A Few Details Michigan's Legislators Might Want to Consider
Michigan’s nitwit media have been gushing over the announcement last Thursday that Switch, LLC will purchase the erstwhile Steelcase Pyramid southwest of Grand Rapids and convert the site into one of their state-of-the-art SuperNAP cloud computing data centers. The ‘information economy’ has been touted as Michigan’s future by no less than Michael Dell. He was in Detroit to address the Economic Club after his company purchased EMC Corporation, another major data center operator with three facilities in Michigan, in a blow out $ 67 billion buyout. Switch SuperNAP promoters, notably The Right Place, Incorporated, are touting 1,000 new jobs in Gaines Township, but this should be regarded wth the same skepticism as any other MEDC clone employment prediction. No one has said anything about financing, but there is good reason to believe that Michigan will be asked to ‘participate’ here as well.
Steelcase vacated their distinctive Corporate Development Center in 2012 and sold it to to Norman Properties in May. Norman Properties, in turn, has agreed to sell this property to Switch LLC, pending the approval of State tax breaks. Those tax breaks have been introduced in the Michigan House by Representatives VerHeulin, Yonker, and Schor. Identical tax break legislation has been introduced in the Senate by Senators Hildenbrand, Schuitmaker, and MacGregor. These legislators are targeting quick passage in the legislative session which convenes after their Thanksgiving break. They might want to consider a few details before they lunge further forward.
This being RightMI, you might think this post is about those tax breaks. You would be wrong. There is actually a critical flaw in this project which will injure Consumer’s Energy electricity customers all across West Michigan. A couple of other issues exist as well, but they pale in comparison to the electricity consumption of this project. Those tax breaks are a lost cause in American politics today – not even worth protesting.
MITA gave another $ 25,000, new total circa $ 5.42 million
Michigan Aggregates Association gave $ 20,000, their first act of obeisance
PVS-Nolwood gave $ 25,000, new total $ 75,000
Operating Engineers Local 324 gave $ 35,000, new total $ 135,000
The motives of three late contributors are pretty obvious. PVS-Nolwood is a chemical company in Detroit specializing in acids and their disposal. As [a very profitable] part of this business, they unload neutralized acid byproducts on wastewater treatment plants as clarifiers. Those wastewater treatment plants just happen to be owned by various units of government which, in turn, use their water billings to rape the public at large. PVS-Nolwood have a long history of sucking up to Michigan’s power elites to further their very lucrative business interests.
So how should average middle class Michiganders engage in this electricity debate? What should they demand in the 2015 legislation on electricity? Can they prevent the titans from looting their family budgets?
First and foremost, Michiganders should demand an end to hybrid deregulation. All electricity consumers should be under the same regulatory scheme, with equal options to escape. No favoritism. This aligns the interests of politically potent, large electricity consumers with those of the average Michigander. This creates an effective counterbalance to the political power of the utilities; political power purchased with your electricity payments. Even full regulation is preferable to our current hybrid deregulation scheme.
Michiganders should further demand full deregulation of our electricity market. As regulated entities, utilities have a ‘cost plus’ mindset which relentlessly drives prices higher. Regulatory bodies limit themselves to dampening this drive for higher prices, but do not drive efficiencies which would genuinely control energy costs. Competition-driven efficiencies are very important to Michigan’s economy, which still has a significant, energy-intensive industrial base. Also Michigan’s utilities have not demonstrated any special competence operating their electrical power stations, so competition in the supply of electricity will promote best practices there and lower costs as well. Ultimately, a deregulated grid properly managed is more tolerant of supply shocks because more actors will be supplying the electricity.
The RPS should not be renewed at any level. Renewables should not be forcibly subsidized by any ratepayers, overtly or covertly. The current PA 295 regulatory scheme has residential electricity consumers subsidizing renewables through skyrocketing rates, while large consumers escape this burden. As renewable energy sources become cost effective, they will be welcomed by all parties.
If environmental wackos want their own electricity to come from RPS renewables, let them pay the full cost including base load backup costs. Most renewable sources are intermittent and require expensive base load backup capacity for periods where they cannot generate electricity. The Midwest Independent Transmission System Operator (MISO) historical record shows that Michigan wind power, by far the most significant current RPS component (883 turbines, about 58% of RPS power), was only available 31.5% of the time (termed ‘capacity factor’) during 2011 and 2012. During two months, July and August of 2011, wind was available only available 16% of the time. Most evaluations of the cost effectiveness of wind and solar generation pointedly neglect the costs of base load backup capacity to keep the lights on. Essentially, wind power capacity has to be backed up by 100% of its rated capacity with fossil-fueled base load capacity to prevent blackouts during zero wind periods, so why bother install wind power (or solar, for that matter) in the first place? Ratepayers subjected to RPS get to pay the capital costs for twice the generating capacity they actually need.
Fortunately, the greed political acumen of DTE and CMS Energy is coming to your rescue. Both utilities are seeking full reregulation of Michigan’s electricity market. They are issuing thinly veiled threats about brownouts ‘reliability’ of supply unless Michigan forces the fortunate 10% back into our utilities’ waiting arms. And with President Obama’s hobbling of coal-fired power stations ramping up, they actually have a point. So the fortunate 10% will have to seriously reengage in Michigan’s electricity rate debate or their electricity costs will skyrocket.
Things may have quieted down in Michigan after Proposal 3’s demise in 2012, but President Obama’s EPA were furiously developing their ‘War on Coal’ to dramatically increase the cost reduce pollution of electricity generation. The Mercury and Air Toxics (MATs, also known as MACT) rule requires scrubbers on all coal-fired power plants nationally, costing something north of $ 1 million per steam boiler. The Cross State Air Pollution Rule (CSAPR) requires Michigan coal-fired power plants to reduce their thermal efficiency during peak summertime generating periods to reduce oxides of nitrogen at a yet to be determined cost.
In 2014, EPA’s ‘Cooling Water Intake Structures’ rule finally went into effect after a decade of legal wrangling, requiring that Michigan’s electrical utilities take some very expensive steps over 8 years to protect the Great Lakes’ beloved zebra mussel and round goby populations.
At the end of 2014, EPA imposed newly restrictive rules on the disposal of coal combustion residuals (CCRs), commonly known as coal ash, from coal-fired power plants. Almost unique in the history of Federal regulation, EPA admitted in their final CCR rule that it had a negative cost-benefit ratio. Fly ash, the most abundant CCR, is actually a remedy for the alkali-silica reaction (ASR) which causes premature failure of many MDoT concrete structures. So EPA managed to simultaneously increase Michigan’s cost of electricity generation and reduce the lifespan of our roads and bridges. An Obama ‘two fer’.
Taken together, these circumstances will trigger a wild four-way donnybrook pitting electrical utilities, electricity consumers, and environmental wackos against one another later this year. But this is only three parties, so why do you say four-way? Large industrial consumers have substantially escaped the consequences of PA 295, while smaller Michigan consumers – including residential consumers – have experienced the fifth highest rate of electricity cost increases in the nation. These two electricity consuming groups’ interests do not coincide.