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Avoiding A Coal Collision

Governor appears poised to end Michigan’s dual-track energy strategy

January 2, 2009 | By Keith Schneider
Great Lakes Bulletin News Service

Part One of Two Parts

On Tuesday, officers from the Michigan Department of Environmental Quality will hear citizens from around the state explain why they oppose or support building a new, coal-fired power plant near Rogers City.

The opponents will point to pollution and soaring plant construction and fuel prices and urge the state to take a new, cleaner, and safer approach to generating electricity. Supporters will say the state needs the power and the jobs produced by such projects.

But many opponents appearing in Lansing for the final hearing on the draft permit that MDEQ issued last fall for the 600-megawatt, $1.2 billion Rogers City plant believe there is even more at stake. They also want to halt Michigan’s two-track energy policy, which for three years has tried both to develop more coal plants and attract investment in the green energy industry, the fastest-growing industrial sector in the country.

The Great Lakes Bulletin News Service has learned they may soon have an ally in Governor Jennifer M. Granholm.

Sources in the Granholm administration say that a host of fresh financial, legal, regulatory, technological, and political trends have erected formidable new barriers to developing new coal-fired plants anywhere in the country, including Michigan. And, they add, those trends point to heavy federal investments in renewable energy.

That, the sources say, may put Michigan’s two-track strategy—more coal, more green power—on a collision course that could further damage the state’s financial health, environmental quality, and economic competitiveness. So the governor is preparing to publicly address coal’s biggest problems in Michigan — its global warming carbon emissions and whether the state needs any new coal-fired plants.

Senior Granholm administration officials declined to be specific about what they said would be a “major statement,” but indicated the governor might support a moratorium on approving new coal plants while the state formulates CO2 regulations—something coal opponents around the state have pushed for with lawsuits, petitions to the governor, and a steady barrage of press and grassroots events for more than a year. Or, some officials said, the governor might announce an outright ban on new coal plants.

The governor’s advisors, who declined to be quoted on the record, confirmed that revised state forecasts of diminishing electricity demand and increasing energy efficiency and renewable energy offset the need for new coal-fired plants.

The officials added that Michigan spends roughly $24 billion annually on energy, much of it imported, and that a switch to clean energy would allow the state to sharply reduce imports, keep more cash in the state, enable utilities to generate power with little or no pollution, and bring much more predictability to future energy costs. The sun and the wind, after all, are free.

Greening Michigan’s Power Supply
If Ms. Granholm does downplay new coal plants as part of Michigan’s energy future, it will follow a series of actions she took to aggressively encourage the development of a clean energy industrial sector, quietly discourage coal-burning power plants, and maintain standing with Republican opponents and their allies in the state’s utilities and major businesses, who insist that new coal-fired power is essential.

In 2006, for instance, Ms. Granholm ordered the MDEQ to write new rules for all 20 coal-fired power plants in Michigan that would reduce their mercury pollution by 90 percent by 2015. The same year she appointed a Renewable Fuels Commission in the state Department of Agriculture.

In 2007, the governor directed a Michigan Public Service Commission panel to prepare recommendations for satisfying the state’s electricity needs that would aid a transition from fossil fuels to wind, sun, water, biomass, and other clean energy sources.

The report, though, also said there was a need for one new large coal-fired power plant, a recommendation that produced applause from the state’s utilities. But the report, entitled Michigan’s 21st-Century Electric Energy Plan, drew strong criticism from clean energy advocates who said the state’s electricity demand would continue to fall for years and that the report paid little attention to the cheapest, most jobs-rich source for creating new electrical capacity—energy efficiency.

Yet many industrialists see coal as a bridge fuel and insurance policy while new cleaner technologies take hold, particularly in Michigan, where coal produces 60 percent of the state’s electricity.

“Sooner or later we'll need to build baseload [fossil fuel-burning] generating plants in Michigan," Rich Studley, executive vice president for the Michigan Chamber of Commerce, told reporters last summer. "If you don't begin now to have that debate and start that planning to build at least one, probably two baseload generating plants, there's a very substantial cost to doing nothing.”

But others who study different approaches to meeting electrical demand disagree.

"Michigan could meet all of its power growth needs through energy efficiency and renewables," said Martin G. Kushler, the utilities program director for the American Council for an Energy-Efficient Economy, at a town hall meeting in June in Dundee.

No Comment For Now
Still, as the argument over meeting Michigan’s energy demand continued, fast-moving market, credit, and political factors began to tilt against coal this year, making Michigan’s two-track energy strategy more competitive than cooperative and producing discomfort at the senior levels of the Granholm administration.

MDEQ Director Steven Chester, whose agency hosts Tuesday’s hearing and reviews all air permit applications for coal-power utilities, publicly expressed his dismay last summer.

"We find ourselves in a very awkward place," Mr. Chester told the Associated Press. "There simply isn't an environmental law that exists presently that allows us to pick and choose or say that we simply don't need this many coal plants.”

