Superior Watershed Partnership

The Presque Isle power plant near Marquette, Michigan.

Michigan’s U.P. goes head-to-head with its energy future

Across the country, utilities, regulators and government officials are grappling with the complex question of how to replace the energy from retiring power plants.

On Michigan’s Upper Peninsula, that transition is playing out on a much more urgent timescale.

“We’re in a crisis right now,” said state Rep. Scott Dianda, who represents an area northwest of Marquette on the Keweenaw Peninsula. “We need to have reliable power up here. That’s the number one thing — reliable, reasonable rates for power.”

Dianda’s colleague, Democratic state Rep. John Kivela from Marquette, added: “It is our biggest issue in the Upper Peninsula, without question. It’s that dire.”

A mix of regulatory agencies, nonprofits, politicians, utilities, businesses and residents all have a stake in the next chapter, as We Energies winds down operations at the coal-fired, 450 MW Presque Isle Power Plant in Marquette — the biggest source of power in this 16,000-square-mile wilderness.

The plant will be closed “as soon as practically possible,” according to the Midcontinent Independent System Operator (MISO).

In the meantime, experts and elected officials are planning a roadmap that many hope will feature more localized, distributed sources — a departure from the centralized, expensive and transmission-heavy system of today.

All of this is piled on a region of the state with some of the highest electricity rates in the country — and it’s going largely unnoticed by the general public there.

A wide range of representatives — from the Governor’s office to local nonprofits — are scheduled to meet later this month in Marquette at an energy summit to grapple with these questions.

Transmission opposition

As Presque Isle — which is one of multiple Michigan coal plants staying open under a System Support Resource agreement with MISO — inches closer to retirement, one option is to expand transmission capacity from Wisconsin (which is closer to the region geographically than the rest of Michigan).

Kivela, however, said that would be an “unacceptable” alternative.

“Being dependent on another state for energy and the cost for transmission is basically unaffordable for our residents,” he said. “It really stifles any economic development opportunities we have.”

Last month, Dianda introduced a resolution in the Legislature encouraging the build-out of new generation in the U.P. and recommending natural gas, renewables and more localized distribution — all of which would be more cost effective than transmission lines, he said.

“One of the worst things we can do is spend $500 million on a transmission project from Wisconsin for coal and nuclear power,” said Richard Vander Veen, a renewable energy developer with an interest in renewable projects in the U.P. “That would make a few people a lot of money. If you’re an [American Transmission Company] shareholder, that’s great. But from a customer’s standpoint, I’d much rather see new state-of-the-art generating being built, coupled with efficiency.”

And those costs would be hitting a region with already high unemployment and low median incomes, said Abhi Kantamneni, an engineer at Michigan Technological University’s Keweenaw Research Center and a Ph.D. candidate in computer science.

“As this situation continues to move forward, any solution reliant on [fossil fuels] and building giant [transmission lines] will only disproportionately burden people already paying high rates,” he said.

Andy Schonert, a spokesperson for MISO, said “transmission solutions” are one of several alternatives MISO is studying leading up to Presque Isle’s retirement. Others include “generation redispatch, new generation (and) demand response.”

“Given the U.P.’s location and limited options in the region, finding alternative solutions there is more difficult than in other parts of the MISO footprint,” Schonert said in an email. “Ensuring reliability in the Upper Peninsula of Michigan is a major priority for MISO. We are currently working with stakeholders to develop a solution that will allow the retirement of Presque Isle Power Plant while providing long term reliability benefits for the region.”

An agreement to extend the SSR through the end of 2015 is before the Federal Energy Regulatory Commission, according to a We Energies spokeswoman. Under that agreement, We Energies would receive $8 million a month to operate the plant and make pollution upgrades to comply with federal regulations, increased from the $4 million a month it receives now. It’s unclear how exactly those costs will be distributed among customers in the U.P.

Still, Schonert said that distributed generation and demand-side efficiencies presently wouldn’t be enough to meet that region’s load.

“Some level of distributed generation along with demand-side solutions could be effective in reducing the total amount of local generation required, however it is not realistic to expect that the entire load could be met without adequate local generation and/or transmission supplies in that area,” he said. “MISO believes that a practical solution is some combination of new generation and transmission lines in that region which may take at least 3-4 years to implement.”

Industry vs. small users

The future of the Presque Isle plant was thrown into question when one company — Cliffs Natural Resources, with 85 percent of the plant’s load — switched to a provider with cheaper prices because of an exemption in Michigan’s energy choice law.

Robert Kulisheck, a former Marquette mayor and city commissioner and professor emeritus of public policy at Northern Michigan University, believes that smaller consumers are at a disadvantage compared to large users like Cliffs.

“Now that they are operating under a deregulated market up here, it seems smaller entities don’t have the same capacity to compete on the open market that big players like We Energies and Cliffs do,” he said. “It seems like there’s a need for some intervention from the state or feds to make it a more fair playing field.”

