later this afternoon and have not already filled out a request form identifying your contact information and area of interest, we’d ask that you visit the welcome center to fill out a form at your convenience. Moving ahead, we’ll cover Michigan’s current energy optimization targets as outlined in Public Act 295 of 2008.
  • These two charts are taken from the report prepared by the Commission on Energy Optimiztion programs in November of 2012. Figure 2 shows the electric energy savings targets as specified in PA295 and the ramp up in those savings targets from 2009 – 2012. The 1% savings target continues through 2015. Figure one shows that Michigan exceeded the electric energy savings targets each year from 2009 – 2011. The energy optimization programs that resulted in these energy savings are funded by electric customers as outlined in the report prepared by the Commission which is available on our website.
  • These figures are taken from the same report and outline the GAS energy savings targets and show that Michigan also exceeded the gas energy savings targets from 2009 – 2011. In 2011, EO program expenditures of $205 million by all combined gas and electricutilities in the state resulted in lifecycle savings to customers of $709 million. This means thatfor every dollar spent on EO programs in 2011 customers should realize benefits of $3.55. Dataprovided to the Commission in EO provider annual reports indicates that EO resources wereobtained at a statewide average levelized cost of $20/MWh, significantly cheaper than supplyside options such as new natural gas combined cycle generation at $66/MWh, or new coalgeneration at $111/MWh. (EIA)
  • This is where you tell people to stick to the facts and not advocate a particular position. Same message to both scheduled presenters and those in attendance wishing to participate. Remind people to fill out of form if they would like to speak later in the meeting.

Michigan Energy Forum - April 4, 2013 Presentation Transcript

  • 1. Michigan Energy Forum:Michigan Energy Policy 2013 April 4, 2013 © Ann Arbor SPARK
  • 2. Policy Issues ShapingMichigan’s Energy Future Michigan Energy Forum April 4, 2013 presented by www.mieibc.org 2
  • 3. About MiEIBC The Michigan Energy Innovation Business Council (MiEIBC) is a business organization representing companies in Michigan’s growing advanced energy sector. MiEIBC’s mission is to grow Michigan’s advanced energy economy by building an active statewide network of advanced energy companies, fostering opportunities for innovation and business growth and offering a unified voice in creating a business-friendly environment for the advanced energy industry in Michigan. The Institute for Energy Innovation is the not-for-profit sister organization to MiEIBC. Its mission is to promote greater public understanding of advanced energy and its economic potential for Michigan, and to inform the public and policy discussion on Michigan’s energy challenges and opportunities. The business voice of advanced energy in Michigan. www.mieibc.org
  • 4. Advanced energy globallyAdvanced Energy Today:$1.1 TRILLION global industry Advanced Energy Today:$200 BILLION Global revenue from 2012 installations The business voice of advanced energy in Michigan. www.mieibc.org
  • 5. Advanced energy in Michigan$7.2BILLIONBILLION annual economic impact of advanced energy $1.8 manufacturing economic impact of Renewable Energy Standard$2.5BILLION ratepayer savings under EO program, 2011- 2015 The business voice of advanced energy in Michigan. www.mieibc.org
  • 6. More than 1 GW of renewable energy installed since passage ofrgy projects based on the contracts and solar programs approved by the Commission through 2012. 9 PA295projects based on the contracts and solar programs approved by the Commission through 2012.9 Figure 4: Cumulative Renewable Energy Capacity by Commercial Operation DateFigure 4: Cumulative Renewable Energy Capacity by Commercial Operation Date  RES responsible for 1400.0 1400.0 development of more 1182 MW 1182 MW than 1.1 GW of 1200.0 1200.0 964 MW 964 MW renewable energy 1000.0 1000.0 generation capacity Capacity (MW) since 2009 Capacity (MW) Hydro 800.0 Hydro 800.0 AD.Biomass 600.0 Landfill AD.Biomass  Michigan placed 8th in 600.0 Solar Landfill the nation in new wind 400.0 400.0 Wind Solar development in 2012, 200.0 48 MW 69 MW Wind with 611 MW of new 17 MW 0.0 200.0 48 MW 692012 MW generation coming on 2009 2010 2011 2013 0.0 17 MW line 2009 2010 2011 2012 2013  But what happens inThe breakdown by renewable energy technology type for all renewable energy projects based 2015?acts and solar programs approved by the Commission through 2012 is shown in Figure 5. The breakdown by renewable energy technology type for all renewable energy projects based Michigan. The business voice of advanced energy in www.mieibc.org Figure 5: Renewable Energy Capacity by Technology Type
  • 7. Key drivers of Michigan electricitypolicymaking process • The variability of renewable resources • Advanced energy costs continue to decrease dramatically • Need to remove market barriers and reallocate risk, regardless of choice The business voice of advanced energy in Michigan. www.mieibc.org
  • 8. Addressing variability concerns The business voice of advanced energy in Michigan. www.mieibc.org
