solar panels
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Independent developers claim DTE Energy ignored interconnection requests as it sought to build its own capacity.

Renewable energy developers for months disputed DTE Energy’s claim that it did not expect to need any new generation capacity over the coming decade.

Now that Michigan regulators have approved the utility’s plan to build a 1,100 megawatt natural gas plant, DTE’s position will be tougher to challenge.

The question of whether a utility needs more generating capacity matters to renewable energy developers because under federal law they earn a better rate for projects when a utility has a need for capacity.

Solar developers, in particular, have expressed frustration with DTE’s willingness to work with third-party developers, accusing the utility of stalling or ignoring interconnection requests as it worked on plans to build its own large natural gas plant to replace retiring coal units.

A DTE spokeswoman said the company is fulfilling its legal obligations and trying to keep electricity as affordable as possible for customers.

The utility’s critics have been partially validated by the Michigan Public Service Commission, which in its ruling on the gas plant said it was “inappropriate” for the utility to tell developers it did not have a capacity need over the next 10 years without getting a determination from the commission.

But the gas plant decision leaves an uncertain role for independent renewable developers in the utility’s territory in the coming decade.

“Michigan is a market that’s in transformation,” said Kevin Borgia, Midwest policy director for Cypress Creek Renewables, which has filed a formal complaint against DTE’s response to the company’s solar proposals. “There are a lot of opportunities that will present themselves but it’s not really clear where the most specific opportunities are going to arise.”

Developers file formal complaints

The federal Public Utilities Regulatory Policy Act of 1978 (PURPA) requires utilities to purchase power from independent producers if it is at-cost with what the utility would build itself.

It’s most lucrative for developers when utilities show a need for future capacity, or the amount needed to cover customer demand plus a reserve margin. If a utility does not show a capacity need, it is still required to buy the electricity, though at a much lower energy cost.

In April, two out-of-state developers — Cypress Creek and a subsidiary of Geronimo Energy — filed complaints against DTE claiming the utility did not respond to requests to interconnect with their grid, which in turn blocks the opportunity for PURPA contracts. The two companies are having similar difficulties developing projects in Consumers’ territory due to uncertainty around PURPA.

The complaints are “really about DTE being slow, unreasonably expensive and incomplete” in responding to interconnection requests, said Douglas Jester, a partner at the consultant firm 5 Lake Energy.

“I do think part of the problem, though by no means all of it, is neither Consumer or DTE have experienced the volume of requests they’re getting now,” Jester said. “They weren’t prepared to address this workload.”

Cypress Creek filed 141 interconnection requests with DTE totaling 775 MW between June 2017 and March 2018, according to the company’s complaint. The company claims DTE failed to make a timely response on 111 applications. Cypress Creek calls it “part of a conscious attempt by DTE to frustrate (third-party) development in its service territory so that DTE can meet its capacity needs through self developed projects, all in violation of state and federal law,” according to the complaint.

Geronimo filed a complaint alleging DTE was not negotiating in good faith a power purchase agreement for a planned 20 MW solar project. (A Geronimo spokesperson declined to comment for this story.)

In a May 29 response to Cypress Creek, DTE said the “deluge of interconnection requests is due to ongoing proceedings that have threatened a market aberration that would bestow windfall profits on PURPA developers, to the corresponding detriment of Michigan utilities and customers.”

DTE denies “every allegation of wrongdoing or other impropriety … as untrue,” as it also denied the allegations by Geronimo’s subsidiary.

Borgia said Cypress Creek has had “similar experiences” with utilities in other states, but “what we’re seeing with DTE is severe. It’s pretty obstructionist. It’s not the kind of thing we’re seeing with Consumers.”

Waiting for MPSC guidance

DTE and Consumers Energy have projected no capacity needs into the future as they retire coal plants, in part due to existing PURPA contracts and their own generation projects.

A rate case before the MPSC will help regulators determine utilities’ capacity needs over a 10-year planning horizon. The MPSC also has an open docket to determine what DTE’s avoided cost rate — what developers are paid under PURPA contracts — should be. This creates more uncertainty, developers say.

The capacity question around the 1,100 MW gas plant may be on hold, though. On May 29, a coalition of environmental groups appealed the MPSC’s decision approving the gas plant. The group claims that DTE “simply ignored” its PURPA obligations when it sought approval for the plant.

At this point, renewable developers believe there is still 300 MW worth of capacity in DTE’s territory that could be built under PURPA contracts. However, DTE disputes that figure.

“With the approval of our new gas power plant and our most current forecasts, DTE Energy does not foresee any additional capacity needs through the late 2020’s,” said DTE spokeswoman Cindy Hecht. “It is not uncommon for load and capacity forecasts to change up or down a few hundred megawatts within a year.”

Observers say a clearer picture of utility capacity forecasts will come in integrated resource plans filed over the next year, which give a long-term generation outlook. Hecht said DTE is also “waiting for further guidance from the MPSC on PURPA requirements.”

“We recognize and understand that DTE has certain purchase requirements under PURPA, and we fully intend to fulfill our legal obligations,” Hecht said. “At the same time, we want to keep electricity as affordable as possible for our customers so we want to make sure we do not buy too much or pay too much for PURPA-related purchases.”

Jester said other options in Michigan for independent developers include selling to alternative energy suppliers for the retail market, or selling their generation at wholesale prices on the MISO market. These options, however, are more uncertain and uneconomic than PURPA contracts with utilities. Jester also said there are limitations with selling power to cities.

“There is very limited opportunity,” Jester said. “The only practical purpose — the only buyer in town — is through the utility.”

Andy compiles the Midwest Energy News digest and was a journalism fellow for Midwest Energy News from 2014-2020. He is managing editor of MiBiz in Grand Rapids, Michigan, and was formerly a reporter and editor at City Pulse, Lansing’s alternative newsweekly.

One reply on “Michigan gas plant leaves uncertain role for renewable developers”

  1. The link to the LARA site talks about “Greenwood Energy not Geronimo
    “Geronimo filed a complaint alleging DTE was not negotiating in good faith a power purchase agreement for a planned 20 MW solar project. (A Geronimo spokesperson declined to comment for this story.)” –

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