From Goal to Law: Institutionalizing Michigan’s Electricity Decarbonization

In November of 2023, the governor of Michigan signed a package of climate bills (Executive Office of the Governor 2023) that sets a 100 percent clean electricity target for 2040, one of the earliest in the United States (CESA n.d.). In 2020, the governor issued an executive order setting a goal for the state to reach net zero carbon emissions by 2050 (Executive Directive 2020-10 2019); in 2022, the MI Healthy Climate Plan was released, outlining actions the state could take by 2030 to work toward that goal (EGLE 2022). The state’s largest investor-owned utilities had previously set voluntary decarbonization targets: DTE for 2050 (DTE Energy 2019) and Consumers Energy for 2040 (Consumers Energy 2020). Fall 2023’s legislative package included six pieces of legislation: SB 271 on clean electricity, HB 5120 on renewables permitting, SB 277 on siting solar on farmland, SB 273 on efficient electrification, SB 519 on helping workers transition out of the fossil sector, and SB 502 on the utility integrated resource planning (IRP) process. This brief compares the provisions of the legislation with the state’s existing plan and utility plans to evaluate the progress the state has made toward institutionalizing electricity decarbonization.

Michigan is the second-highest electricity-producing state in the Mid-Continent Independent System Operator (MISO) territory (after IL and excluding TX) (EIA 2024). It produces about as much electricity as it consumes (Figure 1a), and in 2022, it produced 29 percent with coal, 22 percent with nuclear, 35 percent with gas, and most of the remainder with renewables. The majority of its capacity is gas (44 percent) and coal (21 percent), but it also has substantial nuclear, pumped storage, and wind (Figure 1b). For more than a decade, the state’s electricity emissions have been trending downward (Figure 1c), largely through coal to gas switching. Michigan has had a Renewable Portfolio Standard (RPS) since 2008, originally topping out at 10 percent in 2015. After a 2012 ballot initiative failed to raise the goal to 25 percent by 2025 (Ferber 2012), the legislature raised it to 15 percent by 2021 (Walton 2016). Given that some out-of-state renewables are eligible for credit toward RPS, compliance with the 15 percent target was achieved with in-state renewables only generating 11 percent of total sales (Figure 1a). The majority (74 percent) of sales in the state are by its two largest investor-owned utilities, Consumers Energy and DTE (Figure 1d).

Figure 1. Overview of Michigan's Electricity Sector

The headline provisions of the legislative package are the RPS and clean energy standard (CES). The MI Healthy Climate Plan called for reaching 60 percent renewables in 2030 (EGLE 2022). The November legislative package contains a modified version of this plan: 50 percent RPS by 2030, 100 percent clean by 2040 (SB 271 2023, §28(1) and §51(1)). It includes gas with carbon capture and storage (CCS) as an eligible clean technology (SB 271 2023, §3(i)(ii))—likely because DTE modeled that as its 950 MW of firm power in 2035 as part of its 2022 IRP (In the matter of the application of DTE ELECTRIC COMPANY 2022, Item No. 17, p. 8). The law also includes half credit for Michigan’s last incinerator until 2040, when it must retire (SB 271 2023 §39(c)); it is in Grand Rapids (Buza 2023). All electricity providers (regulated utilities, municipal utilities, rural cooperatives, and independent suppliers) are subject to the clean and renewable energy requirements (SB 271 2023, §5(d)), And eligible facilities must be in-state or eligible to meet MISO “resource adequacy obligations” (SB 271 2023, §29(1)).