  • 9. Integration of advanced energy • Significantly higher adoption of renewables possible with existing technology – up to 99.9% at costs comparable to today’s power prices • Need electric system that is as well-equipped to handle variability in supply as it is at managing variability in demand • Greater incentives to incorporate demand response and efficiency measures a key element of moving to user-focused system • New FERC Order 745 creating new economic opportunities for integrating demand response The business voice of advanced energy in Michigan. www.mieibc.org
  • 10. Cost of renewables is fallingrapidly – and far faster thanexpected The business voice of advanced energy in Michigan. www.mieibc.org
  • 11. Innovation driving new possibilities  Capacity per turbine increased 23%  Energy production per turbine increased almost 55%  Economical wind production now possible in 60% of Michigan’s total land area  On-shore wind potential using 2012 technology is 478% of 2011 total electricity delivery in MichiganThen: 2008 Technology Now: 2012 Technology The business voice of advanced energy in Michigan. www.mieibc.org
  • 12. Need to address market barriersand risk allocation – regardless ofchoice • How can we reinvent rate design in a regulated environment to discourage utility price discrimination, customer cherry-picking, and cost-shifting in retail competition? • Can we reform anti-competitive utility and regulatory barriers for advanced energy without retail choice? • How do we shift risks from ratepayers and onto the decision-making utility or improve the ability of the MPSC to include risk considerations in its decisions? The business voice of advanced energy in Michigan. www.mieibc.org
  • 13. New energy realities require anew energy paradigm Renewable energy is rapidly approaching “socket parity” on a cost basis with the retail price of electricity  When it’s cheaper for businesses and individuals to generate their own electricity than to purchase it from their utility, we need a whole different way of thinking about our electricity system  What does this look like, who pays stranded costs, how to maintain overall reliability, what’s the appropriate regulatory response?  As we approach parity, will we continue to approve new investments that will become stranded assets for which we must pay?  KEY ISSUE: Need to change the electricity model before the current one breaks voice of advanced energy in Michigan. The business www.mieibc.org
  • 14. Dan ScrippsMiEIBC/ Institute for Energy Innovation dan@mieibc.org presented by www.mieibc.org 14
  • 15. Perspectives on Energy Policy:The Transportation Dimension John M. DeCicco University of Michigan  Energy Institute & School of Natural Resources and Environment Michigan Energy Forum April 4, 2013
  • 16. World Energy Supply Renewables 2% Nuclear 5% Hydropower Oil 6% 33% Natural Gas 24% Coal 30%Source: BP Statistical Review of WorldEnergy 2012, estimates for 2011 2011 Source: BP Statistical Review of World Energy 2012, estimates for 16
  • 17. Evolution of U.S. Energy Supply 1850 1900 1950 2000 As of 2010: 37% oil, 25% natural gas, 21% coal, 9% nuclear, 4% hydro, 4% biomass and other sources.Source: ExxonMobil Outlook for Energy 2009;U.S. DOE/EIA Annual Energy Review 17
  • 18. Michigans Energy Supply Other Renewables 1% Biomass 5% Oil Nuclear 29% 11% Natural Gas 27% Coal 27%Source: U.S. Energy Information Administration, data for 2010 Source: BP Statistical Review of World Energy 2012, estimates for 2011 18
  • 19. President ObamasEnergy Security TrustProposalAlthough trust idea is new, thestrategy is not.Every president since Nixon haspromised America freedom fromforeign oil; see The Daily Show:www.thedailyshow.com/watch/wed-june-16-2010/an-energy-independent-futureR&D is certainly crucial.This October will bring the 40thanniversary of the oil embargothat sparked the Energy Crisis.What has been learned andwhere has successful innovationactually occurred? 19
  • 20. Global Oil Reserves-to-Production (R/P) ratio 50 Reserves/Production (years) 45 40 35 30 25 20 1980 1985 1990 1995 2000 2005 2010Source: BP Statistical View of World Energy 2011 20
  • 21. Projected U.S. Oil ProductionSource: IEA World Energy Outlook 2012, Figure 3.18Innovation does occur in mature energy markets, but investmentcycles are very long and price volatility is inherent. 21
  • 22. Family Haulers Then and Now 1975 Mercury Marquis • 6.6L V8, 150 hp • Rudimentary pollution control • Seat belts • 11 MPG2005 Ford Freestyle• 3.0L V6, 203 hp• Ultra-low emissions• Sophisticated safety features throughout• 24 MPG 22
  • 23. Trends in Design-Related Impacts of U.S. Automobiles 23
  • 24. Relative Technology Benefits and Costs Projected cost impacts and GHG reductions for efficiency-optimized midsize cars in 2035 relative to a 2005 baseline An evolutionary path can carry BATTERY 80% the U.S. automobile fleet quite ELECTRICIncrease in Cost far with manageable costs of technology and minimal risks for 60% customer acceptance. PLUG-IN 40% HYBRID H2 FUEL CELL GASOLINE 20% Baseline HYBRID Vehicle DIESEL TDI GASOLINE GASOLINE TDI 0%  0% 20% 40% 60% 80% Reduction in GHG Emissions 24
  • 25. Comparing some of the green leaders of model year 2012Source: AutoEcoRating.com 25
