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Thursday, September 20, 2012

Michigan Truth Squad Reports on Energy Proposal

Below is a report from the Michigan Truth Squad about Proposal 3, a ballot proposal to require 25% of energy production in Michigan to come from "reneweable" sources.  Energy issues are very important to the future of our community.  So, I thought you would be interested in this article.

By bridgemi/Bridge staff
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Proposal 3, one of six measures on the statewide ballot on Nov. 6, seeks to install in the Michigan Constitution a requirement for the use of electricity generated from renewable energy sources, such as wind and solar.
Michigan currently has a state law that mandates a 10 percent “renewable portfolio standard” by 2015. Under Proposal 3, the RPS would become a constitutional measure and rise to 25 percent by 2025.
Leading proponents of Proposal 3 are environmental groups and businesses in the alternative/renewable energy field. They have coalesced in the Michigan Energy Michigan Jobs campaign. Leading opponents of the proposal are DTE and Consumers Energy, which have backed the Clean Affordable Renewable Energy for Michigan Coalition, or CARE, and statewide business groups such as the Chamber of Commerce and Michigan Manufacturers Association, which have helped fund a broad-based vote “no” ballot group called Citizens Protecting Michigan’s Constitution.
This week, the Michigan Truth Squad, Bridge’s sister publication, reviewed ads from both MEMJ and CARE about Proposal 3. You can see the analyses side by side below:

Pro-Prop 3 ad gets tricky with jobs claim

Who: Michigan Energy Michigan Jobs – Pro-Proposal 3 group
What: TV ads
Truth Squad call: Technical foul
Michigan Energy Michigan Jobs (MEMJ) is a ballot proposal committee supporting Proposal 3, a measure to require utilities to obtain 25 percent of Michigan’s electric needs from renewable sources by 2025 (with some caveats). MEMJ is a coalition of environmental, alternative energy, union and business interests.
In the latest reporting period ending July 20, the group raised $2,247,277, according to state campaign finance records. Of that amount, $1,772,000 came from clean-energy advocacy organizations in San Francisco and New York. Its largest in-state contribution was $450,000 from the Michigan League of Conservation Voters.
Questionable statement: “Michigan spends billions importing coal from other states and oil from the Middle East. (TEXT ON SCREEN: ‘1.7 Billion to other states. Source: U.S. Energy Information Administration Website.’”
This state report says Michigan spent $1.39 billion to buy coal to produce electricity. And all of the coal was imported.
Michigan imports 97 percent of its petroleum needs.
The state is expected to use 4.12 million gallons of gasoline in 2012.
Largest single source of U.S. petroleum imports is Canada; Persian Gulf nations constitute the second-largest source.
In 2011, the United States spent $327 billion on net oil imports, says the Congressional Research Service.
Questionable statement: “That’s right, 60 percent of Michigan’s electricity comes from imported coal. (TEXT ON SCREEN: 60% OF ELECTRICITY FROM IMPORTED COAL).”
This Energy Information Administration analysis says three-fifths of the state’s electric generation stems from coal. As noted above, a state report says all Michigan’s coal is imported.
Questionable statement: “It will create 94,000 jobs Michigan jobs and spark new businesses (TEXT ON SCREEN: create 94,000 jobs Michigan jobs. Source: Jobs and investment impact study done by MSU, 8/10/12; www.mienergymijobs.com/economicimpact).”
The study can be found here, on the site of the Michigan Environmental Council. The MEC is a supporter of Prop 3 and a member of MEMJ. The study notes that its work was “supported by a contract” between MSU and MEC. And an MEC spokesman confirmed that the group paid for the study.
The MEMJ page says 74,000 jobs would come from work toward the renewable standard. Another 20,000 would come from a 50 percent market capture of the manufacturing, for a total of 94,000.
However, that’s not exactly what the study says. The summary notes:
“The $10.3 billion investment in renewable energy in Michigan that would be required by the proposed 25% by 2025 policy could create 74,495 job years (emphasis added) in Michigan, which is divided into 31,513 construction jobs years and 42,982 operations and maintenance job years. … Additionally, there is potential to capture manufacturing job creation; however, the magnitude of that gain is dependent on the success of Michigan manufacturers’ ability to capture market share in the renewable energy market.”
A “job year” is a technical term, defined in this report as “Full employment for one person for 2,080 hours in a 12-month span.”
As the Mackinac Center for Public Policy, a Midland-based free market think tank, cheekily noted: “That is, a person newly hired by a wind company and who works 25 years would count as 25 job years, though it is still just one job.”
MEMJ counters that “job years is an academic term that is always translated as jobs.” The group pointed to a Detroit News story from Sept. 5 about jobs created by natural gas drilling, which MEMJ says is based on a report that uses the same terminology.
But not every economist you speak to will agree with the terms’ flexibility.
Questionable statement: “There are 8,000 parts in a wind turbine and all of them can be made in Michigan.”
A study by the Center on Globalization, Governance and Competitiveness at Duke University says a wind turbine has an estimated 8,000 parts.
The state’s Michigan Economic Development Corp. says, “Michigan’s industrial base, tuned to supporting the needs of the automotive industry, has all the expertise and capacity to handle the advanced precision manufacturing needs of the wind energy industry. In fact, federal studies rank Michigan among the top four states in industrial capacity to develop and manufacture wind energy systems.”
Questionable statement: “In West Michigan they make the blades.”
Holland-based Energetx makes wind turbine blades.
Questionable statement: “Astraeus wind manufacturing in mid-Michigan manufactures hubs.”
Astraeus Wind in Eaton Rapids (southwest of Lansing) makes hubs.
Questionable statement: “Danotek in Southeast Michigan makes high-tech generators that create clean energy and jobs.”
Canton-based Danotek makes “high performance permanent magnets.” Those parts are key to modern wind turbines.
Overall impression: The ad is better on describing Michigan’s current electric generation situation than it is in describing the employment prospects if Proposal 3 is enacted. Michigan has seen considerable activity in the manufacture of, and siting of, wind turbines.
Foul or no foul: Technical foul, which MTS defines as “A statement that implies something that isn’t quite true and deserves additional explanation, or that is entirely false.” A typical viewer is likely to think of a “job” being a “job” – something that will last, not something that ends in a year. Equating the word “job” with the economist term of “job year” certainly “deserves additional explanation.”

