As the Michigan legislature grapples with passing a new energy law that will direct the state for at least the next decade, renewables and natural gas are the big engines expected to drive the state’s energy future after energy waste reduction.
Valerie Brader, executive director of the Michigan Agency for Energy, said the past decade has brought significant changes to Michigan’s energy portfolio, and those changes will continue over the next decade.
“We’ve seen natural gas prices plunge to lows we haven’t seen in decades and stay there,” she said. “That is largely due to the tremendous volumes of gas being produced by high volume hydraulic fracturing, or fracking, which has changed the overall supply picture of the United States and changed the economics and made natural gas much cheaper than coal, which 10 years ago, people didn’t think would be the case.”
Brader said the cost of renewables also has fallen significantly, something that hadn’t been expected to occur either.
“So, we’ve seen a big plunge in the cost of natural gas and a big plunge in the cost of renewables, and that has resulted in an enormous change in the market,” she said.
Federal environmental regulations also have changed the energy picture.
“We’ve seen a big increase in regulation that made coal less favorable, while the economics of alternatives really shifted to be cheaper, and this has put a lot of pressure on nuclear power, too,” she said. “The fact that natural gas is so cheap has made nuclear more of a challenge in the market, generally.”
She expects nuclear power will continue to face challenges.
Brader said Michigan and the country’s shifting energy portfolio is presenting some opportunities the state can capitalize on.
“In other states, you see a coal mine and a coal plant,” Brader said. “When coal was the cheapest and we are getting it from Wyoming and others are getting it from literally next door, you are inherently going to have a higher cost resource. We are moving from a resource that has to be 100 percent imported.
“With natural gas, we have more natural gas storage than any state in the country, and we have a lot of pipelines that come through here. Our infrastructure isn’t perfect, but a lot of other states don’t have the storage or the existing pipeline infrastructure, and that becomes a limiting factor for them.”
Brader said the biggest challenge for Michigan going forward will be not over-relying on natural gas production, which could face challenges if fracking regulations are enacted.
“If you over-rely on it, you could end up in the bad position. So, you have to think about balance,” she said. “And also watching the balance between upgrading infrastructure and making sure rates are affordable and cost competitive and making sure there isn’t a negative impact to the environment. Keeping all of those in balance is a challenge.”
Sally Talberg, Michigan Public Service Commission chairwoman, said another factor to consider is potential technology breakthroughs in energy, which could disrupt the whole industry.
“If there were a fundamental change in the economics for energy storage, that could change how we go about producing and consuming energy,” she said. “That is a factor. We are planning and investing in assets that have 40- to 60-year lives, and it’s at a time where there could be changes in technology that could affect how that system is going to work.”
Brader said Michigan, being a peninsula, faces some challenges that need to be considered.
She said Michigan’s Upper Peninsula receives power through a branch system out of Wisconsin, which creates congestion.
“Electricity flows better in loops than branches,” she said.
That is why Michigan is in the process of researching, with the Midcontinent Independent System Operator, an option to connect with Ontario, which could create a better electricity flow in the northern half of the Lower Peninsula and the U.P.
“What we are trying to study, with MISO’s assistance, is connecting Canada and the U.P. down to the knuckle line of the Lower Peninsula, and seeing if by creating loops and better connecting pockets, we can lower prices by lowering the congestion in our system,” Brader explained.
The results of the study are expected in the middle of next year.