  • 26. A Need for Caution on Alternative Fuels Liquid hydrocarbons remain hard to beat  Issue is how to mitigate risks: economic, environmental  Beyond higher efficiency, addressing CO2 is an upstream issue Alternatives lack a compelling value proposition for the foreseeable future  Lower fuel costs not nearly enough to balance high up-front technology, infrastructure and convenience costs  If an option is not commercially viable based on core business case, subsidies and mandates are unlikely to help Is the quest to "get off of oil" but a fools errand that wastes resources without addressing real problems?  "The Stone Age didnt end for lack of stone …" (Ahmed Zaki Yamani, Saudi oil minister 1962-86)  The end of the Stone Age was not centrally planned! 26
  • 27. Reinventing book cover 27
  • 28. Google car 28
  • 29. Automated transportation A postmobility paradigm shift is approaching  Information technology will truly touch the "car" for first time  21st century humans are too bad to drive and too good to drive  Path and form of disruptive change impossible to predict  Likely with greater connectivity leading to some combination of autonomous and intensively networked mobility systems Compelling value propositions  Free up drivers time and attention  Do for crashes whats been done for air pollution  Enable step change in energy efficiency  Will facilitate rather than require electrification Challenge: business and institutional innovation will be as essential as technology innovation 29
  • 30. Importance of scalable market value Transportation energy demand is vast  Growing slowly in US, other mature economies  Growing steadily in developing economies Dominant modes that drive energy demand are automobiles, line-haul trucking and air  Speed and distance favor energy dense liquids  Urban mobility (including rise of megacities) is creating a need for new systems Disruptive change  Its not a matter of whether, but when and how  Info tech will trump "clean" tech 30
  • 31. Conclusions Policy premised on "getting off of oil" is oh so 70s  Hasnt worked over past 40 years  Have market fundamentals really changed? Evolutionary technology change  Has greatly mitigated environmental problems through a steady (but sometimes contentious) process of policy-guided engineering  Potential is far from exhausted, and progress can be made on the new challenge of CO2 emissions through a similar strategy A transformative transportation strategy based on connected vehicles is difficult to predict, but can set the stage for:  Biggest change in transportation energy since Edwin Drake struck oil  Biggest opportunity for new value creation in mobility services since Henry Ford developed mass production  A chance for Michigan to reassert itself as one of the worlds leading centers of not only technical innovation but also production and the rich and widely shared economic rewards that can bring 31
  • 32. Thank you!John M. DeCicco, Ph.D.Research Professor • University of Michigan Energy Institute (UMEI)Professor of Practice • School of Natural Resources and Environment (SNRE)University of Michigan, Ann Arborhttp://www.snre.umich.edu/profile/deciccohttp://energy.umich.edu/Some recent articles:Factor Analysis of Greenhouse Gas Emissions from Automobileshttp://ssrn.com/abstract=2205144 (working paper)Cars Should Tune in Sooner, Plug in Laterhttp://autoecorating.com/tune-in-sooner/ (blog post)Renewable Fuels: Due for a Reality Checkhttp://goo.gl/PfMuN (op-ed on The Hill) 32
  • 33. Readying Michigan to Make Good Energy Decisions Steve Bakkal, Director Michigan Energy Office John Quackenbush, Chairman Michigan Public Service Commission
  • 34. Governor Snyder’s Special Message on Energyand the Environment: – Foundation: Adaptability – Pillars • Reliability • Affordability • Protecting the Environment
  • 35. Governor Snyder outlined information needs inthe following areas: - Energy Efficiency - Renewable Energy - Electric Choice - Other Additional Areas
  • 36. Timeframe – Input Phase • Press release announcing 7 Public Forums: January 25th • Launch Website www.michigan.gov/energy: January 28th Questions posted on website Website open for preliminary submissions until April 25th
  • 37. General questions we seek input on:1) What information do energy policy makers need to consider in order to make good energy decisions?2) What existing data or studies are available for Michigan policymakers to consider when evaluating Michigan’s energy policy after 2015?
  • 38. Public Forums… University Center DetroitLansing Monday, March 4 Monday, March 25Thursday, February 14 Delta College NextEnergy CenterLibrary of Michigan Lecture Theater MarquetteGrand Rapids Kalamazoo Friday, April 12Monday, February 25 Monday, March 18 Northern Michigan UniversityGrand Valley State University Western Michigan UniversityLoosemoore Auditorium Fetzer Center – Kirsch Traverse City Auditorium Monday, April 22 Northwestern Michigan College
  • 39. Remaining PhasesMay-June: Outlining reports in each program and laying out planfor development of information that is not yet available.July- September: Compilation/development of information.October-November: Release of draft reports for public feedback.November-December: Finalize reports and release finalversions.
  • 40. Electric Energy Efficiency
  • 41. Gas Energy Efficiency
  • 42. Status of Renewable Energy Source: Renewable Energy Credits generated or acquired each year as reported in electric provider renewable energy annual reports, PA 295 contracts and Commission Staff projections.
  • 43. Electric Choice
  • 44. • Scheduled Presentations• Public Participation• Written feedback: www.michigan.gov/energy
  • 45. Next Michigan Energy Forum:Energy and the Built Environment May 2, 2013 © Ann Arbor SPARK