Anti-Prop 3 ad doesn’t back up claim on big utility bills

Who: Clean Affordable Renewable Energy for Michigan Coalition
What: TV ad
Truth Squad call: Technical foul
Questionable statement: “In a few short weeks, you’ll be asked to vote on an energy mandate that would be locked into our state constitution. Because it would be locked into our constitution in a way that cannot be changed quickly or easily, this plan would affect your utility bills and taxes for years to come.”
Proposal 3 would require Michigan utilities to generate 25 percent of their electricity from renewable energy resources by 2025, with some caveats. Under current law, electric providers must generate 10 percent of their energy from renewables by 2015.
The proposal, which would amend the state constitution, is opposed by the Clean Affordable Renewable Energy for Michigan Coalition, which includes the state’s largest utilities, and a number of business and labor groups.
CARE raised $5,922,165 to defeat the proposal, according to its most recent state campaign finance filing. Of that, $5.8 million was contributed by DTE Energy and Consumers Energy. Each gave $2.9 million.
The ad does not explain how the 25 x 25 proposal would affect taxes “for years to come.” It cites an Associated Press story in supporting the claim, but the story does not mention taxes.
Questionable statement: “Michigan would be forced to generate 25% of its electricity from renewable energy by the year 2025. Even though it’s expensive and less reliable.”
CARE cites a Michigan Capitol Confidential story from July 11, 2011, as its source for the claim that renewable energy is “expensive and less reliable.”
The story quoted Pat Michaels, a senior fellow in environmental studies at the Cato Institute, as saying that mandated renewable power will make energy more expensive. Michaels also said that renewable energy is unreliable, requiring more back-up generation.
But the story did not cite any statistics to back up Michaels’ claims. It did say that Consumers Energy customers were paying a $2.50-a-month renewable energy surcharge, but that the surcharge was expected to drop to 65 cents in September 2011.
In May, the Michigan Public Service Commission approved lowering Consumers Energy’s monthly renewable surcharge to 52 cents, citing lower renewable energy costs for the utility.
Michigan Capitol Confidential and the Cato Institute are not exactly disinterested sources of information on renewable energy. Michigan Capitol Confidential is a publication of the Mackinac Center for Public Policy, which has been critical of renewable energy policies.
The Mackinac Center and the Cato Institute, a libertarian think tank, contend that renewable energy sources, such as wind and solar, are not economically viable because they rely on hefty government subsidies.
Questionable statement: “The wind often doesn’t blow. The sun doesn’t always shine. In fact, this experiment would have an estimated price tag of $12 billion.”
CARE cites a Massachusetts Institute of Technology study, which says utilities are being challenged to provide a steady flow of reliable energy. That’s because it’s difficult to operate fossil fuel-powered generating plants in a flexible manner to smooth out the ebb and flow of power from wind and solar sources.
The ad cites a story in the News-Herald of Southgate for its claim that the 25 x 25 proposal has an estimated price tag of $12 billion.
CARE provided the Truth Squad with background material showing that the $12 billion cost estimate came from this Consumers Energy statement:
“Looking at the increased amount of renewable generation (17,500 GW-hours) we would need if we went to a 25 percent RPS — at an average cost of $2,500/KW (wind) at 40 percent capacity factor — it would be a $12 billion investment if the state used mostly wind — and that’s the cheapest renewable right now.”