In an interview with the Great Lakes Bulletin News Service, Stanley “Skip” Pruss, Michigan’s new chief energy officer and director of the newly renamed Department of Energy, Labor, and Economic Growth, declined to confirm or deny whether the governor was preparing a policy statement on coal. He did, however, note that several new market trends are clarifying the Granholm administration’s support for clean sources of energy.

Mr. Pruss pointed out that the credit crunch has virtually eliminated financing for new, multi-billion dollar coal-fired plants. Construction costs have more than doubled over the last two years, according to the Michigan Public Service Commission. Fuel costs also climbed. And public opposition to coal-fired plants has mounted in Michigan and throughout the country, he said.

“What you have heard from the governor is increasing concern about new coal plants,” said Mr. Pruss. “It’s well founded because of the withdrawal of the investment community. There have been cancellations or delays of 70 or more coal-fired projects around the country. There is the expectation of carbon taxes, cap-and-trade legislation, and further regulation. You have the investment community and fund managers pulling investments from carbon-intensive industries.

“The reality with respect to new coal-fired generating stations is this,” Mr. Pruss said. “If we build new plants, it has an effect on the potential to deploy new renewable sources. There is only a finite need for electricity generation. The situation is very dynamic. It is incumbent on state government to look at this very carefully, especially with investments of $2 billion or more. There is a fiduciary responsibility that comes into play.”

A Careful Strategy
In the past two years Ms. Granholm said little about coal publicly even as she elevated clean energy development to the top of the state’s priorities. In 2007 and 2008 she urged the Legislature to approve a renewable energy standard; it passed this fall and requires state utilities to generate 10 percent of their power from renewable sources by 2015.

Renewable energy supporters and coal opponents praised the action because they expect it to provide a ready market for clean energy in Michigan, as similar requirements have in many of the 28 other states that now have them.

While the grassroots battle over coal plants and the legislative struggles over renewable energy standards continued, Ms. Granholm toured the world and scoured the nation to recruit companies and jobs to Michigan. She gained considerable traction among several wind, solar, bio-fuel, and battery companies. (See Page 2 of this article.)

Today, according to several analyses, Michigan’s steadily evolving clean energy sector employs roughly 12,000 people, while GreenJobsReport.com says that, over the last four months, Michigan was among the most active states in developing new green-collar jobs.

In the last three months, the governor accelerated her administration’s clean energy development strategy.

In October, she issued an executive order adding the word “energy” to the name of the state economic development agency, signaling the administration’s continued determination to recruit and coordinate clean energy development. And, on December 23, Ms. Granholm signed financial incentives that support the clean energy sector.

"The new energy economy is, singularly, Michigan's greatest opportunity to create thousands of new jobs, attract new investment, and diversify our economy," Ms. Granholm said. "By consolidating the state's energy efforts, we will create an efficient alignment of all the state's tools and resources to focus with laser-like precision on leading the nation in the new evolving energy sectors." 

Utility and mining industry executives remain skeptical. “Michigan can’t wait for the grand experiments in alternative energy to reliably power the new factories that we need today,” argued the editors of the Mining Exploration News, an industry publication.

But, after a long silence about coal that made some of the governor’s pro-environmental supporters uneasy, Ms. Granholm’s administration now seems willing to say that it clearly disagrees with that assertion. After all, the energy market in Michigan is static. Recent federal court rulings in Utah and Georgia bar new coal-fired power plants because they lacked controls on carbon dioxide, the primary global warming pollutant.

And, in early December, Houston-based Dynegy Inc., which proposed the Georgia plant, said it was reconsidering building a similar 750-megawatt coal-fired plant in Midland.

Help From Washington
The Granholm administration is also expecting some help from Washington. The federal government is moving to promote clean energy and more strictly regulate coal-burning plants. Barack Obama was elected on promises to combat global warming, develop a cap-and-trade system to reduce greenhouse gas emissions from coal plants, and promote a clean energy sector with five million new jobs.

In fact, Mr. Obama’s nascent administration is preparing an economic stimulus package that could invest $100 billion or more over the next two years in clean energy projects.

Ms. Granholm has positioned the state to be a prime recipient of federal clean energy funding, but is concerned that Michigan’s national reputation as the home for eight proposed coal plants—the most in the nation—is producing an unhelpful, mixed message. That is another reason why, some aides say, the governor needs to make a public statement about coal.

The actions of some other states may also be affecting Ms. Granholm’s thinking.

California effectively barred new coal-fired power plants in 2006 when it passed legislation to significantly reduce emissions of carbon dioxide and other climate change pollutants. Florida’s Republican Governor, Charlie Crist, and Kansas’ Democratic Governor, Kathleen Sibelius, also have barred new coal-fired plants in their states.

All three governors are pursuing a clean energy strategy for producing electricity, transportation, building construction, and community design.

Ms. Granholm has similar goals. "Michigan is committed to leading this nation to energy independence, and to meet that goal, we must foster renewable fuel research, production and use across our state," she said.

Part Two of this article lists new green-energy developments that are coming to Michigan. Keith Schneider, a nationally known environmental and energy journalist, founded the Michigan Land Use Institute in 1995. He is now communications director at the Apollo Alliance. Reach him at keith@mlui.org.

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