The legislative package also codifies storage deployment goals and enables further distributed generation. The MI Healthy Climate Plan called for 2,500 MW of additional storage by 2030 (EGLE 2022), the exact requirement ultimately included in the law (SB 271 2023, §101). This target is substantially higher than that proposed in utility plans. DTE agreed to 780 MW of storage by 2030 in its settlement agreement (In the matter of the application of DTE ELECTRIC COMPANY 2022, Item No. 527, section 13). Consumers Energy planned for no additional storage until 2032 in its IRP (In the matter of the application of Consumers Energy Company 2021, Item No. 4, p. 243) but agreed to a battery deployment program in its settlement agreement (In the matter of the application of Consumers Energy Company 2021, Item No. 901, section 3). The MI Healthy Climate Plan called for an increase in distributed renewable generation but did not recommend a mechanism to achieve it (EGLE 2022). At the time, Michigan law did not require utilities to allow distributed generation of more than 1 percent of their average peak load, a rule referred to as a “cap” on distributed generation (Buza 2023). But the state began negotiating with utilities to increase the amount of distributed generation in the IRP process, getting DTE to agree to 6 percent in the 2022 settlement agreement (In the matter of the application of DTE ELECTRIC COMPANY 2022, Item No. 527, section 15). The November legislative package uniformly increased the cap on distributed generation to 10 percent (SB 271 2023, §173).

The MI Healthy Climate Plan called for retiring all coal units by 2030 and phasing down gas generation (EGLE 2022), but the legislative package contained no constraints on fossil generation. In their last IRP, DTE and the state agreed that it would retire all remaining coal by 2032 (Belle River coal converted to gas in 2024; Monroe 1 & 2 and 3 & 4 retired by the end of 2028 and in 2032, respectively) (In the matter of the application of DTE ELECTRIC COMPANY 2022, Item No. 527, sections 2 and 3). Although the utility does not plan to reduce gas generation before the late 2030s (In the matter of the application of DTE ELECTRIC COMPANY 2022, Item No. 17, p. 5), it does plan to retire one of its gas peakers (St Clair) in 2024 (In the matter of the application of DTE ELECTRIC COMPANY 2022, Item No. 527, section 17). The state and utility agreed to securitize 1.045 billion of the costs of the Belle River conversion and Monroe closures and treat the remainder as a regulatory asset (In the matter of the application of DTE ELECTRIC COMPANY 2022, Item No. 527, section 4), which means that any remaining debt on the plants stays in the rate base. DTE also envisions a new gas CCS plant in 2035 (In the matter of the application of DTE ELECTRIC COMPANY 2022, Item No. 17, p. 8).

Consumers Energy planned to retire all coal by 2025 (Karn 1 & 2 in 2023; Campbell 1, 2, & 3 in 2025) (In the matter of the application of Consumers Energy Company 2021, Item No. 4, p. 7). To make up for the lost capacity, it plans to buy a gas plant owned by an independent power producer It proposed buying four such plants (In the matter of the application of Consumers Energy Company 2021, Item No. 4, p. 10), but the state negotiated it down to one (In the matter of the application of Consumers Energy Company 2021, Item No. 901, section 2). and will retire two additional gas and oil units in 2031 (Karn 3 & 4) if not needed as system support resources (In the matter of the application of Consumers Energy Company 2021, Item No. 901, sections 2 and 4). Like DTE, Consumers Energy received permission to recover the costs of Campbell and its coal ash and cleanup as a regulatory asset (In the matter of the application of Consumers Energy Company 2021, Item No. 901, section 5).

These plans, if carried out, should leave Michigan with essentially zero coal capacity after 2032 Michigan would still have the MSC Sebewaing coal plant (1.5MW) and the Munising (Cogen) coal plant (6.2 MW), which powers a paper mill (Global Energy Monitor n.d.; GridInfo n.d.). but fall short of the MI Healthy Climate Plan’s recommendation to retire all coal by 2030 and reduce gas.

The legislative package creates a uniform permitting system for renewable energy throughout the state and eases the way to siting solar on agricultural land. The MI Healthy Climate Plan only suggested that the state “support local… government to adopt best practices for siting renewable energy systems” (EGLE 2022, p. 35). The legislation goes much further and creates a uniform renewable permitting system through the Michigan Public Service Commission (MPSC). It sets uniform health and safety standards, including setbacks and limits on noise, light, and shadow flicker for properties that have entered into agreements with developers (‘participating properties’) and those that have not (‘nonparticipating properties’) (HB 5120 2023, §226(8)).

