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Energizing the Economy

Fifty-four billion dollars could buy 3,884,892 diamond rings from Tiffany & Co. It could also buy 21,600 seven-seat private jets or 54,000 Park Avenue apartments in Manhattan. President Barack Obama chose to spend that money in a different way – his stimulus plan dedicates $54 billion toward developing and utilizing renewable energy.

In the past, the United States has been criticized for its failure to capitalize upon its abundant natural resources and educated workforce in order to advance the use of renewable energy. Some have claimed the United States cares more about its economy than the environment. In a 2005 Associated Press Article, Britain’s ambassador to the United Nations, Sir Emyr Jones Parry, commented on the United States and the environment. “It consumes almost a quarter of the world’s energy, more than China, Russia and Japan combined,” Parry said. He added that there was “no need for a trade-off” between helping the environment and supporting the economy, a problem the United States had cited in its refusal to ratify an agreement limiting greenhouse gas emissions.

 

Wind MillWith a new administration in office, however, the country seems to have turned a new page on policy and the environment. In the coming years, the United States will attempt to play catch up with the world leaders in renewable energy.

This change in attitude is being seen in new legislative proposals across the country. For example, many states have adopted a policy called a renewable portfolio standard, which mandates that a certain percentage of energy produced be renewable by a target date. In Michigan, the renewable portfolio standard requires that 10 percent of the state’s energy come from renewable sources by 2015. Other states have set more ambitious, long-term policies. Illinois and Minnesota demand 25 percent renewable energy by 2025.

The most prominent of current environmental proposals in Michigan is the feed-in tariff, which is based on the concept of net-metering. Net-metering is a plan that applies to consumers who own their own sources of renewable energy. If excess energy is generated by one of those sources, that energy is returned to the power grid and the consumer receives credit for it. This saves the consumer money and the environment the stress of producing more energy.

For an example of how this would work, consider a household that powers itself with solar energy. Throughout the year, different amounts of energy will be generated due to changes in the weather. On a mild, sunny day, more energy would be generated than could be used. Under net-metering, the utility company would be obligated to give credit for that energy to the household.

Net-metering applies to any source of renewable energy, including solar, wind, water, geothermal or biomass. The feed-in tariff would be based on this idea. “The feed-in tariff is a rather clunky name for a rather elegant policy,” said former Michigan Rep. Kathleen Law, who proposed the tariff in 2007. “It has not had a hearing, has not had any real interest at all until this year.”

Cory Connolly is a senior fellow on energy and the environment for the Roosevelt Institution, a student think tank at MSU. The Roosevelt Institution allows MSU students to be active members in the process of making policy decisions in Michigan. Connolly has been working with Michigan legislators for several years, focusing on the issue of renewable energy. The Roosevelt Institution has given him the opportunity to meet with state representatives as well as experts in areas such as wind energy to discuss policy.

Connolly described the feed-in tariff as “net-metering on steroids.” The international relations junior said that while net-metering is intended to offset individual energy use, the feed-in tariff is intended to actually make a profit for consumers. “You would connect a wind turbine directly to the grid at your house and you would receive a rate which is set by the state higher than normal energy rates, so you’re going to make a profit for every kilowatt that you use,” Connolly said.

Energy Efficient Light BulbThe additional cost is spread out over the entire consumer base, so instead of having utility companies absorb that cost, the price of energy goes up a small amount for everybody. Connolly said he has seen estimates that the feed-in tariff would cost anywhere from $1.80 to $3 a month, meaning consumers would pay about an extra $22 to $36 a year on their energy bills.

Twenty-two dollars doesn’t seem like a lot when it comes to preserving the environment, and Connolly added that one of the reasons the feed-in tariff is receiving significant opposition is a misunderstanding because of its price tag. “A lot of people think they’re going to really, really raise energy prices,” Connolly said.

For that reason, many consumers are reluctant to support the tariff, especially in times when everyone is cutting corners to save money. The tariff also faces resistance from utility companies, who will lose business if consumers are generating their own energy.

Unfortunately, there is no way to compromise on this point. Creating an alternative to utility companies is the point of the legislation. With the feed-in tariff, energy would be generated from clean, renewable sources, rather than limited sources that are harmful to the environment. “Utility companies, they would be cranking back on the coal that they’re burning to heat water, to make steam, to turn generators, to create electricity,” Law said.

Ironically, the legislation also faces opposition from extreme environmentalists, who refuse to support the bill unless it calls for the most ambitious action possible. Connolly said this can be a huge impediment to getting legislation passed, because compromised bills can often be important stepping-stones toward more explicit action.

The feed-in tariff was successfully implemented in Germany in 2004, where more than 14 percent of the energy produced is renewable, as well as in Denmark, Spain, France and South Africa.

Connolly said that while he believes a German-style feed-in tariff would be ideal for Michigan, a watered-down version may be more realistic. This less-aggressive tariff would be based on communities rather than individuals. So whereas in Germany it is possible for either individuals or communities to contribute renewable energy and make a profit, this legislation would limit only communities to doing so in Michigan.

Solar Panels“You would have a community that wanted to invest in a wind turbine,” Connolly said, “but the initial start-up costs are so high that one person individually might not be able to handle it, so you would share the start-up costs.” This would limit the environmental impact of the legislation because individuals and single households would not have the opportunity to benefit from the policy, and therefore would have less incentive to set up their own sources of renewable energy. Instead, they would have to be involved with a local community. On the other hand, it does make the idea of installing a renewable energy source less intimidating.

Legislators have been skeptical about the idea in the past, but with the tariff being reintroduced in 2009 by state Rep. Lee Gonzales (D-Flint Township), Law said interest is growing. “We’re very pleased with the reception that we’re get
ting,” Law said.

The feed-in tariff is also getting attention from members of the MSU community. At a September 2008 seminar, Paul Gipe, a writer and wind energy-advocate, discussed feed-in tariffs with an audience at the Kellogg Center. In addition, MSU’s Land Policy Institute features a discussion forum about feed-in tariffs on its Web site.

Geology freshman Angela Marchand said she thinks the feed-in tariff is a good idea, especially in economic terms. “Yes, it does take money,” Marchand said, “but it will be a big incentive if they [consumers] can get paid more than what the energy costs. It might jump start the economy in a way.”

Law has also set her sights on the economy, especially in terms of jobs. “This is a job bill,” Law said. “It has been proven to be the most aggressive job-builder and re-invigoration of manufacturing base policy yet devised.”

In Germany, 186,000 jobs were created from the feed-in tariff, and Law hopes the tariff will have a similar result in Michigan. “We gotta build 1.2 million wind turbines nationally,” Law said. “Where would they get the steel? How would they get that steel moved? Where are the electricians? Where are the millwrights? Where’s the welders? They’re here. That is southeast Michigan.”

Law added that the feed-in tariff would create jobs that are sustainable, which would help to prevent the skilled professionals from leaving the state.

In a speech this April at the state capital, Dr. Subhendu Guha, executive vice president of United Solar Systems Corporation in Troy, MI, described what would happen if the feed-in tariff is not passed in Michigan. “We’ve got to have it,” he said. “If we don’t have it, what is going to happen is that the jobs that we are creating in Michigan, the jobs that already existing in Michigan, are going to go away.”

Law agreed that without the feed-in tariff, Michigan will face serious consequences. “The [energy] monopolies want to be monopolies forever, but it’s not sustainable,” she said. “The children of all species are at risk. I resent that. I object.”

“We are going to miss the wave,” Law said. “Let’s get to work.”

 

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