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Co-op Study Attacks Jobs and Homegrown Energy Bill

But criticism draws sharp rebuke from veteran feed-in tariff expert

November 11, 2009 | By Glenn Puit
Great Lakes Bulletin News Service

  A feed-in tariff program guaranteeing profitable home solar installations in Florida is sold out through 2015.
A trade association representing Michigan electric co-ops is attacking proposed state legislation that would create thousands of clean-energy jobs and cut the need for new, coal-fired power plants.

The association, the Michigan Electric Cooperative Association, provides public relations services for, among others, Wolverine Power Supply Cooperative Inc., which wants to build a 600 MW coal plant in Rogers City that state regulators say is unneeded.

In late August, MECA published a white paper discrediting the proposed legislation, which would aggressively promote installation of renewable energy devices by Michigan homeowners and businesses. The proposal, called “feed-in tariffs,” would require utilities to pay profitable, premium rates for the electricity generated by property owners who install solar panels or wind turbines and feed their clean energy into the grid.

Last month, an executive from Wolverine’s family of retail co-ops echoed the MECA report’s objections to the proposal, calling feed-in tariffs, or FITs, “worse than a sharp stick in the eye” in MECA’s Michigan Country Linesmagazine, which is mailed free to co-op utility customers in Michigan.

Both the MECA white paper and the co-op executive, Tony Anderson of the Traverse City area’s Cherryland Electric Cooperative, maintain that feed-in tariffs would produce only a few thousand jobs in Michigan, exclude people with low incomes from the profit opportunity, and also harm them with higher electricity rates.

Mr. Anderson did not respond to an inquiry from Great Lakes Bulletin News Service about his column. He and the association made their claims despite evidence from other countries that the tariffs often trigger strong job growth in renewable energy manufacturing and installation.

However, neither the MECA report nor Mr. Anderson’s column acknowledged that as thousands of people take advantage of FITs, the new electricity they generate would further reduce the need for building highly expensive new coal-fired power plants—like the one Wolverine wants to erect to supply Cherryland and its three other retail co-ops.

FITs Gaining Support
The co-op attack on feed-in tariffs comes as support for them is spreading in the United States and in Michigan, a state desperate to reactivate its hundreds of idled factories to make new products for global markets.

Michigan Governor Jennifer Granholm, a number of state legislators, and ReEnergize Michigan, a new coalition of citizen groups, unions, churches, and environmental organizations, are pushing to accomplish that by campaigning for aggressive, pro-clean energy policies, including FITs.

FIT advocates point to the policy’s success in places as different as Germany, Spain, Vermont, Ontario, and Gainesville, Fla. In each case, FITs quickly attracted strong interest due to their profit guarantees; in Germany the policy birthed a new solar manufacturing industry.

In Michigan, FITs are receiving a warm reception from Consumers Energy customers who snapped up all available participation slots when that utility unveiled a small feed-in tariff pilot program three months ago. The federal government is looking closely at feed-in tariffs, too: The National Renewable Energy Laboratory is studying its economics and promoting it to state and local officials.

And James Woolsey, Jr., the former director of the Central Intelligence Agency, recently told the Great Lakes Bulletin News Servicethat he sees significant potential for Michigan if it implements feed-in tariffs.

“I think there is a lot of potential for new local jobs in this,” Mr. Woolsey said. “If one big [manufacturing] state were to implement feed-in tariffs, such as a Michigan, California, or New York, then it would really get them on the map for new jobs.”

Not Right for Michigan?
MECA, however, sees things differently. Its white paper, Feed-In Tariffs: Are They Right for Michigan? downplays the job-creating power of feed-in tariffs, saying that, at best, they might create 4,500 permanent jobs in Michigan.

By comparison, Wolverine Power Cooperative says that the coal plant it wants to build near Rogers City, which according to its own three-year-old estimate will cost at least $1.3 billion, would create about 1,000 temporary construction jobs and, once it is operating, less than 100 full-time permanent jobs.

The white paper was authored by MECA Research and Policy Director Richard Barclay, a former state Republican caucus employee and budget coordinator with a background in agricultural economics.

“I understand the ‘infant industry argument’ of jump-starting a [clean-energy manufacturing] sector,” he said of the tariffs’ ability to create new markets. “So the idea of subsidies per se didn’t bother me,” But, he added, “As a co-op member, I was a lot more concerned about it.”

Mr. Barclay added that MECA officials did not pressure him to discredit feed-in tariffs.

“I won’t tell you that there weren’t people who were very skeptical,” he said. “That was basically my boss’ first charge: He was skeptical. This legislation may begin to move, so we need to get the facts.”

In his white paper, Mr. Barclay asserted that:

  • In Germany, where feed-in tariffs are wildly popular, green job growth statistics are misleading and in Michigan they might create 4,500 jobs “at best.”