Then there is the question of who should bear the costs of keeping Presque Isle open. Cliffs still technically receives energy from that plant, even though it doesn’t pay We Energies for it. FERC has ruled that a bulk of those costs should come from Michigan utilities and their customers. One co-op asked FERC last month to reconsider its decision.

“We’ve said for quite a while: Cliffs Resources, which owns the Empire and Tilden mines, should be responsible for paying the costs and true costs of the electricity that they need to serve their operations,” said Howard Learner, executive director of the Chicago-based Environmental Law and Policy Center. “Whether it’s through their own facilities, or through a transmission line or through Presque Isle, Cliffs Resources shouldn’t be allowed to impose financial or pollution costs on the public.

“Cliffs Resources is the cost-causer for much of the Presque Isle coal plant but it doesn’t want to pay the fair costs of the electricity being generated for its beneficial use.”

In an open letter to Michigan Gov. Rick Snyder, Keweenaw Renewable Energy Coalition President Melissa Davis writes: “Our region is home to a disproportionate share of low- to moderate-income households, who spend a disproportionate amount of their gross income on utility costs. A further rise in electricity costs could prove devastating.”

Building momentum for renewables and natural gas

Davis’ letter goes on to promote the renewable potential in the U.P. — particularly solar, wind along the shores of Lakes Superior and Michigan, geothermal “due to our vast flooded copper- and iron-mine reservoirs” and woody biomass.

“I’m not against solar or wind,” state Rep. Dianda said. “But up here we do have the luxury of having a lot of biomass with the forests and ways of looking at many different aspects of biofuel.”

Kantamneni, who moved to Houghton, Michigan a few years ago without having a particular interest in renewable energy, said local, distributed sources started making sense when he ran the numbers.

“I’m convinced distributed generation is the future for the U.P. and Michigan. When I moved to Houghton, I wasn’t convinced about the merits of renewables,” he said. “Having looked at how the technology has caught up today, I think the only challenge to renewable integration into the grid is a lack of vision and renewable policy from the state.”

While these may benefit the overall energy diversity of the region, Kantamneni says that to satisfy the energy needs of high-end users like the mines, “Natural gas might look like the answer.”

Still, Kantamneni warned about placing “eggs in one basket” and being tempted by cheap natural gas prices. “Down the line, who knows where gas prices might be?” he said.

Vander Veen said he’s helping put together a 20-year plan for the U.P. that starts with educating the public about what’s going on.

“It’s not good enough for people to be oblivious. Unfortunately, a lot of people are just that. They don’t see a problem, they’re not prepared for oncoming [energy] prices,” he said. “Part of me wonders if it takes a crisis.”

Consensus, Vander Veen says, is what it takes to get these projects in motion.

“If we’re closing coal plants and we need more generation in the U.P., where does that come from? Shouldn’t it be utility-scale wind or solar, and probably a gas plant or two or three?” he wondered.

Vander Veen says he’s “laying the ground work to do wind and solar in the U.P.” and he also believes utilities should be “empowering” residents to generate their own energy.

The latest (and which many see as good) news is that Cliffs is considering building a natural-gas powered cogeneration plant with Invenergy Thermal Development LLC.

Learner, of the Environmental Law and Policy Center, said it’s a “very different situation” should Cliffs generate its own power onsite.

“Then there’s very little load left for Presque Isle to serve,” he said.

State Sen. Tom Casperson, a U.P. Republican, says throughout the region, natural gas and biomass should be the immediate focus. He believes wind is too contentious of an issue — in which “some families won’t even talk to each other anymore” over and as evidenced with yard signs attacking wind — to push forward as an alternative.

Casperson said that, along with Cliffs’ choice to leave We Energy, EPA pollution rules (which, like many other critics, he dubs a “war on coal”) are contributing to an immediate closure of Presque Isle, exacerbating the situation.

In the short tem, state Rep. Kivela predicts Cliffs will build a natural-gas plant for itself and a second “small but expandable” generation facility will come online elsewhere.

“ATC is making a run saying transmission is what we need. We don’t find that acceptable,” he said. “We’re going to be prepared to halt that if we can.”

Dianda suggested a “permitting fast track” in the next two years as more generation projects surface.

“It’s going to be tight, but we have to do it,” he said. “We have no choice.”

Kantamneni, of Michigan Tech, suggests a “bottom-up” approach to solving the U.P.’s power problems, with communities becoming self-reliant when it comes to generation.

“This whole top-down approach of passing legislation to solve problems leads to problems like we’re facing right now,” he said, referring to the energy choice exemption the mines received that allowed Cliffs to leave We Energies. “Small communities, at this point, will have to start to diverge from the government’s larger agenda of supplying energy to high-end customers and people will come together. That’s the hallmark of being American, isn’t it?”

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