The group also paid for a study on Proposal 3’s impacts by Ken Sikkema, a senior policy fellow at Public Sector Consultants in Lansing. Sikkema is a former state lawmaker and a past executive director of the West Michigan Environmental Action Council. (Editor’s note: Sikkema also serves as a paid policy adviser to the Center for Michigan, which produces the Michigan Truth Squad. Sikkema has no part in the Michigan Truth Squad and he has not been part of the internal research and writing team for this Truth Squad analysis or any other.)
Media reports on the Sikkema study said it found Proposal 3 would cost $10 billion to implement. The $10 billion was in a footnote in the study attributing the cost to a Michigan State University study.
The MSU study found that $10.3 billion in renewable energy investment would be required to meet the 25 percent renewables standard.
Sikkema told the Truth Squad there are too many unknowns, including the price of fossil fuels and regulatory costs, to accurately predict how much more renewable energy might cost than conventional power plants through 2025.
But he noted that Consumers Energy, DTE Energy and MSU all predicted a range of between $10 billion and $12 billion.
Questionable statement: “That works out to thousands of dollars in higher electric bills for Michigan families and small businesses.”
Sikkema’s study said electricity customers in Michigan would pay more if voters passed Proposal 3. But the study said it is unclear how much rates would rise because of various uncertainties associated with the proposal.
For example, Proposal 3 caps annual rate increases at 1 percent a year, but the Sikkema study says it is unclear what current costs would be included in calculating a baseline rate from which the maximum 1 percent annual rate increase would be calculated.
Sikkema also noted that Michiganians pay taxes on utility bills in two ways: Directly, via a sales tax on the bill. Also, owners of the equipment to generate power — in this context, wind turbines — would pay a personal property tax (the state’s business equipment tax). Those taxes, Sikkema says, are “baked in” to the rates, as set by the Public Service Commission, and are paid indirectly by consumers.
CARE and the utilities have said the 1 percent cap likely will be challenged in court should Proposal 3 pass.
Overall impression: No one is disputing that raising Michigan’s renewable energy standard to 25 percent will cause increased spending on electric generation. Proponents of Proposal 3 regard that cost as an investment that will create jobs and boost alternative energy businesses, giving a lift to Michigan’s economy. Opponents regard that increased spending as costs that will be passed on to energy consumers.
A central question is how much more Proposal 3 will cost to implement. The ad says $12 billion. The MSU study pegs additional spending at $10 billion between 2016 and 2030. And the Sikkema study, paid for by CARE, says the answer is unclear.
A February report by the Michigan Public Service Commission found that the cost of renewables is significantly less than the cost of building a new conventional power plant.
The ad raises a valid concern that a constitutional amendment will make it difficult to adjust the 25 percent renewables standard should it prove unworkable.
But the ad also relies on sources with a vested interest, or clear point of view on policy, plus media reports on statistics from those sources to back up its various claims.
Foul or no foul: Technical foul, which MTS defines as “A statement that implies something that isn’t quite true and deserves additional explanation, or that is entirely false.” In this ad, the scariest claim for voters is the notion that consumers and families will pay “thousands of dollars in higher electric bills.” The add does not clearly explain, or cite sources that clearly explain, that assertion.

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