September – October 2017 Commentary

Illustration by James Yang

Energy — Shifting Grid

Many major manufacturing operations across the nation operate power plants as a way to save money over purchasing energy from the grid, as well as to ensure reliability. But more and more, federally overseen grid operators, independent system energy producers, regional transmission organizations, and states are forcing large manufacturers to siphon off and sell electricity they produce.

Inside the Numbers

The reason for forcing manufacturers to sell their energy is to make up for supply gaps, namely the inability of wind turbines and solar arrays to generate power when the air is still and the sun doesn’t shine. The Obama administration, for its part, pushed through regulations to close or limit the opening of clean coal plants (30 percent of coal plants have been closed since 2012).

“We’re concerned about the potential deterioration of grid reliability and power quality created, in large part, by the growing penetration of utility-scale solar and wind facilities,” said John Hughes, president and CEO of the Electricity Consumers Resource Council, a trade group representing large energy users on federal electricity regulation and policy, in prepared remarks in June before a Federal Energy Regulatory Commission conference.

“This has led to efforts to force large manufacturers to take actions (often against their will) to support grid reliability. In other words, responsibility for grid reliability is being shifted from utilities (where it belongs) to utility customers. Power plants at manufacturing plants not only ensure least-cost production, but they also mitigate important safety, reliability, and environmental risks at the manufacturing site.” 

In other words, large industrial concerns aren’t in the business of generating power and then selling it. That’s what utilities and private energy producers are for. A major goal of any manufacturer is the ability to access power that’s cheap and reliable.

One way they accomplish this is through what’s known as combined heat and power (CHP), where excess steam and heat are used to generate electricity or operate boilers. But utilities and government regulators, which have been behind the growth of renewable energy sources like wind turbines and solar arrays, want manufacturers to act as merchant plants to feed the grid when supply slackens, rather than build those plants themselves.

I see the people in Detroit are … very proud to be from there, and they
really want to see change and they really want to see good things happen.”

— Kid Rock, musician

“The organized markets want industrial CHP units to operate under the same rules as merchant power-generators. That’s a dog that doesn’t hunt,” said Paul Cicio, president and CEO of the Industrial Energy Consumers of America, in the Washington Examiner. “Industrials are not in the business of generating and selling power. We are in the business of producing manufactured products.”

All of this comes as the Trump administration weighs backing the opening of clean coal, natural gas, and nuclear power plants. For the sake of manufacturers, new energy production facilities will offset the inability of green energy sources to provide electricity at the flip of a switch, regardless of whether the sun is shining or the wind is blowing. 

Automotive — Legislation Wanted

As the automotive industry, along with the technology sector, develops self-driving cars and trucks, it’s time for our federal lawmakers to pass legislation that provides for the safe and efficient operation of autonomous vehicles on American roads. Right now, every automaker must wade through a maze of state-by-state regulations.

As it stands, 22 states have enacted rules for self-driving vehicles, including Michigan. The measures range from requiring a standard vehicle registration (Arizona) to having autonomous cars and trucks escorted at all times by a police escort (New York). With the variety of rules, it’s all but impossible to undertake a national rollout of such vehicles.

Rather than have the laws change once a self-driving car or truck crosses a state line, Congress should move forward this year on passing legislation governing the use, operation, and integration of autonomous vehicles. Recently, the House of Representatives passed a 14-bill package that governs the use of robo cars, while in June the Senate released an outline of how a self-driving marketplace would operate.

With auto and tech companies investing billions of dollars in the development of driverless cars, if the House and Senate can soon put standards into place, the industry will know how to best design, produce, and operate such vehicles. That will, in turn, allow them to introduce the new vehicles into the marketplace more quickly.

Labor — Training Detroit

Safety has improved in the city of Detroit ever since Mayor Mike Duggan hired Police Chief James Craig to bring more aggressive tactics to patrolling the streets and rounding up criminals and parole violators. The police and business owners also have started to conduct sting operations to catch thieves, including people who strip vehicle parts at chop shops.

Still, the fact remains that crime can be best countered by education and training. While the city and state have done a poor job of improving the public school system in Detroit — witness the proliferation of charter and private schools in the city over the last two decades — the public and private sector have done an admirable job of training citizens for construction, retail, manufacturing, and utility jobs. Those efforts should continue in earnest.

While labor statistics show the city had a reported 7.5 percent unemployment rate in May, the actual figure is much higher. James Holman, director of fiscal policy at the Mackinac Center for Public Policy, a nonprofit free market think tank in Midland, said about two-thirds of the drop in the unemployment rate in recent years is due to a smaller workforce. He calculates the real unemployment rate is closer to 19 percent, while others peg it as high as 50 percent.

The task of training people in Detroit is made more difficult due to the lack of a robust educational system within the public schools. If officials could fix the public school system, it would further complement job training programs, boost economic spending, and reduce crime. Trainers could focus all of their teaching on employment needs, rather than spending valuable time working with students on the basics of science, math, reading, and writing. 

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