Second Wind? Is it time to revisit Wisconsin's renewable energy requirements?
If you’ve managed to survive even one brutal Wisconsin winter (or unseasonably hot summer), you know that looming utility bills can often creep into your daydreams and nightmares on a moment’s notice, eating away at your peace of mind well before they have your kids’ college fund for lunch.
If you’re a small business owner who pays his or her own heat or electricity, you’ve got double trouble, and in addition to unpredictable weather, unforeseen rate increases can be the difference between shivering in the dark and avoiding a deep freeze.
So imagine if your utility bills ran into the hundreds of thousands every month instead of the hundreds. Well, there are plenty of Wisconsin ratepayers — big manufacturers and other commercial energy consumers — who don’t have to imagine. They live that reality. And they are skittish about a recent proposal to beef up Wisconsin’s renewable energy mandate from its current 10% threshold to 20% by 2020 and 30% by 2030 — a move that, many believe, would spike energy prices that are already high in comparison to other states.
“We serve one business customer where probably 75% to 80% of its total cost of business is electricity, so for them, every fraction of a penny is very, very important,” said Gregory Bollom, assistant vice president-energy planning for MG&E. “For a typical homeowner, their utility bill combined, electric and gas, is less than 5% of their total cost. So businesses, particularly those that are high energy users, where their cost of electricity is a big part of their bill, they’re going to be a lot more cost sensitive than smaller customers.”
To put it even more starkly, some of MG&E’s ratepayers are in the million-dollar-a-month club, a fact that must seem astonishing to your typical householder.
“Oh, yeah — we have one customer that pays us better than $2 million a month,” said Bollom. “So we do have some customers, large customers, that are over a million dollars each month.”
That’s where Todd Stuart comes in. As the executive director of the Wisconsin Industrial Energy Group (WIEG), a trade association that advocates for affordable and reliable energy on behalf of some of the state’s largest manufacturers, Stuart is reluctant to sit back and observe while new energy regulations work their way through the legislative pipeline.
The bill in question, titled the Wisconsin Renewable Energy Act, was introduced in February by Sen. Mark Miller (D-Monona) and Reps. Katrina Shankland (D-Stevens Point) and Cory Mason (D-Racine).
If passed, it would require that 20% of the electricity used in the state come from renewable sources by 2020 and 30% by 2030. The current mandate, which was passed in 2006, sets a 10% threshold by 2015. According to Sen. Miller, that threshold, while forward-thinking when it was passed, has left Wisconsin behind the curve.
“Wisconsinites deserve a comprehensive energy policy to reduce fluctuations in fuel energy costs, enhance reliability, provide healthier air and water, and promote businesses and jobs,” said Miller, who notes that conservation is also a key part of his vision. “We currently lag behind our neighboring states in the competition for the benefits that come from renewable energy. We need to catch up, but over a sustained effort, hence my proposal for a 30% renewable standard by 2030. This goal allows for long-range planning and investment by utility companies.
“Many states have a 25% standard by 2025. My proposal allows Wisconsin to catch up and regain the lead, or at least keep pace with other states.”
As of today, Wisconsin’s major utilities are on track to reach their current renewable portfolio standard (RPS) requirements, and a majority have already hit their 2015 goals. Seeing the state’s utilities cross the finish line early may have emboldened renewable energy advocates and simpatico legislators, but it has folks like Stuart calling for a rest period.
“As an association, I represent 30 companies in a broad cross-section of the economy, and a good chunk of them are papermakers,” said Stuart. “Wisconsin is one of the most manufacturing-heavy states in the country, and we’re probably one of the most energy-intensive ones as well. We’re number one for papermaking in the state, we have a very high per capita of manufacturing jobs. We have a very high level of foundries as well as food processors.
“Some of my members, most of the reason they’re in the association is they pay about a million dollars a month or more in electric bills — not everybody, but a good chunk — and energy is in their top three costs. So they’re very energy intensive, very energy dependent, and they compete globally.”
Today, says Stuart, Wisconsin has among the highest electricity rates in the Midwest, partly because we’ve spent billions on meeting the current renewable mandate, building new power plants, retrofitting old plants, building transmission lines, and improving energy efficiency.
Because of our state’s efforts to get ahead of the game, we’re paying more, says Stuart, and it’s time to tap the brakes.
“Since we were early actors — and I’d say good actors in a lot of areas — I would say we might want to just take a deep breath right now and see how things play out, and the reason I say that is we did retrofit for most other places, we have some brand-new coal plants that are state of the art, and we have very high rates right now.”
