Last Updated December 21, 2023
Program Overview
Category:
Regulatory Policy
State:
Michigan
Incentive Type:
Renewables Portfolio Standard
Administrator:
N/A
Start Date:
10/06/2008
Expiration Date:
N/A
Web Site:
N/A
Applicable Sectors:
N/A
Eligible Renewable/Other Technologies:
N/A
Summary
Michigan enacted Public Act 235 in November 2023, expanding renewable energy requirements substantially and adding a clean energy standard. Renewable energy requirements are now 50% by 2030 and 60% by 2035. Clean energy requirements are 80% by 2035 and 100% by 2040.
In October 2008, Michigan enacted the Clean, Renewable, and Efficient Energy Act (Public Act 295), requiring the state's investor-owned utilities, alternative retail suppliers, electric cooperatives, and municipal electric utilities to generate 10% of their retail electricity sales from renewable energy resources by 2015. SB 438, signed in December 2016, increased this requirement to 15% by 2021, and made other changes. The standard allowed utilities to use energy waste reduction (i.e., energy efficiency) to meet a limited portion of the requirement.
The state's two largest investor-owned utilities, DTE Electric and Consumers Energy, had additional obligations beyond those of other utilities.
Public Act 235 of 2023 substantially expanded renewable energy requirements and added clean energy requirements, superseding previous requirements.
Eligible Technologies
Renewable Energy
Under the standard, eligible renewable energy resources include:
- Solar photovoltaics (PV)
- Solar thermal
- Wind
- Geothermal
- Existing hydroelectric
- Tidal, wave, and water current (e.g., run of river hydroelectric) resources.
- Biomass, with several sub-categories:
- Landfill gas is included if located in a landfill whose operator employs best practices for methane gas collection and control and emissions monitoring, as determined by the department of Environment, Great Lakes, and Energy.
- Gas from methane digesters, so long as the digester only processes municipal wastewater treatment sludge, wastewater, or sewage, food waste or food production and processing waste, animal manure, or organics separated from municipal solid waste.
- Woody biomass used by facilities in commercial operation by November 28, 2023.
- Woody biomass used by facilities that enter commercial operation on or after November 28, 2023, so long as the biomass is sourced from sustainably managed forests or procurement systems.
New (post-October 6, 2008) hydroelectric facilities that require new dam construction are not considered an eligible resource, although repairs, replacements, and upgrades of existing dams may be counted towards compliance. Renewable energy resources do not include petroleum, nuclear, natural gas, industrial waste, post-use polymers, tires, tire-derived fuel, plastic, or coal.
Clean Energy
Public Act 235 introduces a separate clean energy portfolio standard, with its own definitions. Clean energy includes all sources that generate electricity or steam without emitting greenhouse gas, including nuclear generation. It also includes combined cycle natural gas plants that use carbon capture and sequestration plants to achieve at least 90% emissions reductions, with the proviso that if a capture rate higher than 90% meets the U.S. EPA's best available control technology standard, as applicable, that higher percentage shall be used instead of 90%. Existing combined cycle natural gas facilities can be classified as clean energy if they by 2030 receive approval from the Public Service Commission for a plan that achieves functional equivalence with the clean energy standard (presumably a 90% emission reduction) through reduction of greenhouse gas emissions using carbon capture and sequestration and other available applications, including, but not limited to, carbon removal technologies.
"Energy Waste Reduction"
The definition of energy waste reduction is synonymous with what is generally defined as energy efficiency. In order to be counted under the standard, energy efficiency measures must reduce customer consumption of energy, electricity, or natural gas. This includes both changes in equipment and changes in customer behavior directly attributable to an energy efficiency program or energy waste reduction plan. It does not include utility infrastructure projects that are approved for cost recovery (e.g., transmission or generation facility upgrades).
Energy waste reduction credits can be substituted for renewable energy credits if approved by the Michigan Public Service Commission and if the energy provider doing so has achieved annual incremental energy savings of greater than 2% under an energy waste reduction plan. Energy providers cannot use energy waste reduction credits for more than 10% of their obligation under the renewable energy credit standard.
