Awaiting green energy's payoff

A North Carolina company canceled a wind farm project in January that would have placed as a many as 112 towering turbines across two counties in northwest Michigan.

Energy Conversion Devices, one of the state’s pioneer manufacturers of advanced batteries and solar panels, filed for bankruptcy protection in February.

Several ethanol refining plants planned for the state never materialized.

And in early March, General Motors halted production of its much-ballyhooed Chevrolet Volt gas-electric vehicle for five weeks and temporarily laid off 1,300 workers due to slow sales. (Though, the automaker quickly altered its plan.)

“It’s a difficult environment across the landscape for virtually all types of renewable energy,” said Arn Boezaart, director of Grand Valley State University’s Michigan Alternative and Renewable Energy Center in Muskegon.

The reasons, experts say, include politics, economics and, as former President George Bush once put it, America’s addiction to oil.

Federal legislation that sought to end tax breaks for major oil companies failed in late March. The bill, co-sponsored by Michigan Sen. Debbie Stabenow, a Democrat seeking re-election, was seen as having little chance of passing both houses of Congress.

In Michigan, state government’s attitude toward promoting alternative energies has shifted radically, from unbridled enthusiasm under former Gov. Jennifer Granholm to cool ambivalence under her successor, Gov. Rick Snyder.

Granholm staked her legacy on the creation of green jobs to offset the nearly 850,000 jobs lost on her watch as the auto industry imploded.

But the federal Bureau of Labor Statistics, in its first effort to quantify jobs that benefit the environment or reduce energy consumption, found they comprise a small proportion of the total.

Michigan had 79,771 green jobs in 2010, or 2.1 percent of all jobs, according to federal data. Of those, 64,615 were in the private sector. The state ranked 12th in the nation in green jobs. California led all states with 338,445 such jobs.

A study by the Granholm administration in 2009 said there were 96,767 direct green jobs and an addtional 12,300 supporting jobs in Michigan in the private sector alone -- or 50 percent more than what was found by the BLS for 2010. The study was based on a survey of about 6,400 businesses, analytical work by state labor market economists and focus group research.

The BLS said its study was based on a nationwide survey of 130,000 businesses polled in the quarterly census of employment and wages program.

“The state of Michigan is silent on what the state’s energy future might look like,” Boezaart said. “It’s left people to figure it out on their own.”

Under Granholm, the state approved $3.4 billion in tax incentives, loans and grants to clean energy companies, according to figures provided by the Michigan Economic Development Corp.

The federal government promised another $2.4 billion, including $1 billion awarded to battery and component manufacturers in Michigan.

Granholm also signed into a law a requirement that the state’s utilities produce 10 percent of their electric power from renewal sources of energy by 2015. The Michigan Public Service Commission says utilities are on track to meet that goal.

But Snyder has dismantled Michigan’s network of tax credits and incentives, including those that supported battery production and other alternative energies.

His approach is to lower taxes for businesses across the board, rather than single out certain industries for special treatment in an attempt to attract jobs and investment.

“We said, ‘Let’s look at how we are doing business in the state and level the playing field for everyone,’” said Steve Bakkal, director of the Michigan Energy Office.

The small office, located at MEDC, has an annual budget of about $1 million, money which comes mostly from the U.S. Department of Energy. It promotes energy efficiency and renewable energy, mostly through consumer education, consulting services and federal lending programs.

Some say the deluge of state and federal spending between 2008 and to 2010 to develop batteries for electric vehicles, wind turbines, solar panels and biofuels created a glut of capacity that will take years for demand to absorb. Financial support from the federal government also is underpinning the development of lithium-ion batteries, used in electric and hybrid vehicles, including the Chevy Volt.

Vocal critics, including conservative radio host Rush Limbaugh, say the government is trying to make automakers produce vehicles that consumers don’t want.

Arguing over electric vehicles

GM CEO Dan Akerson recently lamented that the Volt has become “a political punching bag.”

The debate over batteries and electric vehicles is magnifying every setback in those industries, said Alan Baum, a West Bloomfield auto industry analyst who studies the electric and hybrid vehicle segments.

