This week, Governor Whitmer signed into law a suite of clean energy policies that set Michigan on a path to a decarbonized power system. The new laws include some of the most significant energy policy reforms since the establishment of the state’s renewable portfolio standard in 2008 and electric integrated resource planning in 2016.
At the core of the bill package is a 60% renewable energy target by 2035, as well as a 100% clean energy standard by 2040 —among the most aggressive targets in the nation. The policies promote investments in the advanced energy solutions needed to reach those goals, including energy waste reduction, renewable energy, and energy storage to diversify the state’s energy portfolio, reduce reliance on imported energy resources, and improve the resilience of the state’s power system to extreme weather. To improve social equity and environmental justice, the Michigan Public Service Commission (MPSC) will be required to consider environmental justice and affordability within the utility’s integrated resource plan (IRP) cases. The bills go into effect in mid-February 2024.
A report by 5 Lakes Energy, Evergreen Action, and the Michigan Energy Innovation Business Council found that the passage of these clean energy policies will lower household energy costs by about $145 a year, draw $5.3B in federal funding from the Inflation Reduction Act and an additional $7.8B in investment by 2050, and stimulate the creation of thousands of new jobs on top of the over 120,000 clean energy jobs Michigan already has.
Several items, some of which are highlighted in the summary below, will be implemented at the MPSC through various proceedings and rulemakings. Advanced Energy United will be closely engaged with in-state partners to clarify certain provisions and to participate in MPSC cases.
SB 271 – 100% Clean Energy Standard, 60% Renewable Portfolio Standard, Storage Target, Distributed Generation Cap Increase
Renewable Energy Standard
Timeline: By mid-February 2025, all electric utilities will be required to file biannual Renewable Energy Plans to demonstrate how they will meet the renewable energy targets of 15% by 2029, 50% by 2030 and 60% by 2035.
Eligible Sources: Renewables are defined to include wind, solar, energy storage, energy waste reduction credits, biomass (landfill gas, methane digesters from certain feedstocks, existing biomass systems, and biomass from trees and wood derived from sustainably managed forests), geothermal energy, and geothermal heat pumps.
Clean Energy Standard
Timeline: Beginning in 2035, utilities must acquire 80% of their energy from clean energy, ratcheting to 100% by 2040. In 2028, as part of their IRPs, utilities will include a plan to meet the Clean Energy Standard which will be reviewed every four years. The plan can be amended in the interim, with processes in place for stakeholder input.
Eligible Sources: Clean energy is defined to include all renewable energy sources as well as nuclear power and natural gas with at least 90% effective carbon capture and storage.
To encourage the development of in-state renewable energy, the policy requires that at least 95% of renewable energy credits (RECs) be procured from in-state resources for the state’s two largest utilities, while 5% may be procured from out-of-state bundled energy and capacity. Additionally, the state’s two largest industrial customers, Dow Chemical and Hemlock Semiconductors are able to report their voluntary out-of-state renewable purchases to Consumers Energy and DTE Energy, which may contribute to up 5% of the REC target.
Utility-Scale and Distributed Energy Storage
With the passage of SB 271, Michigan became the first state in the Midwest to establish a target for energy storage capacity. The state’s utilities must procure 2,500 MW of utility-scale energy storage capacity by 2030. Compliance will be handled through the utilities’ regular IRPs, with additional yearly reports to the MPSC detailing centralized and distributed energy storage systems in each utility’s territory. The law also requires the MPSC to complete a study of long-term and multiday energy storage systems within a year of the law’s effective date.
Eligible Sources: Eligible storage technologies must be capable of absorbing, storing, and redelivering energy, and excludes fossil fuel storage and power-to-gas.
Distributed Generation Program Cap
SB 271 raises the cap on each utility’s distributed generation (DG) program from 1% to 10% of peak load. At least half of the program capacity is reserved for systems ≤20 kW; the remaining capacity is reserved for systems >20 kW but not more than 550 kW. SB 271 also removes a requirement that generation meters be installed for systems >20 kW. The MPSC will implement these changes.
This increase in each utility’s DG program cap will enable more customers to connect their rooftop solar systems to the grid, allowing customers to save money on their energy bills, expanding the market for rooftop solar providers and creating more jobs for solar installers.
HB 5120 & HB 5121 - Renewable Energy and Energy Storage Permitting Reforms
As in many Midwest states, restrictive siting and permitting at the local government level has been a major barrier to renewable development in Michigan. HB 5120 and HB 5121 aim to address these challenges by creating a process for certifying utility-scale solar, wind and storage projects through the MPSC, balancing a robust community input process with the need for consistency and scientific prudency in the renewable development application process.
- provide standard setbacks, restrictions and considerations for renewable developments; and
- allow developers seeking permits for wind projects greater than 100MW and solar or battery storage projects greater than 50MW to seek certification through the MPSC in cases where:
- localities lack compatible ordinances;
- permits are denied or delayed for projects meeting the basic considerations outlined by the law; or
- local permitting and zoning rules are changed mid-application.
If a local zoning authority has adopted a compatible ordinance, developers are required to work with local authorities to receive approval for proposed projects.
The law also requires community benefit agreements that includes a direct payment to each host community of $2,000 per MW of nameplate capacity of the proposed project and requires the applicant to financially support the participation of local governments in the approval process before the MPSC.
Within one year, the MPSC will establish rules for implementing the new siting and permitting processes, so it is unclear when project applications can begin to be accepted.
SB 273 – Energy Waste Reduction
SB 273 expands the state’s energy waste reduction (EWR) policy to all utilities operating in the state, not just investor-owned utilities, effectively ensuring that all Michiganders and businesses have access to programs to reduce their energy usage.
Energy Waste Reduction Program Expansion
The policy raises annual minimum energy waste reduction targets from utilities to 1.5% for electric utilities and 0.875% natural gas utilities beginning in 2026. Average measure life for electric and gas EWR programs are 8 and 10 years, respectively, with 67% of gas program budgets required to be spent on reducing space heating load. Additionally, performance incentives were revised to encourage utilities to achieve savings higher than their minimum targets and pursue deeper energy-saving measures. Utilities will need to file new EWR programs by mid-February 2025.
SB 273 enables utilities to voluntarily offer electrification plans, which they may recover the costs of. Only consumer-owned and natural gas utilities may claim efficient electrification energy savings towards their annual energy savings targets.
SB 502 - Michigan Public Service Commission Reforms
SB 502 brings reforms to utility regulation and requires the MPSC to conduct an assessment of the potential for electrification of transportation, buildings, and industry every four years, beginning in 2025.
SB 502 brings many changes to utility IRP cases designed to improve equity and access. Changes include:
- requiring utilities to study the projected greenhouse gas emissions from proposed generation assets and conduct an environmental justice (EJ) impact analysis;
- requiring the MPSC to consider affordability and compliance with labor provisions in approving IRPs; and
- charging the MPSC with conducting four public hearings around the state aimed at expanding accessibility transparency and participation in ratemaking for low-income households, consumers with high energy burdens and impacted communities.
The Michigan Legislature and administration of Governor Whitmer deserve praise for the monumental accomplishment these clean energy policies represent. Collectively, these policies will work to invite investments and jobs to the state, lower energy costs and build a modern clean energy power system.
United will be working with the stakeholders, policymakers, and the MPSC to best implement this new law and support achievement of the state’s clean energy goals. We will specifically be looking for opportunities to advance priorities for industry which may have been objected to or omitted from these bills, including issues related to ownership of renewable energy and energy storage projects, community solar, virtual power plants, and voluntary renewable purchases, to name a few.
Learn more about Advanced Energy United’s advocacy work in Michigan.