For localities that have siting ordinances compatible with the state-level one, developers must apply through the locality (HB 5120 2023, §223(3)). If the local government denies the project even though it complies with the statewide rule, then the developer can apply for a permit through the MPSC (HB 5120 2023, §223(3)(c) and §223(5)). The law outlines what such an application to the MPSC should look like—including proof of community outreach and a justification for the choice of site if it is a greenfield instead of a brownfield (HB 5120 2023, §225). The law includes criteria for approval, including compliance with the health and safety standards (HB 5120 2023, §226(8)), labor standards (HB 5120 2023, §226(7)(e)), notice and comment for the locality (HB 5120 2023, §226(2)), a host community agreement or community benefits agreement (HB 5120 2023, §227), and “consider[ing] and address[ing]” harm to the environment (HB 5120 2023, §226(7)(c)).

A second piece of legislation eases the way to siting solar on farmland by allowing it on farmland that has entered into a “development rights agreement” with the state, which is a type of agreement wherein the landowner and the state agree to maintain the land undeveloped for a period of years) (SB 277 2023).

The legislative package makes strides toward building electrification but does not set firm targets in the building and transport sectors. The MI Healthy Climate Plan calls for building out charging infrastructure for 2 million electric vehicles (EVs), adding EV subsidies, reducing greenhouse gas emissions in the building sector by 17 percent by 2030 (without identifying the base year), and increasing the targets of the state’s Energy Waste Reduction (EWR) program (EGLE 2022). The legislation does not address EVs, but it expands on the EWR program to encourage building electrification. Michigan’s EWR program is similar to energy efficiency programs in other states, and prior to the passage of the new law required electric utilities to reduce electricity sales by 1% each year relative to the prior year’s sales and gas companies to reduce gas sales by .75% each year. M.C.L 460.1077(1) and (3), (2008) (modified 2023), now SB 273 2023, §77(1) and (8).

The new law encourages building electrification by defining “efficient electrification” as a type of EWR (SB 273 2023, §71 and §72(1)). If an electric or gas utility helps a customer replace a gas furnace with an electric heat pump, the utility gets credit for the difference between the energy consumption of the old appliance and that of the new one even though electricity demand increases (SB 273 2023, §77(4)). The law also increases the EWR requirement from 1 percent to 1.5 percent for electric utilities, with a goal of 2 percent (SB 273 2023, §77(2)), and from 0.75 percent to 0.875 percent for gas utilities (SB 273 2023, §77(8)). Utilities receive compensation based on their performance in meeting or exceeding the target (SB 273 2023, §75(2)). If electric utilities met all the EWR with efficient electrification measures, demand could grow by more than 2 percent per year. The legislation also requires the MPSC to study electrification as a means of reducing CO2 emissions (SB 502 2023, §6t(1)(j)) and so that it can set demand growth projections that utilities must consider in future IRPs (SB 502 2023, §6t(1)(f)).

The legislation does not directly address affordability, but it does strongly support low-income energy efficiency and electrification. The MI Healthy Climate Plan calls for “develop[ing] and expand[ing] utility programs to ensure no low-income household is spending more than 6 percent of their annual income on energy” (EGLE 2022, p. 36). This has been an ask of Michigan’s environmental and energy justice movement since at least the Detroit’s People and Energy Coalition’s campaign against DTE shutoffs in the early 2010s (Rector 2023). Households with income less than 30 percent of the area median income spend 18 percent of their income on energy compared to 3 percent for the state average (DOE Office of State and Community Energy Programs n.d.). Like most states, Michigan provides some assistance for low-income electricity consumers through the Low-Income Home Energy Assistance Program (LIHEAP) (Energy and Weatherization 2024) and occasional required donations from the utilities. The Consumers Energy settlement agreement requires the company to set aside $5 million in 2022 and $2 million a year during the life of the coal regulatory asset for low-income bill assistance (In the matter of the application of Consumers Energy Company 2021, Item No. 901, section 13). The DTE settlement agreement requires the company to pay $30 million to organizations that provide payment assistance to low-income ratepayers over the lifetime of the regulatory asset portion of the retired Monroe coal plant (In the matter of the application of DTE ELECTRIC COMPANY 2022, Item No. 527, section 20). The new legislation does not address this concern. It does, however, offer strong incentives for electrification in low-income households; in particular, it requires electric utilities to spend at least 25 percent of EWR money on them (SB 273 2023, §80(3)). It allows the use of such money for health and safety investments “that are impediments to implementing energy waste reduction measures for low-income residential customers” and provides a monetary incentive for doing so through performance-based compensation that treats health and safety investments as though they saved the same amount of energy per dollar as the utility’s average dollar spent on EWR (SB 273 2023, §80(2)).

