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What will 2017 Bring? Dramatic Change?

20 Dec 2016

edit_calendar_ssk_47433454In prior years, we knew that regulatory and environmental change was coming but we expected it to be slow and incremental.  With an unknown quantity like President Elect Trump, one thing is clear – no one really knows what may happen.  Here are a few possibilities:

1.  Coal/Cleaner Energy Generation – revitalizing the coal industry was part of Mr. Trump’s midwest stump speeches.  Will Mr. Trump be able to reverse Barack Obama’s Clean Power Plan? What about the Paris Climate Accord?  Certainly, his team is looking at both of those right now. The dispute in Michigan v. EPA, decided in June 2015, continues to rage.  In 2015, the US Supreme Court ruled that the EPA didn’t properly justify its rule governing mercury and toxic pollution (MATS) from power plants because it did not specifically address costs at the initial stage of the rulemaking process. In April, the EPA announced it was standing by its MATS rule and concluded that the benefits far outweighed the costs.  Petitioners continue to litigate whether the EPA properly evaluated costs.  Here in Michigan, new legislation has been passed (and is awaiting the Governor’s signature) intended to encourage additional investment in energy generation and transmission while balancing consumer choice and a greater percentage of renewable energy generation.  Will it work? At a reasonable cost?

2. Power Generation Subsidies/Oil/Gas Generation – Mr. Trump’s attacks on “crony capitalism” would seem to mean that he will stop financial incentives for solar and wind generation.  Will he also attack oil and natural gas supports in the tax code?  Will he open up ANWAR to oil/gas exploration?  Will he scale back attempts to regulate fracking?  This will be difficult in light of the December EPA Report  which concluded that fracking posed problems such as:  fracking water withdrawals compete with other water needs; spills of hydraulic fracturing fluids and chemicals or produced water may impair groundwater resources; injection of hydraulic fracturing fluids into wells may allow gases or liquids to move to groundwater resources; discharge of inadequately treated hydraulic fracturing wastewater to surface water resources; and contamination of groundwater due to disposal or storage of fracturing wastewater.

3. Pipelines – will Mr. Trump reverse the Obama administration’s dim view of oil and gas pipelines such as the Keystone XL and Dakota Access Pipelines?  How will this affect Michigan where public awareness of two 60+ year-old pipelines under the Mackinac Straits has galvanized both sides of the political spectrum into action.  In 2014, Michigan convened a pipeline task force which issued a report in 2015.  In September, 2015, the State entered into a written agreement with Enbridge to prevent the transport of heavy crude oil through the Straits Pipelines.  The task force also recommended that the pipelines be independently evaluated and that additional financial assurance be provided.  The State solicited Requests for Information and Proposals (RFPs) and Enbridge agreed to pay $3.6 Million for the evaluation of the Straits Pipelines.  An independent evaluation of alternatives to the Line 5 pipelines is also underway.  When those will be completed is not known.

4. Infrastructure – Mr. Trump campaigned on infrastructure (although to hear him tell it, that only encompasses airport quality), and Governor Snyder appointed a 21st Century Infrastructure Task Force which concluded that the State needed to be investing $4 Billion more than it was in infrastructure to address roads, bridges, internet, water, sewer and other infrastructure needs.  Given the recent nationally publicized Flint Water debacle, will Michigan find the intestinal fortitude to fully invest in infrastructure or will we continue to patch and delay?  Given the State’s recent fight against a federal judge’s order to deliver clean water, and Michigan legislators “default anti-tax setting,” the future does not bode well.

5. Brownfields – as previously reported, Michigan adopted legislation streamlining its brownfield funding laws and deferred action on Dan Gilbert’s “transformational” brownfield funding legislation.  Will that resurface in early 2017?  I expect it will.

6. Other issues – there are a number of other issues on the horizon including cleanup standards, the maturing of the Great Lakes Water Authority and its ability to deliver clean water and septic services at a reasonable price, Michigan’s effort to reimagine its solid waste program, water withdrawals and protection of the Great Lakes from invasive species and nutrients leading to algal blooms.

Michigan alternative electrical generation – Henry Ford is not a good analogy

5 Oct 2015

utility workA recent op ed in Crains Detroit Business argued that legislation pending in Lansing regarding Michigan’s electrical system is wrongheaded. The authors focus on the proposed elimination of the renewable portfolio standard (RPS requiring 10% of Michigan’s electricity be generated by renewables by this year) by the legislation and argue that the legislation will cost Michigan energy jobs. They argue that  Henry Ford wouldn’t have built his automobiles here if there wasn’t a legislative infrastructure to support buyers of his cars.  I think I agree with the authors that we should retain the RPS, but their argument doesn’t persuade me. I believe that the future will include a greater mix of sources of electricity. It will not be simply large power coal-fired plants owned by large utilities providing us electricity.