In addition, says Stuart, new federal regulations could be in the works that would likely put upward pressure on energy costs.
“We’re also looking at these EPA rules that are kind of looming in the background,” said Stuart. “We might see them this summer. Since it’s an election year for Congress, I don’t know if we’re going to really see them before November, but we will see carbon regulations at some point.”
No time to wait?
WIEG hasn’t been the only group urging caution, of course. Shortly after it was introduced, the Wisconsin Renewable Energy Act drew a sharp response from Wisconsin Manufacturers & Commerce (WMC), which criticized the bill in even starker terms.
“It is hard to fathom what the authors are attempting to accomplish with a bill that punishes consumers with higher electricity bills and drives employers out of Wisconsin,” said WMC Environmental Policy Director Eric Bott in a press release. “WMC will work aggressively to educate our members and the public about the extraordinary costs that would be created by the bill.”
That’s a lot of sturm und drang for a piece of legislation that even supporters acknowledge has about as much chance of passing as a statewide ban on beer consumption during Packer games — but opponents of more stringent energy regulation no doubt feel the bill could be a sign of things to come, particularly with the debate over global warming reaching a fever pitch.
At the end of March, the U.N. Intergovernmental Panel on Climate Change issued its direst warning to date, saying that climate change is bad and getting worse, and that it threatens economies around the globe. The U.N.’s report provided more ammunition for environmental advocates, who contend that our way of life — and our standard of living — could be irrevocably harmed if we fail to quickly act.
Among those who would like to see Wisconsin return to a leadership position in the promotion of sustainable energy is RENEW Wisconsin Executive Director Tyler Huebner, who says that our state was out front on the issue in 2006 when the current mandate was passed but has fallen behind its neighbors in recent years.
“We think that this bill would really reestablish Wisconsin’s leadership in renewable energy and job creation around clean energy and manufacturing,” said Huebner.
While Huebner acknowledges that the bill has little to no chance of passing in its current form, he believes the investment it would attract would be a net plus for the state’s economy.
“From our perspective, [the 10% mandate] has been a resounding success,” said Huebner. “The numbers we’ve got show about $2.3 billion of investment has been driven into Wisconsin to build wind energy. There’s millions of dollars that go back in taxes paid and in leases to the landowners that own the land where the wind turbines sit. So that’s a big driver for the state.”
Huebner cites a 2011 Environmental Law & Policy Center study that found that, in Wisconsin, there were 171 companies in the wind energy supply chain and 135 in the solar supply chain. According to the study, those companies are tied to around 12,000 jobs.
“So we do have a lot of businesses, and a lot of big-name businesses, that are either in this industry or are going that route on their own,” said Huebner.
Unfortunately, says Huebner, investment in renewables has slowed in recent years, thanks to the Legislature’s decision to enact changes in siting rules for wind farms.
“About eight different wind farms were in some stage of progress and process in 2009 and 2010, and those were all scrapped in 2011 when the Legislature tried to make it harder for wind farms to come in and suspended our wind-siting rules,” said Huebner. “So we had a lot of investment teed up to get more wind energy in the state, and those companies, which are national and international, they’re looking around at where they can do business without restrictions, and they abandoned Wisconsin because it was too strict here.”
For Burke O’Neal, co-owner and co-founder of Full Spectrum Solar, increasing the mix of renewables in the state wouldn’t necessarily directly boost his business, which primarily installs solar energy systems for smaller clients, but it could increase the visibility of renewables in Wisconsin, and that would definitely be an overall boon to the renewable energy sector.
“I would expect this bill to bring about millions of dollars of new investment in Wisconsin,” said O’Neal. “Instead of spending money on fuels imported from out of state, we would be creating good-paying construction jobs in Wisconsin. I have no doubt this would be a significant boost to Wisconsin’s economy and make us more competitive in the long term.”
If there’s a bellwether in the renewable energy game, it’s Germany, the economic powerhouse of the European Union and a country that shares a fair amount in common with Wisconsin, both culturally and geographically.
Renewable energy advocates would argue that Germany’s experience shows that aggressive renewable energy mandates are not only workable but entirely compatible with a thriving 21st century economy.
Thanks to aggressive public policy measures, Germany has already vaulted past a 20% renewable electricity threshold, and it’s set a target of 35% by 2020, 50% by 2030, and a gaudy 80% by 2050.