Requirements
All Electric Utilities
The compliance period for the standard began in 2012. Each utility has a unique annual obligation based on its existing renewable energy portfolio, the amount of energy that would be required to meet the ultimate target during a compliance year, and the applicable percentage obligation for that year. The annual benchmarks are as follows:
- 2012: Existing renewable energy baseline plus 20% of the gap between baseline and 10%
- 2013: Existing renewable energy baseline plus 33% of the gap between baseline and 10%
- 2014: Existing renewable energy baseline plus 50% of the gap between baseline and 10%
- 2015 - 2018: 10%
- 2019 - 2020: 12.5%
- 2021-2029: 15%
- 2030-2034: 50%
- 2035 forward: 60%
- 2035-2039: 80%
- 2040 forward: 100%
To determine the target for a given year, a utility may calculate total retail sales using average retail sales during the previous three years or using weather-normalized sales from the previous year. Both methods then deduct the amount of sales attributable to customers participating in an electric provider’s voluntary green pricing program and the outflow from customers participating in the distributed generation program. Cooperative electric providers and multistate electric providers may also subtract the number of megawatt hours of nuclear energy that the electric provider obtained from a system located in-state that the electric provider owned or from which the electric provider had contracted to receive nuclear energy on or before January 1, 2024.
Utilities are required to file a proposed plan for meeting the renewable energy standard within two years of the enactment of Public Act 235 and every two years thereafter. The Michigan Public Service Commission (MPSC) reviews these plans every 2 years.
Additional Requirements for Large Utilities
In addition to the percentage-based energy requirements, utilities with more than 1 million retail customers as of January 1, 2008, (i.e., Consumers Energy) must have met a renewable energy capacity standard of 200 megawatts (MW) by December 31, 2013, and 500 MW by December 31, 2015.
Utilities with more than 2 million retail customers as of January 1, 2008, (i.e., DTE Electric) must have met a renewable energy capacity standard of 300 MW by December 31, 2013, and 600 MW by December 31, 2015.
Energy production from these new renewable energy facilities could be counted towards the percentage-based component of the standard.
Compliance
Compliance with the percentage standard can be met by purchasing renewable energy credits (RECs) with or without the associated electricity generated from the renewable energy resource (i.e., "bundled" or "unbundled" RECs). A REC is created for every megawatt-hour (MWh) of electricity generated by a renewable energy system. Under Public Act 235, only 5% of the renewable energy credit requirement can be met with unbundled RECs (except for municipal utilities), and no unbundled RECs can be used for compliance after 2035.
A REC has a lifetime of five years from the end of the month it was generated. RECs generated within 120 days of the start of a calendar year may be used to satisfy the previous year's obligation.
Utilities may substitute energy waste reduction credits for renewable energy credits with approval of the PSC. No more than 10% of a utility's obligation may be met using energy waste reduction credit.
Generally, RECs may be obtained from in-state facilities or from out-of-state facilities located within the retail electric service territory of a utility (or subsequent expansions) as recognized by MPSC. Alternative electric suppliers are generally not permitted to meet the standard using out-of-state resources. However, a variety of exceptions exist to these general eligibility criteria, relating primarily to existing power purchase agreements with out of state facilities.
Verification and Reporting
MPSC established the Michigan Renewable Energy Certification System (MIRECS) as the REC certification and tracking system.
Utilities and alternative suppliers are required to submit plans for complying with the standard to MPSC (details vary by utility type). They are permitted to recover their compliance costs through an itemized charge beginning 90 days after the PSC approves their renewable energy plan. The program website has information on the plans filed by Michigan utilities.
Public Act 295 also included annual reporting requirements for the PSC, including information on the status of renewable and clean energy in the state, the effects of the standard on electricity prices, the cost effectiveness of the standard, and the effect on employment in the standard. The reports are due annually by February 15. The 2015 report is available here.
Credit Multipliers
The standard also contains a series of bonus credits for each MWh of electricity generated by certain types of systems. These credits act in addition to the single credit that a facility receives for producing 1 MWh of electricity from a qualified resource. Thus it is possible to earn multiple credit bonuses on a single MWh of electricity generation. The bonuses are described below.
- Electricity produced using solar power placed in service prior to April 2017 receives an additional 2 credits per MWh.
- Renewable electricity produced at peak demand times by technologies other than wind receives an additional 1/5 credit per MWh.
- Off-peak renewable electricity generation stored using advanced electric storage technology or hydroelectric pumped storage and used during peak demand times receives an additional 1/5 credit per MWh. The credit is calculated based on the initial amount of electricity used to charge the storage device, not the amount that is discharged.
- Renewable electricity produced using equipment manufactured within the state of Michigan receives an additional 1/10 credit per MWh. This add-on is only available for three years after the in-service date of the facility.
- Renewable electricity produced using a system which was constructed using an in-state workforce receives an additional 1/10 credit per MWh. This add-on is only available for three years after the in-service date of the facility.
The underlined section below may be inapplicable after the passage of Public Act 235 in 2023.
Cost Mitigation Measures
Rate impact cost ceilings have been set at $3.00 per month for residential customers, $16.58 per month for secondary commercial customers and $187.50 per month for primary commercial and industrial customers.