Published in Energy

State regulators issue energy assessment amid transition from coal

BY Sunday, October 13, 2019 05:00pm

The polar vortex early this year strained Michigan’s energy supply as the state experiences an “unprecedented shift” in the way it produces power and relies more heavily on natural gas and renewables, according to state regulators.

In response to a call from Gov. Gretchen Whitmer, the Michigan Public Service Commission last month released a final Statewide Energy Assessment on the state’s preparedness for dealing with severe weather events and grid disruption. The report outlines dozens of recommendations for improving energy reliability and resilience. 

In short: The state’s supply and infrastructure is adequate, but more work is needed.

Underlying the report’s 37 recommendations for improving energy infrastructure, however, is that Michigan is in the middle of a major shift from coal-fired power to natural gas and renewables. According to the MPSC, Michigan is closing coal plants at a faster rate than the rest of the Midwest.

As natural gas is increasingly used for electricity, it will compete with gas supplies used for heating, particularly for residential customers. This competition for supply was evident during the polar vortex in late January and early February.

“This polar vortex highlighted the tension you can have with those competing with each other at extreme times,” said MPSC Chairperson Sally Talberg. “We’re certainly well-positioned with supplies and managing the transition of supplies with aging infrastructure, but we need to be vigilant about the interconnected nature of gas and electricity.”

During the extreme weather event, Jackson-based Consumers Energy asked natural gas customers to curtail their energy use after a fire at a gas storage facility, while the regional grid operator asked Consumers and DTE Energy to have customers who are enrolled in voluntary programs curtail their electricity usage. The incidents led Whitmer to ask regulators to undertake the comprehensive energy assessment.

The events also “highlight the need for improved coordination between electricity and natural gas systems during emergencies,” Whitmer and Talberg said in joint letters to the heads of PJM Interconnection and Midcontinent Independent System Operator (MISO), which manage the grid system in Michigan and other states.

The issue of using natural gas for heating and for electricity is one that the industry “has been looking at for a while now. The incident (this year) certainly brings it to the forefront for us,” said Tanya Paslawski, president of the Lansing-based Michigan Electric and Gas Association.

The state assessment makes 37 recommendations and 15 observations to improve reliability and resilience. These include improving transmission connections with other states, upgrading natural gas infrastructure, diversifying energy supply and developing stronger cybersecurity rules.

An MPSC order on the report also initiated several new dockets that will further study programs allowing customers to curtail energy usage during system disruptions and utility mutual aid agreements, among others.

Paslawski said the group is “very open” to those ongoing planning discussions. However, before the final report, the group raised concerns about additional regulatory reporting requirements and whether the state was going beyond rules outlined under sweeping 2016 energy reforms.

“Making sure we’re prioritizing properly is an important piece for us,” Paslawski said.

Valuing renewables

In their letters to grid operators, Whitmer and Talberg also note that with more distributed, renewable energy coming online, these resources need to be integrated into the grid operators’ forecasting models to ensure the reliability of the system. This includes solar and wind, but also battery storage. 

As costs for renewables and storage come down, utilities are increasingly announcing clean energy goals that significantly cut emissions in the coming decades to address climate change. State officials note that Michigan is seeing increased severe weather incidents, particularly involving ice and peak wind gusts.

“We’ve definitely seen the impacts of severe weather affecting the electric system,” Talberg said.

Paslawski said her group’s member utilities vary on climate change goals and clean-energy plans to achieve them. She differentiated between “on-the-ground, day-to-day” issues raised in the energy assessment versus long-term climate commitments from utilities.

While utility resilience planning may differ between the short-term and long-term addition of renewables, Talberg said the role of distributed generation going forward — and how it’s valued — is “top of mind” for the MPSC.

“I think there’s more work to do to fully get the benefit from those resources from a reliability standpoint,” Talberg said.

Creating new ways to value these resources is an ongoing process at the federal, regional and state levels. System operators like PJM and MISO play critical roles in how these resources are valued on the system.

Cost considerations

While the energy assessment drew praise from a variety of groups, others remain focused on the potential effects for ratepayers. That includes the key question: What are these infrastructure investments going to cost utility customers?

The Citizens Utility Board of Michigan (CUB) and Attorney General Dana Nessel, in particular, have been vocal about protecting residential ratepayer interests during the energy transition.

Nessel filed comments in August urging the MPSC to consider affordability in its recommendations.

“While it is important to assess Michigan’s energy system and its ability to respond to natural and man-made catastrophes, it is just as important to remember who is paying for these potential upgrades,” Nessel said in a statement. “There is always a balance that must be struck between reliable and affordable service.”

The Citizens Utility Board of Michigan supported the final report’s recommendation to begin valuing energy efficiency, demand response and “non-wires alternatives” for improving the grid.

“This is in line with CUB’s comments filed on the initial (Statewide Energy Assessment), arguing that efficiency resources deserve special attention because they tend to carry lower costs for consumers than capital-intensive investments,” CUB Executive Director Amy Bandyk said in a statement.

The group and Nessel also raised concerns about current rules for customers to receive bill credits after extended outages.

Talberg said the MPSC is aware of concerns over rates amid the need for infrastructure upgrades.

“(Operations and maintenance) costs generally are going down, but infrastructure upgrades just continue to escalate,” Talberg said. “We’re trying to make sure we have effective planning processes to really optimize so we get the most value for dollars ratepayers are putting in.”

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