“Electric vehicles and batteries are under a microscope,” he said. “Everything gets blown out of proportion.”

Consider the troubles at Massachusetts-based A123 Systems, a lithium-ion battery maker with manufacturing plants in Livonia and Romulus. A123 has received more than $400 million in state and federal assistance.

Its  recent layoffs, financial losses and an embarrassing recall of defective batteries have generated unwanted national publicity for the company.

On March 26, A123 said it would replace $55 million worth of defective batteries used by Fisker Automotive, its largest customer.

Four days later, conservative columnist Michelle Malkin, writing in the National Review Online, called the company an “eco-boondoggle” and a “green dud.”

A123 spokesman Dan Borgasano disputed Malkin’s claim that A123 is “teetering on the edge of bankruptcy.”

While admitting the company is facing challenges, Borgasano said the A123 has sufficient liquidity to handle the recall.

With gas prices above $4 a gallon, one might think consumers would be lining up to buy electric and hybrid vehicles.

But they’re not, mostly because the vehicles are still too costly. Many consumers see electric plug-in technology, like that used in the Volt, as inconvenient or unproven.

Automakers also are building smaller cars with more efficient internal combustion engines that buyers see as a better alternative to electrics.

“The economics, especially for plug-ins, are not there right now,” said Brett Smith, co-director of the manufacturing, engineering and technology group at the Center for Automotive Research in Ann Arbor.

“It will be a long time before energy storage is viable,” he said, regarding advanced batteries. The business model still doesn’t work.”

Either the price of electric vehicles will have to fall substantially or gasoline prices will have to rise to $7 or $8 a gallon before electric vehicles will become competitive with gas-powered models, Smith said.

Solar hasn't sizzled

The solar manufacturing industry is also facing tough times.

When Swedish appliance maker Electrolux closed its Greenville plant in 2006, throwing more than 2,000 employees out of work, solar-panel manufacturing was seen as the city’s salvation.

Uni-Solar, a division of Energy Conversion Devices, built two factories in Greenville that together employed about 400 workers. The company was awarded state and federal incentives valued at $37 million over 20 years.

But plunging solar prices and the elimination of subsidies in Europe, where Uni-Solar sold many of its panels, drove the company and its parent into bankruptcy in February.

Production in Greenville has been mostly halted and Energy Conversion Devices said it plans to sell off Uni-Solar.

Intermittent winds

Wind power generation is faring better in Michigan, although it has faced opposition from those living in areas where wind farms with giant turbines have been proposed.

North Carolina-based Duke Energy cancelled its planned Gail Windpower Project in Benzie and Manistee counties in January.

The project faced strong opposition from local residents who said the turbines would scar the northern Michigan landscape near Lake Michigan.

Milt Howard, vice president at Duke Energy Renewables, said the project was “the catalyst for a tremendous amount of discussion about wind energy in the region.

“Much of it was respectful and fact-based, some of it less so,” he said.

State officials said they are optimistic about the future of wind power generation in breezy Michigan, in part because costs have been falling rapidly.

Wind power comprised 94 percent of all renewable energy contracts approved by the state Public Service Commission to help meet the 10 percent renewable energy standard.

“Wind is a great industry in Michigan,” Bakkal said.

Chicago-based Invenergy is nearing completion of the first phase of a 213-megawatt wind farm in Gratiot County. When fully built out, the project will be the largest wind farm in Michigan and produce enough electricity to power 50,000 households.

And last month, Michigan, Illinois, Minnesota, New York and Pennsylvania signed an agreement with the U.S. Department of Energy that supporters say could lead to offshore wind farms on the Great Lakes.

The agreement seeks to harmonize regulations among the states and speed reviews of project proposals.

Capitol Hill decisions loom large

But some say wind turbine installations could stall if Congress fails to renew a wind energy production tax credit, due to expire at the end of the year.

The credit, worth 2.2 cents per kilowatt hour generated, has been hotly debated in Congress, which is seeking ways to trim the federal budget.

Last year, Congress ended a 45-cents-a-gallon subsidy to ethanol. That was a blow to ethanol producers and growers of corn, which is used to make ethanol.

