Reliability in the Midwest: Banning Resources that Keep the Lights On
It’s time to unlock the full potential of demand response to create an affordable, sustainable, and reliable modern grid.
Imagine reading that headline as you land in Detroit Metro an hour before a big meeting in Ann Arbor. Your heart sinks knowing you might need to wait in line for a taxi and likely be late for your meeting. Why would Michigan decide to limit your access to an innovation that you’ve become universally accustomed to using every time you arrive in any airport around the country?
Imagine reading that headline as you land in Detroit Metro an hour before a big meeting in Ann Arbor. Your heart sinks knowing you might need to wait in line for a taxi and likely be late for your meeting. Why would Michigan decide to limit your access to an innovation that you’ve become universally accustomed to using every time you arrive in any airport around the country? Ridesharing saves significant time and money and gives you peace of mind that travel will go smoothly, without having to experience the universally terrible service of the outdated taxi. And how the heck are they supposed to enforce the 10% cap fairly?!?
You would be understandably gobsmacked if you experienced this hypothetical situation. Yet, that’s exactly what the Michigan Public Service Commission (MPSC) has decided is right for its customers . . . whoops, I mean ratepayers . . . as it relates to one of the most innovative energy sources lying fallow in Michigan, namely demand response, a resource that would save Michigan customers more than $260 million per year immediately. The same 10% cap that the MPSC has imposed on customers choosing an alternative energy supplier is arbitrarily imposed on those who would like to deliver to Michigan the very local resource that the MPSC has stated is desperately needed to address Michigan’s electricity needs. Demand response offers the promise to deliver more than 2,700 MWs of Michigan’s local resource requirement to meet peak electricity demand. These MWs are the least expensive, most reliable on-peak, and undeniably cleanest local resource available to Michigan today.
Let’s look at the dollars and sense:
Michigan utilities say no to these benefits and the MPSC goes right along with them. Michigan regulated utilities oppose demand response being fully unlocked in the state of Michigan unless they’re the ones being paid for it. The most galling part of this ruse is that the utilities are paid the MPSC-regulated rate for capacity for their demand response MWs while paying a fraction of it to their customers. In the case of Consumers Energy their demand response program pays $25,000 per MW per year to their customers (while passing through unnecessarily onerous penalties and operational requirements) . . . and the MPSC allows them to pocket the difference. Perhaps most stunning of all is that when Michigan regulated utility demand response is asked to actually deliver its capacity it performs at about 60% (put differently, the regulated price of capacity being paid to utility demand response is actually $105,241/60% = $175,402, which is the highest price paid by a state for capacity in the country).
Yet, to its credit the MPSC has taken up the challenge of unlocking the benefits of demand response. It has made progress. But the progress is slow and bogged down in politics while Michigan customers await their taxi in a long line, likely missing the meeting that they came to Michigan for in the first place. The MPSC can and should immediately lift the 10% cap on demand response, treating it differently than competitive retail supply, and deliver $260 million in annual savings to customers. Dozens of other states have done just that while unlocking billions of dollars in proven annual savings to customers, improving grid reliability, and ensuring a cleaner energy future for their communities.
Let’s go!