Trump's call for coal energy could cost Michigan consumers

Michigan energy suppliers say proposed actions by the Trump administration to declare an energy state of emergency are unnecessary and could lead to higher electric bills for customers.

Earlier this month, President Donald Trump ordered the U.S. Energy Department to stop the shutdown of nuclear and coal power plants as energy suppliers look to cheaper and more environmentally friendly options. A leaked memo from the DOE obtained by Bloomberg suggests imposing an energy state of emergency and directing power grid operators to purchase coal and nuclear power to maintain America’s energy diversity, grid strength and national security. Such federal intervention is unprecedented.

The move seeks to make good on Trump’s campaign promises to save coal industry jobs, though critics charge he is giving favors to coal operators who donated to the president’s campaign. 

Members of the Federal Energy Regulatory Commission, which regulates electricity sales and transmission, testified before Congress last week that there is no energy emergency to justify the federal action. Michigan utility companies agreed, saying coal is expensive and that they can provide reliable electricity from cheaper and greener sources such as natural gas, solar and wind.

“If they’re going to buy more expensive power, that comes out of ratepayers’ pockets,” said Jim MacInnes, chair of Michigan’s Utility Consumer Participation Board, a five-member group appointed by the governor to provide grants to organizations representing the interests of residential energy utility customers. “System operators are telling us we have more than adequate capacity. Michigan already has the highest electricity rates in the Midwest. Why would we want to make them higher?”

In March, Michigan had the 13th most expensive residential electricity rate at 15.55 cents per kilowatthour, according to the U.S. Energy Information Administration. The Michigan Public Service Commission sets Michigan utility prices.

Consumers Energy, Michigan’s largest energy provider, said last week that it would eliminate its use of coal by 2040, a goal also set by DTE Energy Co. Under its plan, Consumers would close one coal plant in 2031 and another in 2040. DTE plans to retire three plants by 2023 and its final two by 2040. One nuclear and four more coal plants are expected to retire in Michigan by 2025. The closures would nearly eliminate grid-supporting coal generation in the state.

Consumers Energy would decrease power use by updating demand response, energy efficiency, and power grid infrastructure. It would rely more heavily on solar energy as well as wind and battery storage. The Jackson-based company already has two natural gas plants, which it says would account for 10 to 15 percent of generation once it eliminates coal.

“We don’t believe there is an energy crisis or state of emergency, but we do believe there is an opportunity of a generation to ahave a cleaner and leaner energy supply,” said Patti Poppe, president and CEO of Consumers and its parent, CMS Energy. “What we are doing is beyond federal regulations or mandates. We’re doing this because we can generate electricity with this new balanced and clean energy portfolio in an affordable way that still provides for energy stability, reliability and accessibility.”

DTE plans to increase its use of natural gas and its carbon emission-free Fermi 2 nuclear plant. It recently received approval to build its first 24/7 natural gas plant in East China Township in St. Clair County. The Detroit-based company already has two natural gas units that it uses during peak electricity demand. The money it saves on using those resources would allow it to invest in renewables, said Irene Dimitry, DTE’s vice president of business planning and development.

“Sometimes a market mixture of regulated and partly not leads to dysfunction,” Dimitry said. “In that respect, the DOE’s directive might raise costs. We are not advocating for crisis intervention, because we think we have a sustainable plan going forward.”

The DOE’s plan questions if the national power system can endure natural disasters and cyberattacks without taking action. For two years, the DOE would direct system operators to purchase electric energy or its capacity from certain nuclear and coal plants to increase demand and prevent their retirement. Energy Secretary Rick Perry, however, said recently that federal actions still are being “fleshed out,” Reuters reported.

More demand for coal power would not save many of Michigan’s coal plants, most of which will have been in operation for 60 years or longer by the time they retire. Some parts to repair and update Lansing Board of Water and Light’s two power stations from the ’50s and ’70s are not even available anymore, said Amy Adamy, the board’s spokeswoman.

“These plants are old. They’re reaching the end of their life,” said Dimitry of DTE. “We’re in the transition stage already. We’re investing in them just to make sure they are reliable and safe through the transition period. It’s like a car. You replace parts until there’s so many big parts that need repairs that you just need to buy a new car.”

Advances in hydraulic fracturing and horizontal drilling have made shale formations more accessible, resulting in rising natural gas use since 2005. The methane-rich fossil fuel accounts for about a third of all energy in the United States compared to coal’s 30 percent. In addition to being cheaper, natural gas produces about 50 percent less carbon than coal, according to the EIA.

The DOE memo says nuclear and coal plants minimize threats to the power grid because they can store those resources for months, unlike renewable resources that depend on weather and natural gas plants that rely on pipelines.

Regional Transmission Organizations (RTOs), which oversee the electrical power grid, however, reported they have more than enough capacity in future years. PJM Interconnection LLC is the nation’s largest RTO, serving Washington, D.C., and 13 states, including southwest Michigan.

The Pennsylvania-based company said in a statement earlier this month that it has procured energy capacity through May 2022. It warned federal intervention would damage markets and be “costly to consumers.”

“(T)here is no immediate threat to system reliability,” PJM said. “There is no need for any such drastic action.”

Midcontinent Independent System Operator oversees the power grid for most of the Lower Peninsula, 14 other states, and a Canadian providence. The Minnesota-based RTO would not address the DOE memo in an interview, though in a comment to FERC in March, Jennifer Curran, MISO’s vice president of system planning, suggested FERC “work in partnership with state regulators to help ensure a coordinated effort” in addressing the grid’s resilience. Additionally, projections from earlier this month predict its grid will have more than enough resources for this summer and 2019.

MISO may have more protection from DOE intervention than other RTOs such as PJM, though. Most utilities in MISO own their generators, typically insulating them from the volatility of wholesale prices from independent power producers. This would lessen the proposal’s impact on prices, according to Nick Assendelft, spokesman for the Michigan Public Service Commission.

For now, MISO and PJM still rely on coal energy. In the future, though, Dimitry said Michigan’s resource accessibility is well protected.

“We believe there will be strong access and availability in natural gas,” she said. “On the East Coast, there’s been problems getting the gas delivered in pipelines. That’s not a problem in Michigan, given the pipelines in the state and the pipelines they’re building.”

Michigan has one of the largest deposits of natural gas in the country and more than 8,700 miles of pipelines for its delivery. There is nearly 300,000 miles of natural gas pipelines in the United States.

Grid resiliency relies on more than just distribution, though, said Jon Jipping, chief operating officer of ITC Holdings Corp., a transmission company whose Michigan branch is based in Novi. Resilience includes moving electricity from generators to users, he said, which is why ITC and MISO conduct drills to prepare for power grid threats.

The transition away from coal involves coordination between utilities, RTOs, and transmission companies. It also complicates grid management, since renewables such as wind and solar provide inconsistent power.

“We work really hard to say there’s not an energy state of emergency,” Jipping said. “Resiliency is much more than just this topic of coal and nuclear. It’s really about the grid as a whole.”

bnoble@detroitnews.com

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Twitter: @BreanaCNoble