However, without any historical discussion, they suggest that Henry Ford located his operations in Michigan because somehow the regulatory climate supported buyers of his cars, because in their words Lansing didn’t “kowtow” to the horse and buggy industry and paved streets and put up traffic lights. That’s simply not true.  Detroit’s mayor Hazen Pingree began a push to pave streets in the 1890’s and Ford didn’t begin production of his Model T until 1908 (making over 10,000 of them in 1909).  The traffic light wasn’t patented until 1918 and reportedly the first one was installed in Detroit in 1920 – again, well after Mr. Ford had begun his operations (in 1920, Ford reportedly manufactured 1 Million cars worldwide).

As most students of Detroit history know, the automobile industry focused on Detroit because Henry Ford was from here, there was a history of manufacturing, and there was easy access to raw materials. There was no amazing roadway system which led Ford to conclude “this is the place to build the automobile.”  In short, it was an accident of luck, history, geography and economics. I think a better analogy is the railroads, which required a dedicated infrastructure as Congress wanted to open the western United States to commerce and did so by granting rights, privileges and land so that the railroads could establish their “grid” at a lower cost.

The authors of the op ed pay short shrift to the discussion of the legislation’s other major change – elimination of net metering, but it appears that they view this as problematic also. Net metering is the current system whereby individuals and small businesses that generate their own electricity can sell it back to the grid.  The net metering issue is not over whether individual electricity generators can or should sell power back to the grid – rather, it’s what should be the price of that sale. Currently, individual generators can sell power back to the grid at the retail price of electricity charged by the utilities. This has been a boon for encouraging individuals and others to put up wind turbines and solar cells. The ability to sell excess electricity at the same price that the utility charges certainly means a faster payback which means more people will invest in it.

Utilities argue that this is a subsidy and they’re right.  Individual generators do not have to meet regulatory requirements relating to the power that they generate, nor do they have the costs of ensuring long-term reliability or the overhead costs of delivering power to consumers.  If you took your home-grown tomatoes to Kroger or Meijer, would you expect the law to require the store to buy them from you and at the same price the store sells tomatoes? Of course not.  In my view, the question is not whether there should be an incentive for individuals to create distributed power but, rather, how much of an incentive is fair to incentivize distributed power generation and fair to those who will continue to depend on the existing grid that will need upkeep.

We have an infrastructure in place that requires maintenance and upgrading for the 21st-century.  This is not a problem with a simple one-size-fits all-solution. The Legislature needs a more nuanced approach than simply blowing up the current system, but let’s get the arguments right.

What will be the top stories of 2015?

23 Jan 2015

edit_calendar_ssk_47433454Happy new year!  I know it’s almost February but as this is my first blog post of the year, I thought (particularly after hearing the State of the Union and the State of the State speeches)  I’d predict the big stories of 2015 in no particular order:

  • Wetland Rules – the EPA and the Army Corps of Engineers finally proposed rules in 2014  to address the fallout of the Rapanos case.  The proposal was met with a firestorm of disapproval, particularly from the farming world.  Will they ever finalize them?
  • Brownfield TIF Legislation – after all that work last year, will the Legislature take up streamlining this program and expanding it to allow Michigan to be even more competitive in redeveloping brownfields?
  • EPA Greenhouse Gas Rules vs. Congress – in September, 2013, EPA issued a proposal for carbon pollution from new power plants; in June  2014, EPA issued a proposal to cut carbon pollution from existing power plants – the GOP and coal and oil interests in Congress have fought this for some time.  Will the rules be adopted and enforced?  Will there be enough time for electricity generators to get alternative plans in place before being forced to shutter their oldest, least efficient and most polluting plants?
  • Keystone Pipeline – President Obama and Congress have been locked in a politically charged dispute over the Keystone XL pipeline for almost 3 years now – he seemed to indicate in the State of the Union that he’d veto legislation – will he?
  • Energy Policy – Governor Snyder has pushed for an energy policy, legislation is expected this year and the Governor recently mentioned an intention to develop a new energy agency that would make Michigan more competitive for business.  What that will entail in light of the likely changes due to federal regulations will be interesting to see – will Michigan upgrade or discard its renewable portfolio standard? Can Michigan reduce electrical cost while improving both reliability and environmental performance?
  • Water Policy – the Governor’s long-awaited great lakes policy is expected this year.
  • Pipelines – in addition to the Keystone pipeline, there has been a lot of interest in pipelines in, under and around the Great Lakes – could there be federal and state changes there?
  • Detroit’s Water Authority – it is supposed to morph into a regional authority – as I said previously, the easy part was getting to the agreement last year – will the hard work succeed or will it fail, causing major shockwaves for roughly half of the State’s population?

Change is hard – with great technology comes great upheaval

23 Apr 2014

carcharger

For the last 60 – 70 years, we have lived in an era of significant stability.  That seems to be over.  We’ve all seen how the internet has changed certain businesses (music, newspapers and bookstores).  Technology can be a huge boon but it can be quite disruptive.

The transition from gasoline to electric or hybrid vehicles has been somewhat bumpy as governing bodies struggle with whether dealerships are required and how to pay for roads when less (or no) gasoline will be used.  This is a growing issue as more electric and hybrid vehicles take to the road and as the condition of our Michigan roads continues to cry out for repairs.

As I’ve blogged about before, recent rhetoric suggests that Oakland and Macomb Counties may declare their independence from the DWSD.  With both counties now spending money to evaluate their options, what happens next is less clear. Given that DWSD has apparently not set its rates high enough to cover all the infrastructure improvements needed over the next 5 – 10 years, it is possible (although perhaps unlikely) that a Macomb-Oakland system might actually cost less to develop, construct and operate than the DWSD system.  Such a separation could lead the DWSD to owning over-sized water and waste treatment systems relative to their customer base and the oldest waste and water lines which are likely most in need of repair.  Given DWSD’s well publicized collection issues, this has to be making the investment community nervous as reflected in two investment firms’ recent subpoenas.  This much turmoil would seem to make the DWSD’s recent RFP less appealing than usual.

as with prior technical revolutions, change tends to be messy and the larger the change, the greater the mess

Finally (for the moment), we have seen many advances in the development of solar energy – some of which we’ve discussed on this blog – while those are exciting, they, like changes to gas driven cars and changes to 100+ years of centralized water and sewer systems, challenge the status quo.  For over 75 years, utilities have generated and supplied the electricity and natural gas that we consume in our homes and businesses from centralized points. As part of the deal, those same utilities have maintained the infrastructure needed to both generate and transmit gas and electricity.  So, what happens when people can start generating electricity on their own roofs?  Some hail it as a triple win (saving money, the environment and societal benefits) but most solar generators stay “on the grid” and as a result sometimes are contributing electricity to the grid and other times are drawing on the grid.  Under most systems, including Michigan’s, smaller generators can sell their electricity back to the grid at the utility’s retail price – so called “net metering.”

The ability to sell excess power back at the retail -not wholesale- price, raises the question of who pays for the infrastructure necessary to provide the electricity to those on the grid.  Utilities argue that those installing solar are not paying their “fair share” of such costs.  There are those who say that the price of electric service includes roughly 50% for non-generation expenses.  Some experts argue that there is no such “cost-shifting” occurring because there are savings on power plants, transmissions lines, lost energy as well as the ability to meet greenhouse gas reduction goals without utilities having to make the capital investment.  This is a tough debate and is not something easily reduced to 60 second soundbites and at present is being decided on a state by state basis.

Ultimately, the challenge of existing infrastructure combined with legacy costs makes the transition in technology and improving efficiency much harder and far more political than a “free market” would prefer.  But, as with prior technical revolutions, change tends to be messy and the larger the change, the greater the mess.

Energy creativity – thinking outside the box

31 Jul 2013

Has inspiration struck?

Can we produce “clean” energy to: (1) cost effectively enough to put into use, (2) reduce dependance on foreign oil and US coal; and (3) reduce carbon emissions?

Despite a recent piece in the Wall Street Journal discussing Europe’s experience with higher cost, less dependable solar and wind power, the creativity of academia never ceases to amaze me. I recently came across an article about this publication, Environmental Science & Technology Letters and a paper in it about utilizing CO2 emissions from power plants in fluids, where the CO2 was split into positive and negative ions. The ions were then used to create a flow of electrons that could be captured by an electrode, creating electricity. While this proof-of-concept is not yet efficient (i.e., it uses more energy than it generates), the researchers believe that they may be able to turn that around and make it cost-effective. While this wouldn’t reduce CO2 emissions, it could double the amount of energy associated with the same emissions, effectively cutting CO2 emissions in half per kilowatt generated.  If this works (and there’s no guarantee that it will), it would also enable us to continue to use the current grid system.

Just as interesting, and farther along, are the University of Michigan’s experiments, described here, with capturing energy from low flow water bodies.  The concept of hydroelectric energy is not new but UM apparently thinks that they may have found an efficiency that others may have missed allowing energy to be generated without dams and using natural flow rates.

Whether these technologies will turn out to be cost-effective remains to be seen but the ingenuity of mankind certainly gives me hope that we can protect the planet, be efficient and not have to become luddites.