Powering the Mitten: What mix of fuel will power Michigan's future?

When it comes to electricity, it's all the same to us at the end of the plug. We don't know the origin story of every electron powering our smartphone. We just want to plug it in and recharge it, or turn on the lights

But the truth is, electricity in Michigan comes from a variety of sources — from the billowing clouds of coal-fired power plants, to the enormous nuclear reactors on Lake Erie, to sleek wind turbines spinning atop farm fields in Michigan's thumb.

Today, Michigan gets most of its electricity from coal and nuclear power. But a perfect storm of economic and regulatory issues means many of Michigan's oldest and dirtiest coal-fired power plants are expected to retire in coming years. And new nuclear plants are very expensive to build. Natural gas, which Michigan has in abundance, is expected to take center stage in the race to replace coal. And renewable energy will play a bigger role — though how much bigger is uncertain.



Issue Media Group (Model D's parent company) spoke recently with Nick Khouri, senior vice president for corporate affairs at DTE Energy, to discuss how the utility is planning for the big switch from coal and what types of power sources might be getting those electrons to our devices in the future. 

Issue Media Group: Michigan is facing the potential retirement of 32 aging coal-fired power plants—3,532 Megawatts of capacity—in coming years. Our current electricity power mix relies pretty heavily on coal. How is that portfolio likely to change in the coming years?

Nick KhouriNick Khouri: It’s a really critical time for us as we look forward to the new portfolio. As a state, we will be investing over $15 billion dollars to completely redo the way we generate electricity over the next 10 to 15 years. As we begin this transition, we're looking for enough flexibility to be able to respond to the changing market and technologies so as to minimize costs to our customers.

IMG: Is Michigan going to have enough generation capacity in coming years?

Nick Khouri: For a decade or more in Michigan, and in other parts of the country, we've had a surplus of electricity generation. For a variety of reasons, that surplus is turning into a shortfall over the next few years, and the way we respond as a state is going to be critical to making sure that we have the reliability our customers deserve. MISO, the Midcontinent Independent System Operator, is saying that as early as 2016 we will face a capacity shortfall, and we will need to invest in additional generation. 

IMG: What steps is DTE Energy taking to ensure it has enough reliable capacity for its customers?

Nick Khouri: We are going to continue to build robust new generation as we retire coal plants. We recently announced purchase of a gas-fired plant and we will continue to both build and buy, whenever possible, more generation capacity to meet this expected shortfall. That will change our portfolio.

Today maybe 10 percent of DTE's generation is nuclear and very little is natural gas, and most of it is coal. Between now and 2030, that will change dramatically. Nuclear will stay probably about the same, but gas will probably go up to 50 percent. Coal will go down significantly. There will be more renewables, more gas, and less power generation through coal plants. 

Michigan Energy Mix Facts

• Michigan is # 1 for natural gas; the Mitten state has more underground natural gas storage capacity than any other state in the nation.

• Michigan has three nuclear power plants: Enrico Fermi Nuclear Generating Station in Monroe, Donald C. Cook Nuclear Power Plant in Bridgman, and Palisades Nuclear Power Plant in South Haven, totalling 4008 MW of capacity. Nuclear power provided 30 percent of the state's electricity generation in August, 2014.

• Michigan burned coal to obtain just over half (55 percent) of its net electricity generation in 2014.

• Most of the coal Michigan uses is transported by rail from Wyoming and Montana.

• Since 2008, Michigan has built 1600 MW of renewable capacity, most of it wind.

• Biomass powered 42 percent of Michigan's renewable electricity generation in 2013.

Source: U.S. Energy Information Administration, Michigan Renewable Energy Certification System 

 

IMG: What are the prospects for the various types of renewable energy in Michigan's future mix?

Nick Khouri: Let's start with wind. The price of wind has come down sharply for the last 5 or 6 years, from $100 to $50 per megawatt-hour, for a variety of reasons having to do with technology and the way we run the wind plants. In the future portfolio, there’ll be an increasing share of wind power.

As for solar, we have to approach it with flexibility. You have to be open to any technology, but certainly solar in Michigan at this point does not make economic sense from a customer perspective. Customers would be charged 4 to 6 times more for solar energy than for wind energy. Unless there's a dramatic change in technology, it makes much more sense for our customers, and for the state, to be investing in wind than in solar.

Nuclear is a future option. We currently have a large nuclear plant and we are applying to the federal government for a second plant somewhere down the road. The initial construction cost of a nuclear energy plant is very, very large, and so we don’t see additional nuclear in the near-term. But given changes in technology and in desired carbon reduction, nuclear down the road is a viable option.

Biomass is very small in Michigan. There is some landfill gas generation, and it makes sense, but it will never move the needle as far as a generation source in Michigan.

IMG: How much of our power portfolio can we expect to come from non-fossil fuels in the future?

Nick Khouri: The good thing about a nuclear plant or a coal plant, is it’s there 24/7 whenever you need it. Wind and solar are not there all the time. You have to be careful how much wind you put in the portfolio, both from a cost perspective and a reliability perspective.  There is more opportunity with wind, but you quickly run into limitations both because of the nature of when it runs and the relative cost of siting.

What is most optimal today will change, because technology changes, the markets change and regulation changes. We're very resistant to saying, “The optimal wind portfolio over the next 10 years is X or Y.” You will see more in all likelihood, but we're resistant to locking in any percentages. 

Having diversity in the portfolio is so important. If you rely on a single source—too much coal, too much gas, too much anything—you're going to run into problems somewhere down the road when the markets, regulation or technology changes. We need to keep a diverse portfolio. 

Stay tuned in early January as we delve into how the state as a whole is dealing with the challenge of ensuring adequate electricity supply as aging coal plants get ready to retire.