By Sam Gomberg, senior energy analyst at Union of Concerned Scientists
DTE Energy, Michigan’s largest electric utility, came up short in its attempt to justify charging customers nearly a billion dollars for a proposed new natural gas plant. Expert analysis shows that a mix of clean energy resources would meet customers’ power needs for about $340 million less than the cost to build and run DTE’s proposed plant.
DTE is seeking approval from the Michigan Public Service Commission (MPSC) to charge ratepayers $989 million for a new combined cycle natural gas plant in New China. According to the plan, construction would start in 2019 with the plant scheduled to come online in 2022 as the Belle River coal plant at the same site retires. Before DTE can charge its customers for the new project – along with a hefty profit on its capital expenditures – it must convince the MPSC that its plan is in the best interests of its customers.
After digging into the specifics of DTE’s proposal and the company’s analysis that purportedly supports it, several intervening parties (including the Union of Concerned Scientists) have raised serious doubts that the analysis fairly evaluated clean energy options on a level playing field. What’s more, our own analysis shows that a combination of renewable energy, energy efficiency, and demand response can meet DTE’s needs while coming in at $339 million less than the proposed natural gas plant.
A cheaper, cleaner path forward for DTE customers
Analysis submitted by us and our partners (the Environmental Law and Policy Center, Vote Solar, the Ecology Center, and the Solar Energy Industries Association) shows that a combination of additional renewable energy, energy efficiency, and demand response can meet DTE’s needs at lower cost while supporting more economic development and contributing to a more diverse, lower risk resource portfolio for DTE customers.
Doubling DTE’s commitment to renewable energy – from its plan to achieve just 11% in 2030 to 23% under our plan – with a combination of wind and solar resources, increasing DTE’s energy efficiency programs to achieve 2% annual savings, and adding a small amount of demand response to help reduce peak demand could meet DTE’s identified needs, and maintain reliability, at lower cost than the proposed gas plant.
The overall cost to build this portfolio of clean energy resources is about $340 million less than the cost to build and run DTE’s proposed natural gas plant. When we modeled this clean-energy portfolio using DTE’s own long-term modeling tool, the results show cumulative savings of over $2 billion through 2040 compared with DTE’s long-term resource plan due primarily to significant reductions in DTE’s capital expenditures and fuel expenses.
DTE’s long term plan would result in just 11% of the company’s energy coming from renewable energy and would continue the company’s addiction to fossil fuels – putting its customers and our environment at risk. (“Other Renewables” includes biomass and small-scale hydropower.)
Doubling DTE’s proposed commitment to renewables to achieve a still-modest 23% renewable energy diversifies the company’s energy portfolio, reduces its over-reliance on fossil fuelsand will save its customers an estimated $340 million.
The charts above show DTE’s proposed energy generation mix in 2030 compared to our analysis using increased investments in renewables, efficiency and demand response. Even under our more aggressive renewable energy scenario, DTE is still reliant on fossil fuels for nearly 60% of its energy needs – 37% and 22% for coal and natural gas respectively. This level of fossil fuel reliance is still far too high given the urgent need (and demand from DTE shareholders) to reduce carbon emissions and leaves DTE customers far too exposed to the risks associated with future fuel price and regulatory uncertainty.
But under DTE’s proposed plan, the utility would rely on fossil fuels for a whopping 71% of its energy needs. This level of over-reliance should raise big red flags with DTE customers, the MPSC, and all Michiganders who value a low risk electricity supply, clean environment, or stable climate.
DTE’s own analysis falls short
In addition to our analysis showing how clean energy can beat DTE’s natural gas proposal, analytic errors, inconsistencies, inaccurate assumptions about the expected cost and performance of clean energy options, and blatant biases towards building this plant over other alternatives have been identified. Taking all these flaws together, it’s clear DTE inappropriately skewed its analysis in favor of natural gas over cheaper, cleaner alternatives like renewable energy, energy efficiency and demand response. DTE’s shoddy analysis strips away any confidence in its claim that spending $1 billion to continue its over-reliance on fossil fuels is a good deal for its customers.
The list of issues with DTE’s analysis is long, but the highlights include:
- Making overly-optimistic assumptions about the future price of natural gas;
- Failing to take full advantage cost-effective energy efficiency potential;
- Failing to take advantage of cost-effective demand response potential that would lower peak demand and offset the need for new power plants;
- Making inaccurate assumptions about the availability, cost, and performance of renewable energy options;
- Failing to account for key risk factors such as price spikes in natural gas fuel prices;
- Failing to consider emerging technologies like battery storage as part of the solution; and
- Failing to adequately consider resource options outside of DTE’s service territory.
DTE has not conducted a fair and robust analysis of the options available to meet customers’ energy needs. Taken together, the evidence suggests that the analysis was specifically designed to support DTE’s desired conclusion that Michiganders “need” this $1 billion natural gas plant, despite real-world evidence to the contrary.
In all, DTE’s analysis and justification for spending $1 billion in customer dollars on a new natural gas plant simply doesn’t hold water. The evidence – $340 million worth – points towards renewables, efficiency, and demand response as the solutions that are going to cost-effectively meet customer demands while also reducing emissions. Because DTE’s proposal is not in the best interest of its customers, the MPSC should reject it and send them back to the drawing board.
Sam Gomberg is a senior energy analyst and an expert on responsible energy policies that support the development of renewable energy and energy efficiency resources.
This article was first published on the Union of Concerned Scientists blog, and has been reprinted with permission.
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Thank you for this wonderful analysis. Here in New York State, methane-powered microgrids are on the drawing board. I wish a similar detailed financial analysis could be done for each one of those impending microgrids, which will be powered by frack gas piped in from Pennsylvania.