“We feel that,” said Jeff Sandborn, president of the Michigan Corn Growers Association. “It’s a bad rap.”

Sandborn said he thinks it’s unfair for the federal government to end subsidies for renewable energy sources, including ethanol, while maintaining billions of dollars in subsidies for the oil and coal industries.

Critics say ethanol raises global food prices because it diverts corn used for animal feed to motor fuel.

There are five ethanol plants operating in the state. But 10 plants were proposed as recently as four years ago, according to the Michigan Department of Agriculture and Rural Development.

Mascoma Corp., a New Hampshire-based renewal fuels company, is planning to build an ethanol plant near Kinross. Instead of corn, the plant will use hardwood pulp drawn from Upper Peninsula forests to make 20 million gallons of ethanol a year.

The company received $80 million last December from the Department of Energy for the design, construction and operation of the cellulosic ethanol plant, which is expected to be completed by the end of 2013.

“For a place like Michigan that is adding to forest land, I think we could really grow the cellulosic ethanol industry,” said Bruce Dale, director of Michigan State University’s Office of Biobased Technologies.

Dale also is a member of Mascoma’s science advisory board. Cellulosic ethanol is a new technology and there are no large-scale plants operating the United States.

Although the ethanol-blending subsidy has ended, federal regulations require that 15 billion gallons of corn ethanol be blended into fuel annually by 2015.

Sandborn defended corn ethanol as being good for the state and national economies.

“Farmers don’t take the money and invest it in Dubai,” he said. “They reinvest it here on equipment, fertilizers and other products they need to operate their businesses.”

But Boezaart of Grand Valley State University said Michigan and the federal government need to create energy policies for alternative energy businesses to grow.

“That would begin to give some market certainty to renewable energy producers,” he said.

Rick Haglund has had a distinguished career covering Michigan business, economics and government at newspapers throughout the state. Most recently, at Booth Newspapers he wrote a statewide business column and was one of only three such columnists in Michigan. He also covered the auto industry and Michigan’s economy extensively.

