Michigan Energy Policy Overhaul Pits Power Companies Against Solar Advocates

(Photo: AP/David Eggert)

Michigan Governor Rick Snyder speaks at the Detroit Electrical Industry Training Center in Warren, Michigan, on March 14, 2015. 

The battle between Michigan electric utility companies and renewable-energy advocates over a proposed state energy policy overhaul could deal a severe blow to the state’s small but growing solar-power sector. The regulatory overhaul, which mirrors changes being considered in states nationwide, would slash payments for solar consumers who sell excess energy back to utility companies while also significantly weakening the state’s clean-energy mandates. With federal energy policymaking at a standstill, this controversy once again puts Michigan at the center of the nationwide debate over state-level climate policy.

Michigan’s two largest electrical utilities have pushed for these changes in a new comprehensive energy bill. DTE Energy and Consumers Energy have together spent more than $3 million over the past year on a massive media and lobbying campaign featuring media buys, campaign contributions to state lawmakers, and lobbying by industry representatives in Lansing. But environmental advocates warn that the changes could decimate the sector. The proposals “have already scared a lot of people about investing in solar,” says Mike Berkowitz, the legislative and political director for the Sierra Club’s Michigan chapter. “If [the legislation] passes, it could destroy the market.”

Moreover, last fall, Governor Rick Snyder led a 26-state legal battle against President Obama’s Clean Power Plan, the centerpiece of the U.S. commitment at last year’s Paris climate summit, which seeks to lower carbon emissions in the energy sector. After the Supreme Court halted the implementation of those new measures last month, Snyder grabbed headlines again as Michigan joined four other states to block compliance with the Obama directive until the lawsuit works its way through federal courts, a process that will likely take years.

Renewable-energy advocates say that the Michigan-backed barriers to stronger federal action have made climate policy in the states that much more important. With the rapid growth of small-scale solar power in recent years, more than a dozen states have begun to reconsider how renewable energy is priced and regulated. Currently, 42 states require electric companies to purchase excess energy from individual solar consumers, a policy known as “net metering.” The rates that utilities must pay consumers vary from state to state. Those charges have a dramatic effect on whether customers can afford to invest in solar technology at all. “State-level policy is absolutely critical,” says Benjamin Inskeep, a policy analyst at EQ Research, a national clean-energy research group. “If rooftop solar customers aren’t being compensated adequately, that’s going to significantly reduce the number of people who can participate.” 

The energy policy overhaul on the table in Lansing could do just that. Under current state regulations, a homeowner who invests $10,000 to $30,000 in rooftop solar panels can expect to break even on installation and equipment costs in 8 to 12 years through energy savings and selling excess power back to a utility company. But if lawmakers shift net metering payments from a higher retail rate to a lower wholesale rate, a homeowner would see savings about 20 years later—a period comparable to the timeline of a traditional home mortgage. “Most people are not willing to make financial investments that last that long,” says Berkowitz. “For the average customer, it would no longer be financially viable.”

If state lawmakers leave the current regulations in place, jobs in the Michigan solar sector are expected to grow by 14 percent over the next year. But because jobs remain heavily concentrated in installation, energy experts warn they are particularly vulnerable to regulatory changes that could deter new customers.

Indeed, since state lawmakers first proposed a sharp reduction in these rates last year, some interested consumers decided to reconsider making an investment in solar. “It’s really been killing a lot of solar’s potential business in Michigan since the summer of 2015,” says Berkowitz. “We’ve been hearing it over and over again. People are nervous and don’t want to commit to the financing not knowing what the legislature is going to do with it.”

Supporters of lower payment rates for solar consumers argue that those policies amount to a multimillion-dollar subsidy for those customers, especially since many of them continue to purchase power from utility companies. A November ad campaign launched by Citizens for Michigan's Energy Future, an industry-backed group, says that the net-metering proposal “will make sure everyone pays their fair share to support Michigan’s electric grid.”

But renewable-energy advocates contend that because solar customers typically sell power back to utilities during the day, when electricity demand is highest, the power they contribute is a net benefit for utility companies.

Moreover, opponents of the regulatory overhaul say that the utility companies’ main concern is competition from solar. “This is the first competitive threat to the utilities’ 100-year-old business model that they’ve seen,” says Lauren Randall, public policy manager at the Alliance for Solar Choice, a national rooftop-solar advocacy group.

Citizens for Michigan’s Energy Future, a partnership of the state’s two largest power companies, Consumers Energy and DTE Energy, has been leading the new solar regulatory push. Last year alone the group spent $2.5 million on television and radio ads, $823,000 in lobbying state officials, and $667,000 in campaign contributions, according to a February report by the Michigan Campaign Finance Network. That’s on top of another $300,000 spent by DTE and Consumers Energy each on lobbying state lawmakers. DTE’s contribution represents a 30 percent increase in spending over last year, while Consumers Energy’s is the company’s largest total since 2008.

Governor Snyder was by far the largest recipient of the utility companies’ largesse, hauling in $50,000. State Senator John Proos, the sponsor of the net-metering rate-cut proposal, was another top recipient of utility company cash. All told, 37 out of 38 Michigan state senators and 100 out of 107 state representatives received campaign contributions from seven major industry groups in 2015, according to the Michigan Campaign Finance Network report.  

Power companies in Michigan have not been alone in their fight to loosen state solar-power regulations. According to a Washington Post investigation last year, Edison Electric Institute, the nation’s largest utility trade association, called a high-profile meeting of industry executives in 2012 to address the “declining retail sales” and “loss of customers” represented by the growth of rooftop solar. The meeting spawned a multi-pronged campaign—aided in some cases by conservative groups like Americans for Prosperity and the American Legislative Exchange Council—that have pushed for state-level policy changes in California, Florida, Kansas, and more than a dozen other states.

The utilities industry’s biggest win came last December when Nevada shifted from  retail net-metering rates to wholesale rates, effectively slashing payments to solar customers by 75 percent. The new law also tripled additional fees, called fixed charges, which solar customers pay regardless of the amount of electricity they use. Within weeks, a half-dozen solar installation companies either folded or left Nevada, costing the state thousands of jobs. SolarCity, which controlled 60 percent of the solar market in Nevada prior to the change, saw its stock drop 37 percent in six weeks. The company shuttered its operations in the state shortly afterward.

As damaging as Nevada’s decision has been to the nascent solar industry, advocates say the state was an outlier. Elsewhere, solar-power companies have prevailed in their fights against utility companies. In Arizona, the state’s largest utility and a handful of undisclosed “dark money” groups spent $3.7 million to push a $50-to-$100 fee on solar customers in 2014. Like many state anti-solar campaigns, the Arizona effort ultimately proved unsuccessful. But their efforts show that many utility companies are serious about opposing rooftop solar.

Yet Randall, the renewable energy advocate, says nationwide demand for solar will continue to grow. “Despite well-funded opposition consumers have said we want solar and you can’t stop it,” she says. “Since utilities have started fighting, solar keeps winning.” 

This article has been updated. 

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