The new legislation codifies the consideration of environmental justice (EJ) in utility plans and increases opportunities for public participation in the IRP process, but it does not forbid increases in cumulative impacts the way New York and New Jersey’s new EJ laws do (S8830 NY 2022; S232 NJ 2020) and even partially credits a landfill waste facility in the RPS, an action opposed by EJ organizations. Since a 2019 executive order (Executive Order 2019-06 2019), Michigan has had an office of the Environmental Justice Advocate that has been helping to develop the state’s EJ screening tool (EGLE 2022). The MI Healthy Climate Plan describes EJ as “as the equitable treatment and meaningful involvement of all people, regardless of race, color, national origin, ability, or income in the development and application of laws, regulations, and policies that affect the environment” (EGLE 2022, p. 16) and recommends a state-level Justice 40 initiative, a requirement for EJ analysis in IRPs, and increased funding for the utility consumer representation fund (EGLE 2022, p. 31).

The law follows through on the public participation and IRP recommendations from the Plan. It ups the amount of money going to the utility consumer public participation fund to $2 million and directs the board to emphasize distribution to EJ organizations (SB 502 2023, §6m). It also requires the MPSC to hold four public meetings annually throughout the state and start a docket on public participation and transparency (SB 502 2023, §6aa). Although the state had already begun requiring utility analysis of EJ through settlement agreements (In the matter of the application of Consumers Energy Company 2021, Item No. 901, section 17; In the matter of the application of DTE ELECTRIC COMPANY 2022, Item No. 527, section 23), the law codifies this practice. It requires the MPSC to identify EJ communities on a 4-year cycle (SB 502 2023, §6t(1)(k)); IRPs to include EJ analysis of any construction of a new gas plant and the continued operation or retirement of peaker plants in EJ communities (SB 502 2023, §6t(5)(p)); the MPSC to get an advisory opinion from the Department of the Environment, Great Lakes, and Energy (EGLE) on whether the IRP redresses harm to EJ communities (SB 502 2023, §6t(7)(a)(iii)(F)); and it adds as a criterion for approval that the plan mitigate disproportionate impacts (SB 502 2023, §6t(8)(e)).

Michigan’s November package of climate laws takes substantial steps toward the goals outlined in the MI Healthy Climate Plan. The RPS and CES codify a modified version of the one recommended in the Plan. The permitting law creates a uniform system throughout the state that will make the buildout of renewables easier, far beyond that envisioned by the Plan. Including efficient electrification measures in the EWR program will help the state electrify buildings and reduce costs for low-income households that receive retrofits through the program. The reforms to the IRP process will increase public participation and consideration of EJ in a way that begins to meet the Plan’s commitments to EJ.

The legislation does not make any firm commitments about fossil generation and even envisions a role for it, when coupled with CCS, in the future clean grid, but existing agreements between the state and utilities should retire almost all coal-fired generators by 2032. It does not set firm electrification targets or deal with electrification outside of the building sector. It does not take any steps toward the goal of limiting energy expenditures to no more than 6 percent of income, as outlined in the Plan. The legislative package goes a long way toward codifying and expanding upon the MI Healthy Climate Plan; future progress will depend on implementation.