  • Since Michigan cooperatives primarily serve rural areas with little commercial and industrial development, “the negative impacts of FITs would be out of proportion to the positive impacts. Indeed, they could be crippling to current and future economic development.”

  • Feed-in tariffs are most likely not compatible with the state’s new requirement that utilities produce more renewable energy. Mr. Barclay describes FITs and the new requirements, known as renewable portfolio standards or RPS, as two “opposing policy options.”

  • FITs lead to very high prices for purchased electricity, as much as 1,300 percent higher, making them economically regressive since they have a disproportionate impact on low-income consumers.

  • Michigan electric cooperative members’ annual costs could increase by nearly 50% as a result of FITS.

In an interview, Mr. Barclay added that he sees utilities depending mostly on coal for generating electricity for the foreseeable future.

A German Critique
But FIT supporters say that the position that MECA’s report and co-op executives like Mr. Anderson take ignores the worldwide shift away from centralized, dirty, coal-fired power production. They add that the accelerating shift by industrialized countries, including China, toward green power offers Michigan an opportunity for a jobs gold rush, if the state enacts the tariffs.

That is because the tariffs would create an instant, statewide market for renewable generating equipment that, combined with Michigan’s legendary manufacturing base, would attract companies that build such equipment to the state.

Advocates point out that this is what happened in Germany, which also has a sizeable manufacturing base. Feed-in tariffs quickly created a vast new market for solar panels there, plus a big new panel-manufacturing industry and thousands of retail and installation jobs. At last report, Germany’s overall renewable energy sector was employing close to 250,000 people, more than the country’s auto industry.

Craig Morris, editor of Berlin’s PV Magazine, which advocates for solar power, is sharply critical of MECA’s report. Considered an expert on feed-in tariffs’ successful implementation in Germany, Mr. Morris blogged about the MECA report, calling it “a doozy.”

“The white paper is a below-average, sophomoric attempt at describing the policy it criticizes,” Mr. Morris wrote. “I don’t really mind if people are of a different opinion, but you do have to get the facts right.”

Mr. Morris said MECA employed a “completely misleading” analogy by quoting a solar energy advocate in California who said that, to replicate Germany’s renewables growth, “don’t get caught up in replicating their model. Replicate their budget.”

“Germany does not have a budget for solar that can be replicated at all,” Mr. Morris said, pointing out that feed-in tariffs rarely involve state subsidies. They are, in fact, paid for by the money utilities collect from their ratepayers.

Mr. Morris also said MECA’s white paper erred in maintaining that, even though Germany and Spain are seeing big increases in solar energy production, after 15 years of feed-in tariffs solar still accounts for less than 1 percent of electricity in both countries.

“He is revealing his ignorance of the things he dislikes,” Mr. Morris said, noting that feed-in tariffs were not implemented for solar until 2000. Germany now gets 14 percent of its electricity from renewable sources, according to numerous press reports.

Mr. Morris also disputed the report’s claim that feed-in tariff policies are “determined by inexperienced politicians.”

“Actually, in Germany, feed-in rates are determined by very experienced politicians who could run circles around the author of this white paper,” he said.

He also denied that feed-in tariffs “may not co-exist with renewable portfolio standards.” On the contrary, Mr. Morris said: “Feed-in tariffs can be a mechanism to meet (RPS) targets.”

Mr. Morris rejected MECA’s claim that feed-in tariffs would punish the poor. The report asked, rhetorically, “How many households are likely to finance the investment of a $30,000 solar PV project which would provide only one third of their electricity?”

Mr. Morris said financing such projects in Germany has actually worked well, since feed-in tariffs involve long-term, guaranteed contracts between the private power provider and the utility buying their renewable electricity. German banks view such projects as smart, stable investments.

“The answer to the paper’s question about how cash-strapped American households are to fund solar roofs is quite simple: from a bank,” Mr. Morris said.

And while FIT supporters agree that the tariffs would raise power prices, they maintain that their effect is small—perhaps several dollars more per month, in exchange for thousands of jobs and cuts in global-warming carbon emissions. They point out that properly designed tariffs gradually lower payments for new power contracts, creating downward pressure on the price of renewable energy devices. The tariffs, or rates, are also reduced as more people participate, further controlling costs.

Opponents of Wolverine’s proposed new coal plant point say that the big project would raise electricity prices further and more quickly than feed-in tariffs. One study of Wolverine’s proposed plant, conducted almost two years ago, found that it would at least double the cost of generating electricity for the firm’s customers—including Mr. Anderson’s Cherryland members—the day it went online.

Officials from Wolverine and Cherryland have not disputed that finding and have refused to reveal their own estimates of what their proposed plant would do to their customers’ electric bills.

Glenn Puit, a veteran investigative journalist, is a policy specialist for the Michigan Land Use Institute. Reach him at glenn@mlui.org.

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