WRI’s fact sheet series, How States Can Meet Their Clean Power Plan Targets, examines the ways states can meet or even exceed their standards under the CPP while minimizing compliance costs, ensuring reliability, and harnessing economic opportunities. This post explores these opportunities in Michigan.
As part of the Clean Power Plan, the U.S. EPA requires Michigan to reduce its power sector emissions by 33 percent below 2012 levels by 2030. New analysis shows the state can go even further while harnessing economic opportunities.
By following through on its successful existing clean energy policies and improving the way it uses its existing power plants, Michigan can reduce existing power plant carbon dioxide emissions 36 percent below 2012 levels by 2030, surpassing its mass-based target under CPP.
Michigan’s Power Sector is Already Getting Cleaner
Michigan’s power plant emissions have already fallen 17 percent between 2005 and 2012 due to declining electricity demand and increased use of natural gas and renewables. This trend is expected to continue with planned retirements of aging coal plants and increased deployment of renewable energy. The state’s renewable energy standard has helped double renewable capacity between 2010 and 2013 with the addition of nearly 1,000 megawatts of wind capacity. The cost of wind has rapidly declined in the state over the past several years; utilities have recently secured long-term contracts at prices around 20 percent lower than the average overall cost of providing Michigan’s electricity.
How Michigan Can Exceed Its Target
Michigan can build on progress already made and achieve 98 percent of the reductions required under its mass-based emission target by following through on its existing clean energy policies. Michigan can make up the small remaining gap, and even exceed its target, by making better use of its existing power plants. By taking the four steps below, Michigan would exceed its CPP target for existing power plants by 9 percent:
1. Meeting its energy efficiency resource standard: Requires annual electricity savings of 1 percent of the previous year’s sales from 2012 forward.
2. Meeting its renewable energy standard: Requires 10 percent of sales to come from renewable sources by 2015, and the same amount of credits to be maintained going forward.
3. Increasing the use of existing natural gas plants. Combined cycle plants generated less than one-fourth of the electricity they were capable of producing in 2012. Running existing plants at 75 percent could cut emissions further.
4. Increasing coal plant efficiency. Low- and no-cost operational improvements and best practices at existing coal plants could cut emissions further.
Michigan has the opportunity to go even further by expanding its clean energy policies, which both have targets that remain level after this year. Michigan could nearly double its required reductions by increasing the renewable standard from 10 percent of sales in 2015 to 20 percent of sales by 2022 and the efficiency standard from the current 1 percent of sales to 2 percent beginning in 2019, in addition to taking steps 3 and 4 above.
Maximizing CPP’s Economic Benefits in Michigan
Strategies to cut emissions cost-effectively and harness economic benefits through the CPP include market-based carbon pricing programs — like a cap-and-trade program or carbon tax — and increasing investment in energy efficiency and renewable energy.
- Michigan’s energy efficiency programs resulted in $1 billion in lifecycle savings in 2013. Efficiency is Michigan’s most cost-effective CPP compliance strategy, delivering $4-$5 in savings for every dollar invested.
- Michigan’s renewable energy standard resulted in $3 billion in in-state investments, which support thousands of jobs in construction, manufacturing, installation, maintenance and repair, and other sectors.
- Michigan could take in $160 million every year from 2022-2030 by expanding its clean energy polices and selling surplus carbon credits to other states (assuming a $10 per short ton price of interstate emission allowances). The CPP encourages states to trade credits without formally joining a trading program.
Michigan Should Move Forward, Not Scale Back
Michigan is in a strong position to comply with CPP while taking advantage of economic opportunities in clean energy. Michigan’s existing policies are cleaning the state’s power sector and reducing harmful air pollution while saving money for residents. By expanding these policies, Michigan can scale up their benefits and bring in new revenue to the state by exceeding its Clean Power Plan targets. Repealing or weakening these policies, as has recently been proposed, could make Clean Power Plan compliance more difficult and expensive.