A Fresh Angle: Taking on 'Big Wind' With Competition

Cal Peters retired from the Michigan Department of Environmental Quality in 2013 after being employed as an investigator with the Air Quality Division for 33 years. In 2014, when the state of Ohio enacted significant reforms to its “Renewable Portfolio Standard (RPS),” or renewable energy mandate, Peters observed, and to an extent participated, with a unique perspective.

Mindful that the Michigan Legislature is preparing to review its RPS this year, Michigan Capitol Confidential interviewed Peters on Jan. 8. The following are excerpts from that interview.

Q: You have said that you followed the changes Ohio made regarding its renewable energy mandate last year. What was your primary interest in what occurred there?

A: A friend of mine had purchased the natural gas production rights for some abandoned coal mines in southeast Ohio. My friend is able to drill into the subterranean voids and draw out methane pretty much perpetually, which in my mind deserved to be defined as a “renewable resource.” During the initial round of administrative changes to Ohio’s renewable energy laws, we had the opportunity to make that argument. With the support of EPA's Coal Mine Outreach Program, we were successful in getting Abandoned Mine Methane (AMM) added to Ohio’s list of “Renewable Resources.”

Q: But that wasn’t your only goal; that was just the first step, right?

A: Right. A universal flaw in the way that RPSs are structured is that they all pretty much consider electricity to be the only valid form of renewable “energy.” That means you have to actually produce electricity to qualify for Renewable Energy Credits (RECs); and under these systems, credits are what’s needed to make any real money, as the intent of the RECs revenue is to subsidize renewable energy production.

The consequence of this way of structuring the system is that if you produce Renewable Natural Gas (RNG) from an abandoned mine, a landfill, or an anaerobic digester, or a farm waste digester, as examples; you have to spend about $250,000 on up to buy electrical generating equipment to convert the gas to electricity; take a 50 percent conversion-efficiency hit; and fight with the utilities to get an interconnect agreement. The utilities don’t want the electricity you’re producing because they don't make money off it and it complicates the already complex and fragile delivery grid that they're responsible to oversee. So basically, RNG has the deck stacked against it from the get go.

Our idea was that, instead of converting the RNG to electricity, you simply measure the gas and mathematically convert the BTU to megawatt hours, which are the units of electricity used when computing the credits. If you can use RNG at the point of generation to heat your barns or fuel your boilers, or compress it into a tank to fuel your (Clean Fuel) vehicles, or just compress it into the pipeline to sell by displacement as RNG, wouldn't that be a more efficient, flexible and cost-effective outcome? So we floated the idea to a couple key people in the RNG industry in Ohio, and got instant traction. The idea was taken to the Ohio General Assembly; the provision was drafted, and as of June 13, 2014, Ohio became, to the best of my knowledge, the first place in the world to adopt this simple common sense approach.

Q: From what you observed, would you say that the regular news media in Ohio missed, and failed to report, most of the important changes there?

A: I'm not sure the news media ever understood or covered much of what the legislature changed regarding renewable energy, other than the state putting a hold on the incremental increases in the mandate. You (Michigan Capitol Confidential) have already written about the Ohio news media seeming to have failed to report about Ohio removing the requirement that renewable energy be from in-state sources, and increasing the residential setback requirement for wind turbines. I can tell you that the wind industry definitely understood the significance of the part we were involved in, and the fact that the legislature agreed with our idea about RNG. They didn’t like it and didn’t want it in the legislation.

I think the environmental groups and the wind industry might have focused solely on the issue of the mandates being put on hold because they didn’t want to split their message, and had to prioritize their propaganda efforts. Then maybe the news media followed that lead and only reported that aspect of the changes instead of bothering to do its own assessment of what was in the legislation. The news media definitely missed the whole point of broadening the base for renewable-resource supplies and the fact that RNG solves an environmental problem wherever it is found.

Q: Previous Michigan Capitol Confidential articles have reported the argument that wind energy in Michigan might actually produce more CO2 emissions than just using natural gas would. Is that possible? Could you explain why?

A: Because of the intermittent nature of wind, you might produce usable energy from a given wind site 30 percent of the time, if you're lucky. Those projects aren't “base load capable,” by definition. And since there's no feasible way to store industrial amounts of power when the wind is blowing – with the exception of the Ludington pumped storage facility – you need to have backup generating capacity to ensure grid-supply reliability, which because of the cost and logistics and relative ease of permitting, is invariably natural-gas fueled. As a result, you have to construct and operate the gas backup plants anyway, and the most efficient way to operate them is at “steady state,” as opposed to starting them up and shutting them down whenever the wind does or doesn't blow.

In the energy generation business, “steady state” is the key in terms of efficiency and emissions, and wind, figuratively and literally, blows that business model up and even creates financing challenges for existing traditional generation facilities, because of the inherent uncertainty of the needed capacity factor.

Q.In general, how would you describe wind energy in Michigan?

A: It is uncompetitive, expensive, political, and inefficient, and without the now-expired, Federal Production Tax Credit, bankrupt, because you can't structure new wind projects as tax shelters.

Q: How would you assess the chances that Michigan, as it reviews its renewable energy law this year, might make some of the same changes that were made in Ohio?

A: It's a tall order . . . but with a well-run educational effort that exposes the expensive, political, Bald Eagle-and-bat-killing truth of the existing situation, as well as the advantages of changing to a free and competitive market for renewable energy and leveling the playing field for RNG, I'm hopeful. The bottom line is that energy costs matter in the ongoing effort to attract and retain manufacturing jobs in Michigan. Renewable energy mandates inevitably add to those costs, and to the extent we can minimize those additional costs while maintaining the spirit of renewable energy, we'll be more competitive in keeping and attracting new jobs, particularly in manufacturing.