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Plugged In: Prop 3 Could Boost Community Renewables Projects

Officials would be able to rewrite rules for entrepreneurs, not just utilities

Plugged In, Proposal 3, Power to Change | October 25, 2012 | By Jim Dulzo

Plugged In


Jim DulzoPlugged In is the energy-related blog of Jim Dulzo, MLUI's senior energy policy specialist. You can harass him at jimdulzo@mlui.org.
 

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From left, investors Jim Landes, Tom Gallery, and Doug McInnis worked with wind turbine installer Steve Smiley to develop a community-scale project for Northport's wastewater treatment plant.

There’s a brand-new wind turbine spinning in Leelanau County, and soon it will provide half the power for the Northport/Leelanau Township wastewater treatment plant.

The sparkling white machine high on a hill near Northport may be Michigan’s first-ever “community renewable energy” project; it’s financed entirely by local investors aiming for a very modest profit while assisting their cash-strapped village.

But the turbine, erected by Leelanau County Energy LLC—16 investors who spent $350,000 installing a refurbished, 120-kilowatt, Vestas-20 generator atop a 165-foot tower—also offers a fresh spin on Proposal 3, which requires 25 percent renewables for Michigan by 2025.

Why? Well, some folks wring their hands because they believe Prop 3, as a constitutional amendment, is rigid and could trap us in an unworkable energy future.

In fact, Prop 3 would do the opposite: give lawmakers and regulators a clean slate and a chance to map out an innovative, readily modifiable path to 25 percent—one that includes projects like LCE’s. Officials could write rules allowing people, not just big companies, to profit from renewables—something our current “10 x 15” law, Public Act 295, mostly avoids.

LCE President Doug McInnis, a former aeronautical engineer, said the toughest challenge he and his partners faced was figuring out how to sell their electricity to Consumers Energy, which powers the wastewater plant, in a way that earns back their investment in a reasonable amount of time.

Consumers isn’t obligated to purchase renewable energy from its customers except through state-sanctioned net metering. But that rule, written to please utilities, limits the green power an entrepreneurial customer can sell back to his power company to no more than he typically uses, and then only at the retail rate or less.

That makes it hard for the economics to pencil out, unless the customer already uses a lot of electricity.

The Northport plant does use a lot of electricity, so LCE, which has no bank loans, thinks their turbine will provide partners a 4-percent annual return. The group will donate the turbine to the village after it’s paid off, likely in 10 years, and the plant will then get half of its power for free.

“It’s all local, with no big businesses involved,” Mr. McInnis said. “It’s pretty neat that committed local people came together to do this. We were chided by the naysayers about making just 4 percent, which is what anyone with a savings account can get.

“But Northport told us ‘We can’t afford anything right now,’ so we covered it all.”

Indeed, projects like this could become more common if Prop 3 passes and officials write rules making utilities pay profitable rates to small-scale renewables investors like LCE.

This is not a theory: Minnesota established community wind rules in 2005 and now has hundreds of smaller-scale, community-owned wind turbines producing close to 1,000 MW of renewable energy—roughly the equivalent of an extra-large coal plant.

And, although its electricity is more expensive, community windpower won’t push up rates. Community wind generates too small a fraction of a utility’s supply to affect rates noticeably; besides, Prop 3 has a 1-percent yearly cap on renewables rate increases.

Think of these projects’ effect on the local economy: It puts engineers, excavators, installers, electricians, and maintenance people to work. It boosts local capital formation and keeps new revenues and profits close to home. It provides a way to contribute to strapped local governments, schools, churches, hospitals, charities—or private bank accounts.

And it boosts the local market for smaller-scale renewables manufacturing—a sector Michigan is poised to expand.

There’s no guarantee that, if passed, Prop 3 would make this happen. That’s up to the public rule-making process. But if it loses, certainly none of this will.

By the way, Consumers just held its eighth and ninth drawings among residential and commercial customers who applied to build their own small renewables projects under the utilities’ small, experimental feed-in tariff program. State officials made the utilities continue the program when it became clear that their overall renewables costs are far lower than what the company warned they would be.

Why a drawing? Given the tiny scope of that program, the company routinely receives far more applications than it can handle from people eager to invest in their own renewables projects.

Mr. McInnis won one of those drawings, and he’s working on his own solar array. He and his partners also plan to vote for Prop 3.

“It is so frustrating,” he said of Lansing’s reluctance to move aggressively on renewable energy, forcing advocates to use a referendum. “The Legislature is so paralyzed. The utilities want to control things like they have for the last 100 years.

“We’d like to volunteer our experience to other communities,” he added.

But without Prop 3, that’s not terribly likely.

Jim Dulzo is the Michigan Land Use Institute’s senior energy policy specialist. Reach him at jimdulzo@mlui.org

3 Comments

694 days ago, 3:09pm | by Ilene Wolff | Report Comment

These guys rock! Thanks for letting everyone know about this.

693 days ago, 9:03pm | by Tom Karas | Report Comment

These guys showed a lot of determination in finally pulling this project together. Good things can happen even if the utility companies are doing their best to squash the little guys. Distributed energy like this is the future, it will be cheaper and cleaner and put more folks to work. The question is how long the utility monopoly can stave off the inevitable.

686 days ago, 9:56pm | by Jim Thompson | Report Comment

The State does need a Energy Standard. I see where Prop 3 wants to enact additional laws that will effect the employment of Michigan residents. This sounds more like a labor law than a energy standard.

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