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Comments

Charles buck
Tue, 04/10/2012 - 10:03am
Wind is so uneconomical it is fatuous to continue bringing it into the discussion. The huge subsidies are the basis for the projects -- not cost or taxpayer savings. Why continue to compare coal fired plants, also known to be costly, when there are huge reserves of inexpensive gas for plants. Attack the problem with the right tools.
Al
Tue, 04/10/2012 - 10:11am
A seminar held last year at the Ford Museum in grand rapids and just a few days ago in ann Arbor said it all. THE MOST IMPORTANT POLICY FAILURE-ENERGY. For thirty nine years this country has failed to formulate an energy policy. As long as we send billions of dollars to other countries for energy we will not recover economicly because as we recover those countries will only increase the cost of energy.
Matt
Tue, 04/10/2012 - 7:00pm
So you really expect the same people who've come up with the IRS, TSA, FNMA, the 2700 Page Health Care plan, Iraq, Afghanistan, ETC, ETC, ETC and have run the nation into a $17 Trillion Dollar hole to do this?
Hardvark
Tue, 04/10/2012 - 10:15am
When will people wake up to the fact that the government wants higher energy prices to support their agenda for renewable energy, electric cars and cap & trade. The reason that gasoline prices are high is due to our government devalueing the dollar in the international market. Take note there is no shortage of petroleum in the US allowing us to supply the world market. If the government can't grow the economy, the next best thing is to create inflation to pay the Chinese with cheaper dollars. Isn't that the same reasoning every American bought a house with a 30 year mortgage? The only problem is the Chinese may not be as dumb as the administration hopes. The Chinese have a problem because they can't kill the goose or they lose all the eggs so they continue to fund our out of control government. Sooner or later a better investment may come along for the Chinese and they will decide to cut their loses and bail, leaving the US in a disasterous situation. By generating multiple conflicts within the US between rich & poor, the races, and now even men & women, the government is attempting to set itself up as the savior to heal all the conflicts that it artificially created. Divide and concour is a simple principle that works and the people are so easily led, it is amazing.
Chuck Fellows
Tue, 04/10/2012 - 1:11pm
As long as it is national policy to subsidize fossil fuel production and use with current and future taxpayer dollars this nation will continue to become increasing dependent on 19th century technology to the point of economic extinction. The rest of the world is beginning to recognize that the long term cost of fossil fuel use is far more expensive that the technologies that can currently be delivered (wind, solar, geothermal) and that sustained public investment is needed immediately to push the technology and infrastructure to 100% fossil fuel replacement for the production of energy. The prevalent attitude in political and business circles is the whine "Its too hard" and the desperate clinging to short term ROI and "I got mine" behaviors. Forget the political diatribe about China and the value for the dollar (Ayn Rand is dead and Ron Paul is no visionary), raise the price of a gallon of gas to $10.00 and sustainable practical alternatives to fossil fuels will start to emerge.
N. Vega
Tue, 04/10/2012 - 6:09pm
I get really tired of the same old mantra that oil and gas is getting billions of dollars in tax subsidies and that is why we don't have more alternatives. Look into the details and these are the same tax breaks, i.e. incentives to do business here in the U.S. that every other company in the country gets. They aren't special tax breaks, so by taking them away you are singling out one industry based solely on a political whim, and not on the fact that they are getting "Special Tax Breaks". The CBO just recently did a report showing that wind, solar, ethanol, etc. get way more in subsidies than the oil companies, and their record on producing reliable energy that the country can run on is spotty at best. http://money.cnn.com/2012/03/07/news/economy/energy-subsidies/index.htm The truth is in the details, but you never hear the details about how much funding alternatives get now, and when it is taken away they can't survive based on performance, and you still need fossil fuels to back them up because they just can't produce enough energy when you need it, and not in enough supply..
Wed, 04/11/2012 - 11:32am
Are you familiar with CWIP? Construction While In Progress. Look it up. It's a subsidy for Coal and Nuke plants. They get to charge consumers for a planned plant AS THOUGH THE PLANT IS PRODUCING POWER. Even if the plant never gets built at all. And that happens all the time. For example the two nuke plants proposed in Georgia. The Obama admin offered them 8 billion dollars, or 99% of the cost of production. The nuke companies only have to come up with 1% and they can'd do that. No bank is lending it to them, and their investors aren't ponying up.... ...think about that for a moment. A nuke plant can't make it on 99% of the funding from the government. They need 100%. Meanwhile, though not a single shovel has been turned and not a single electron produced...the nuke companies are still able to charge consumers for non-existent power because of the CWIP subsidy. Nice racket. Wind doesn't even come close.
T.W.Donnelly
Tue, 04/10/2012 - 1:20pm
The role of ALEC-related interests was not mentioned. This Koch brothers flimflam is a service that writes laws favorable to business interests over citizen needs. The packaged legislation is then peddled to various state legislatures, who introduce it and pass it verbatim. It puts me in mind of having a classmate doing your homewoek due to your own laziness. With these big money interests calling the shots, it is no wonder that alternative energy sources are choked out of the picture.Big Gas and Big Oil are using every means possible to scuttle alternative energy production.Sadly, solar and wind energy capture is not done in a vacuum; rather, pushing wind and solar must be done in the atmosphere of Alec-inspired legislation and lock-step lawmakers eager to please their financial backers. So, it is not that the wind and solar products are not viable on their own, but artificial opposition from Big Money corrupts an even playing field.
Richard McLellan
Tue, 04/10/2012 - 2:06pm
You did not cover the petition drive to impose a 25% alternative energy requirement on the state.
Tue, 04/10/2012 - 2:36pm
That's covered in the sidebar story on the state's renewable energy standard, Richard.
Matt
Tue, 04/10/2012 - 7:21pm
So oil and coal are the fuels of the past and wind solar and biomass are the fuels of the future? I'd swear mankind had been using wind, sun and biomass fuels for thousands of years... and in the period of 50 to 100 years we dropped them? So this change had nothing to do with the relative effectiveness of these old fuels vs the new fuels and was just some big oil company/Kock Brothers conspiracy?