Opinion: Modernize renewable energy regulations

Kaitlyn Buss

Climate change has become a No. 1 issue in the United States — whether on the presidential campaign trail or in the classroom. Individually, too, Americans are looking for ways to cut down on waste and reduce carbon consumption.

But little will help spur innovative renewable energy technology at affordable prices like updating the Public Utility Regulatory Policies Act (PURPA), decades-old legislation originally passed to launch utilities’ investment in renewable energy at a time when oil was scarce.

The United States now leads the entire globe in oil output, and renewable energy has grown substantially over the past several decades. Today more than one-third of the nation’s electricity comes from carbon-free sources, which includes nuclear, hydropower and other renewables.

Detroit Renewable Energy's incinerator plant in Detroit converts garbage to steam and electricity for downtown and Midtown areas.

PURPA regulations haven’t kept up with innovation and competitive forces in the market. Changes must be made to reflect these realities.

In 2018, wind, solar and other nonhydropower renewables provided 9% of total U.S. utility-scale generation, according to the Energy Information Agency. Hydropower added another 7%. The agency expects those renewable numbers to keep growing, with the Midwest producing up to 18% of its energy from renewables by next year.

Turbines at DTE's Pinnebog Wind Park.

These numbers show substantial improvement in electricity generation and creative approaches through new technologies. The market has changed dramatically since laws to buoy the then-nascent renewables market were enacted. 

PURPA sets fixed prices in contracts, originally intended to incentivize them in the early days of renewable technology. But these prices and the requirements on utilities under PURPA make purchasing that energy very costly to customers. 

In Michigan, Consumers Energy customers pay 30-50% over market value for PURPA energy, which totals $300 million in above-market prices over 10 years. The company recently reached a settlement with solar developers over prices set by PURPA, further illustrating the practical need for reform.

Wisconsin-based Alliant Energy customers pay $25 million in additional costs under PURPA. 

In other areas of the country the cost is even higher. North Carolina-based Duke Energy estimates its retail customers will overpay by more than $1 billion over the next 10 years due to above-market prices for PURPA energy.

Additionally, mandatory purchase obligations force utilities to buy energy they don’t need. Utility companies have set ambitious goals for renewables in their portfolios. Subsidized PURPA mandates are no longer necessary.

Michigan utilities have indicated they have enough capacity in renewables to get them through the next five to 10 years. Forcing them to pay the fixed, higher prices for PURPA energy they don’t need is simply a cost that gets passed onto customers.

In the fall the Federal Energy Regulatory Commission (FERC) drafted proposed reforms that would bring renewable energy policy and utilities into the 21st century. These reforms would broadly give states more authority over the legislation. 

They would allow states to incorporate market pricing into the rate utilities pay developers, and allows states to require energy rates, but not capacity rates, to vary during the life of the contract. 

The proposed reform would also update the “one-mile rule,” which determines whether some developers can qualify for contracts with utilities based on their proximity to power plants. Relaxing this qualification would increase competition and lower rates for consumers.

Renewable energy has become a critical part of energy portfolios across the United States. In Michigan, utilities have showed their commitment to renewable energy development and continue to take coal-based production offline. 

Much of this development has been thanks to PURPRA and decades-old commitment to a cleaner and more sustainable energy grid. But the law must change alongside market forces. Customers deserve relief from outdated price and capacity mandates that are passed onto them under PURPA. 

As Americans search for ways to contribute to a cleaner, more renewable future, Congress should do its part to provide practical solutions to help make these energy sources affordable and reliable.

Kaitlyn Buss is a freelance writer in Metro Detroit, and a former member of The Detroit News editorial board.