Feasibility and Implications of the Michigan 2012 Proposal 3 for a 25% State Renewable Portfolio Standard

October 2012
Elisabeth Moyer, Sean Johnson, Lexie Goldberger, Joe Zhu, Center for Robust Decision-making on Climate and Energy Policy, University of Chicago

Analysis of wind resources suggests that the proposed expansion of Michigan's renewable portfolio standard to require that 25\% of the state's electricity sales derive from renewables (Proposal 3 on the 2012 ballot) can be met by its 2025 target date with a moderate direct financial impact on the consumer. Impacts on average Michigan electricity rates could be from 3.5-11% depending on the continuation of federal subsidies and details of implementation. Proposal 3 does allow the option of wind generation in some out-of-state areas with significantly higher windspeeds and therefore lower costs than in Michigan. Responsibility for balancing local interests vs. costs is left unclear in the statute and would likely be placed on the Michigan Public Service Commission (MPSC). The same analysis suggests some potential roadblocks for the smaller existing Michigan renewables requirement of 10% of electricity sales by 2015 (Public Act 295). Unlike Proposal 3, PA 295 has a cost cap provision that limits total ratepayer impact to no more than an ~ 3% rise in rates, or a price paid to new renewables of ~ $80/MWh. Meeting PA 295's requirements with in-state renewables should be feasible if federal tax credits for renewables continue but would likely require out-of-state wind if those subsidies are allowed to lapse, as may happen at the end of 2012. Second, while Michigan wind quality should be sufficient to allow profitable generation within this constraint given federal support, the MPSC will need some attention to cost control: average power purchase agreements with Michigan renewable generators to date exceed the value allowed under the PA 295 cap. Both existing and proposed Michigan renewable portfolio standards are likely achievable targets, but the details of their implementation have important consequences.