The Michigan Public Service Commission (PSC) staff issued its First Annual Report on the Michigan Renewable Energy Program on Nov. 18, 2003. The energy sources examined in the report include wind, solar, biomass and hydroelectric energy generation. Unfortunately, the report mostly calls for Michigan to duplicate existing federal programs or to imitate unproductive programs of other states.
In addition, a bill has been introduced in the Michigan Legislature to require electricity suppliers, by 2006, to use renewable resources to generate or acquire 7 percent of the electricity they sell, and to increase this proportion to 15 percent by 2013.
To put the report and this new requirement idea in perspective, consider: After nearly three decades of government preferences and billions of dollars of subsidies for alternative energy, renewable energy (excluding hydroelectric power) has achieved only a 2 percent share of electricity usage nationwide. Even with the recent increases in oil and natural gas prices, renewable energy sources generally are not anywhere close to becoming commercially viable.
One reason is the focus on promoting the idea of renewable energy, rather than upon finding the quickest, most efficient way to overcome technological hurdles and make it commercially viable. One of the most telling indications of this orientation in the PSC report is its No. 1 policy recommendation: Educate the public. The report states: "Educating the public, school children, and encouraging curriculum development in state universities will go far to increase consumer interest and support for renewable energy." In other words, generating support among impressionable students, presumably to create more political support for the future, has a higher priority than grappling with the real problems facing the industry.
Current government support for renewable energy is already substantial. Federal and state initiatives include investment tax credits, accelerated depreciation of capital costs, and public funding of research and development by corporations and universities. The U.S. Department of Energy estimates that well over $1 billion are being spent each year on these forms of subsidization. In addition, several states have imposed mandates for state purchases from renewable energy sources.
The report recommendations evidently are in addition to other Michigan and federal initiatives to promote renewable energy. For example, Diane Katz of the Mackinac Center for Public Policy has previously described Michigan’s "NextEnergy" initiative as a boondoggle. See http://www.mackinac.org/4398.
The PSC report, while trumpeting the environmental benefits of expanding renewable energy usage in Michigan, ends up advocating two renewable energy sources with significant environmental drawbacks. According to the report:
Large-scale solar electric production is not likely to be a significant renewable resource in Michigan in the near future due to the cost difference and the limited sunlight. New hydroelectric capacity is limited by the lack of new, undeveloped sites and the environmental problems associated with fish and wildlife habitat. Wind and biomass appear to be the favored options among the renewable energy technologies, considering the type of resource that might be constructed in the state. (Emphasis added)
While the report is probably correct in identifying wind and biomass as the most commercially feasible renewable energy sources for Michigan, both have significant drawbacks. For example, "biomass" is simply an impressive-sounding term for burning wood and other waste products, which is not necessarily cleaner for the environment than other combustible fuel alternatives. Wind turbines have proven to be harmful to bird life, including some of the most endangered species. Environmentalists in other states have also raised concerns about the size of wind farms and the environmental impact of filling in green spaces with large wind farm construction. Thus, wind farm construction has recently attracted intense environmental opposition in New England, Pennsylvania and California.
The report also touts the reliability benefits of the increased use of renewable energy sources, in light of the nation’s recent blackout problems. While it is true that more diversification of supply sources can improve reliability at the generation level, there is another problem. The most promising renewable energy sources identified in the PSC report usually must be generated far away from populated areas due to the environmental impact, (from burning biomass, for example) or because of the location of the renewable resource (Lake Superior, for example, with its strong wind currents). Accommodating these renewable energy sources commonly requires transmission over great distances. This additional strain on the transmission grid — the place in the electricity network where current reliability concerns are the greatest — must be counted among the costs of these renewable resources.
There certainly is nothing wrong with individuals, entrepreneurs or interest groups pursuing the idea of renewable energy and finding ways of developing them into viable options for America’s energy future. There may well be a viable niche market for renewable energy that can be sustained without continued government support. But beyond this limited market, expensive attempts by the State of Michigan to subsidize more extensive use of renewable energies will generally be ineffective, as they have been elsewhere, and may well undermine the very environmental and reliability benefits their proponents claim.
Note: Theodore R. Bolema, Ph. D., J.D., is an attorney in Central Michigan University’s College of Business Administration, and an adjunct scholar with the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich.