May – June 2019 Commentary

A key gauge of a regional economy’s long-term prospects is access to reliable — and affordable — energy. A steady stream of power is especially important here to meet demand from the nation’s highest concentration of automakers, suppliers, tool-and-die shops, and general manufacturers.
May June 2019 Commentary
Illustration by James Yang

Energy – Current Indicator

A key gauge of a regional economy’s long-term prospects is access to reliable — and affordable — energy. A steady stream of power is especially important here to meet demand from the nation’s highest concentration of automakers, suppliers, tool-and-die shops, and general manufacturers.

As state regulators and local governments consider permit applications for wind turbines, solar arrays, and natural gas plants, they should balance long-term energy needs with environmental stewardship. As it stands, utilities must maintain and continuously improve energy infrastructure to avoid costly downtimes caused by brownouts and blackouts.

While residents and environmentalists have real concerns about the location of new energy infrastructure like wind turbines, regulators and utilities must work hand in hand with property owners to seek out solutions that support a robust power grid. Granted, most people would prefer that a wind turbine be located anywhere except in view of their backyard, but it’s better than living downwind from a coal plant.

In a bid to reduce harmful emissions, maintain balanced energy supplies, and improve the overall environment, DTE Energy in Detroit and Consumers Energy Corp. in Jackson have sought to reduce most carbon emissions by voluntary measures and the submission of permit applications with the Michigan Public Service Commission and local communities (largely for future infrastructure).

In March, DTE Energy, which provides electricity to 2.2 million customers in southeast Michigan and natural gas to 1.3 million customers across the state, updated a program it calls Journey to 80. The plan now calls for reducing emissions, including methane, by 80 percent by 2040 (the original goal was 2050). To get there, DTE Energy will replace and upgrade miles of aging steel and cast-iron pipelines at its gas compressor stations with safer and airtight materials.

The utility also plans to double its renewable energy capacity over the next five years, investing an additional $2 billion and increasing its generation to 2,000 megawatts (which would power more than 800,000 homes). One part of the effort is the recent opening of the Pine River Wind Farm in Gratiot and Isabella counties, a 161.3-megawatt, 65-turbine park that generates power to more than 54,000 homes.

By 2024, the utility plans to double the amount of energy it generates from wind farms. In the following year, DTE Energy’s “solar installations will expand as we take advantage of what we project to be much more efficient panels that will be lower in cost,” says Skiles W. Boyd, vice president of environmental management and resources at DTE Energy.

At the same time we’re boosting energy-efficiency and reducing carbon emissions, we’re also increasing our environmental stewardship. — Skiles W. Boyd, vice president, environmental management and resources for DTE Energy, Detroit

Overall, DTE Energy operates 14 wind parks, 31 solar arrays, 27 natural-gas plants, three coal plants, and the Ludington Pumped Storage Plant (a hydroelectric facility it runs with Consumers Energy). The latter complex is now being outfitted with more efficient turbines. In 2040, both utilities plan to end their use of coal, although one of DTE Energy’s facilities, the River Rouge Power Plant, will continue to generate electricity via recycled
industrial gas from neighboring steel plants.

Upgrading the state’s energy infrastructure, while at the same time reducing harmful emissions and embracing wildlife conservation programs (as both utilities have done), serves as a loud message to current and prospective residents and businesses that Michigan is an attractive place to live, work, and prosper.

Politics – Rocky Start

Since taking office in January, Gov. Gretchen Whitmer has reversed the position she held while on the campaign trail, when she said she wouldn’t rely on user fees to pay for new and improved roads and bridges. In early March, she instead announced a proposal to raise the state gas tax by 45 cents. The measure was quickly panned by the Legislature and most business entities.

She also said during her campaign that she would move to eliminate a pension tax passed by Gov. Rick Snyder. What she didn’t say, but has now proposed, is that her pension tax-reduction plan would only be for state workers. Whitmer’s move was seen as a payback to the various unions that supported her campaign.

The teacher’s union, meanwhile, applauded the governor’s recent proposal to eliminate third-grade reading tests that were slated to be implemented next year. The law, passed by the Snyder administration, was a response to poor test results over several years, and the lack of a stop-gap measure to keep teachers from passing unprepared students from one grade level to the next.

The governor also is trying to end, rewrite, or rebid contracts, especially as it relates to hospital and prison projects. Such efforts, if successful, would give losing bidders another chance to win new work. Rather than propose efforts that have little chance of gaining traction — such as her plan to seek a 41 percent tax hike on small businesses to pay for her carve-out to state pensioners — the governor should roll up her sleeves and work alongside the Legislature to advance goals that would be equitable and sustainable for everyone.

Taxes – Levy Consequences

A proposed 45-cent hike in state gas taxes proposed by Gov. Gretchen Whitmer will improve road infrastructure in the short term, but the levy, if passed, would impact the state’s long-term ability to maintain and build transit corridors. Consider the potential tax hike doesn’t take into account rising sales of electric and hybrid cars and trucks that run entirely, or mostly, on batteries, along with natural gas and hydrogen-powered vehicles.

A drop in sales at gas pumps caused by more alternative-powered vehicles on the road means there will be less money, over time, to repair and build upon our transit infrastructure. What’s more, a 45-cent hike in the gas tax would likely mean the closing of multiple gas and convenience stores along the state’s border with Ohio and Indiana, according to the Michigan Petroleum Association and the Michigan Association of Convenience Stores.   

Not only will Michigan residents and companies near the border avoid a large tax hike by buying gasoline and diesel (and, conversely, convenience goods) in a neighboring state, but fewer people will consider visiting here. Overall, if the gas hike is passed, it will give Michigan the distinction of having the highest fuel tax in the country.

In turn, higher prices on trucking firms would boost the cost of consumer goods. As one industry expert put it, the tax “proposal is a 1950s solution to a current-day problem.” Rather than a huge hike in gas taxes, state leaders should work more closely together to consider raising the 6 percent sales tax, as well as finding a more equitable means for improving our long-neglected roads.

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