But to Stuart, Germany’s example merely reinforces his point about rate shock, particularly in the manufacturing sector. He says that Germany’s heavy-industry, energy-intensive firms are exempt from levies the country imposes on consumers to support renewables. And while Germany is taking a leadership position in the fight against global warming, it’s apparently paying for that distinction. Residential power rates are between 35 and 40 cents per kilowatt-hour in Germany, compared to about 13 cents for a residential customer in Wisconsin. Furthermore, says Stuart, electricity rates in California and the New England states — which have relatively ambitious renewable mandates compared to the rest of the U.S. — are still about half of Germany’s rates.
For his part, Huebner says that we should be careful about making too many assumptions about renewables’ effect on energy prices. He cites a recent study from the American Wind Energy Association, titled “Wind Power’s Consumer Benefits,” that uses Department of Energy data to show that in the past five years, the states using the most wind energy have seen the largest electricity rate declines.
“What we’re seeing is that our neighboring states are adopting wind energy at a greater pace than us and that their rates are increasing slower and staying lower than Wisconsin’s,” said Huebner.
If there’s a palpable tension between industry lobbyists and renewable advocates, that’s nothing compared to the public ambivalence toward stricter renewable standards. In fact, that ambivalence often takes the form of an irksome cognitive dissonance.
In introducing the Wisconsin Renewable Energy Act, the co-sponsors noted that recent polling shows 84% of state residents favor raising the renewable mandate to a 30% threshold. But when it comes time to actually foot the bill for more renewables, energy consumers often balk.
According to Bollom, nearly 10% of MG&E’s customers participate in the utility’s Green Power Tomorrow program, which gives them the option of paying 4 cents more per kilowatt-hour for green energy. Bollom says that the program enjoys among the highest participation rates in the country, but that rate is still quite low compared to the percentage of MG&E customers who express an initial interest in more renewable energy.
“When we survey customers, the overwhelming majority say they’re interested in more renewables,” said Bollom, “yet when we make the renewable energy available on a voluntary basis to customers, not so many are actually willing to pay for it. And so the struggle we have as a utility is, we have a customer base that really wants to be greener, yet they don’t really want their utility bill to go up either.”
As for where our state is headed with respect to our use of renewables — well, that depends on the political winds as much as the gusts that power our growing array of wind farms.
“Obviously, Gov. Walker is a very strong campaigner and is more likely to win than not, so the world may look a little different and it may not [by November],” said Huebner. “If there is a Democratic governor, I believe … that governor will probably call for leadership in this area, because frankly Wisconsin is really getting left in the dust.”
Energy Reporting Ordinance Still on Back Burner
You’d be hard-pressed to find anyone in Madison who’s a fan of energy-inefficient buildings, but a proposed ordinance to require owners of larger structures to report their energy usage created enough of a stir earlier this year to convince the City Council to cool its jets — at least for the time being.
At issue was an energy-benchmarking measure that would have required the annual reporting of electric, gas, and water usage for apartment buildings with more than 35 units, city buildings larger than 15,000 sq. ft., and commercial buildings larger than 25,000 sq. ft.
Proponents claimed that the ordinance would have provided property owners with a reliable measuring stick that might have encouraged them to adopt more sustainable practices, but opponents — including the Greater Madison Chamber of Commerce — said the ordinance was at best unnecessary and at worst a drain on businesses’ resources.
“Requiring businesses to annually report energy usage is cumbersome, costly, and ineffective,” the chamber wrote in a letter to Madison alders. “The energy analysis will not provide information that isn’t already available to the business.”
Chicago, Minneapolis, New York, San Francisco, and Boston are among the cities that have passed energy-benchmarking ordinances, and both California and Washington have enacted statewide laws. In addition, the state of Wisconsin requires benchmarking for state-owned buildings.
In late February, the Madison City Council postponed a vote on the ordinance, but according to Alder David Ahrens, one of the measure’s co-sponsors, the proposal could return in some form in the future.
“We’re going to form a committee of people who broker, own, and manage commercial properties, as well as energy conservation engineers, people who have been involved with education on energy conservation, and we’re going to have a few meetings and try to get some common understanding of what can be done to increase energy conservation in the city,” said Ahrens.
That process could take up to half a year, which would allow people to gather more information on the science behind the issue and how other cities have approached benchmarking, said Ahrens.
“There were parts of it that may have been really objectionable to people, and it wasn’t perfect, and I’m sure it can be modified,” he said.
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