http://www.crainsdetroit.com/article/20160306/NEWS/303069994
by Jay Greene
Going green has been a mantra from some companies for decades, but the business case for it is evident in a new wave of large corporate-led investments in Michigan.
While some enable corporations to produce more renewable energy internally, others are aimed at improving overall energy efficiency. That’s as the major utilities and state lawmakers debate the merits and downsides of the next round of state energy legislation regarding renewable energy requirements.
There are noteworthy case studies in the making on the issue.
A Nevada-based data center operator, Switch, made news in February when it said it would convert a pyramid-shaped building that once housed office furniture maker Steelcase Inc.‘s research center near Grand Rapids into a super green data center that operates 100 percent on renewable power.
And the groundbreaking power purchase agreement being negotiated between Switch and Jackson-based Consumers Energy Co. is piquing the interest of other big energy users who may opt to strike similar deals, company officials tell Crain’s.
While details of the Switch-Consumers agreement aren’t expected until summer, Adam Kramer, Switch’s executive vice president, said it will be a long-term lease of 20 to 25 years and will require Consumers to build or contract with an independent power producer for new renewable energy sources.
Under the agreement, Switch would pay Consumer’s a fixed price for each unit of electricity produced by renewable energy. This kind of deal, which would be the first in Michigan, could provide a hedge against future price increases.
“We will get a flat price for the next 25 years,” Kramer said. “Tell me a commodity that stays flat that long. We will pay a premium above the base rate, and we will pay more now, but in the long-term our costs will be lower because everything goes up.”
Besides saving money, Kramer said, Switch CEO Rob Roy also wants to do what is “right for the environment.”
The contract will also require the Michigan Public Service Commission to approve a so-called “green energy rider tariff,” which could be the first approved in Michigan.
A green tariff is a utility program that allows customers to purchase up to 100 percent of electricity from renewable sources, primarily wind, solar, hydroelectric and biomass.
Nancy Popa, Consumer’s director of renewable energy, said it is likely an interim contract will precede any long-term power purchase agreement because of the nine to 18 months it will take to negotiate the contract, gain final PSC approvals and then build new renewable power production.
Popa said Consumer’s is working to design a green tariff to meet Switch’s needs. Other customers have expressed interest in similar deals, she said.
“We already have something in place to allow Switch to become 100 percent renewable through renewable energy credits,” Popa said. “They could join our Green Generation program in the interim before they generate renewable energy.”
Detroit-based DTE Energy Co. also expects to submit a similar green energy rider to the PSC later this year for its planned community solar projects that could total up to 100 megawatts in 2016, said Irene Dimitry, vice president of business and development with DTE.
“It will be a voluntary tariff,” Dimitry said. “We have GreenCurrents, where people buy renewable energy credits, but people want to point to an asset that provides power. Our intent is to make it available to all customer classes.”
Kramer did not specify how much renewable energy would be required to power Switch’s planned $5 billion data center in Gaines Township, near Grand Rapids.
However, Switch’s data center in Las Vegas, which also is about 2 million square feet, uses about 180 megawatts of electricity. This would require 120 wind turbines or 720,000 solar panels (250 watts per panel) on 900 acres of land.
Switch is one of a growing number of companies in Michigan and nationally —General Motors, Apple, Google, Facebook, Amazon and Whole Foods — that have pledged to be powered by 100 percent renewable energy. So far, 51 companies have signed the Corporate Renewable Energy Buyer’s Principles to increase access to renewable energy.
“Companies are very interested in how the Switch deal gets done,” said Liesl Clark, president of the Lansing-based Energy Innovation Business Council.
Ready to catch fire
Experts say private investment in renewable energy in Michigan over the next several years is poised for major growth regardless of the anticipated slowdown in investments by Consumers and DTE, the state’s two investor-owned utilities.
Last year, Consumers and DTE reached the state-mandated goal of producing more than 10 percent of their renewable energy by Dec. 31, said the PSC in a report last month.
While Consumers and DTE have announced modest renewable energy investments for this year, the community solar and wind projects — totaling about 150 megawatts of wind power and 107 megawatts of solar — will amount to 20 percent less than the average of the preceding five years. During those years, the investments averaged about 318 megawatts per year.
But stepping up next with additional renewable investments could be private companies across a range of industry types and sizes, from GM and Steelcase to Black Star Farms LLC winery. Also getting into the game: Municipalities such as Lansing, Ann Arbor and Grand Rapids, said Clark, who also is a founding principal with 5 Lakes Energy, a Lansing consulting firm.
Herman Miller Inc., Amway Corp. and Dow Chemical Co. have been able to purchase renewable energy from independent power producers under Michigan’s retail open access programs. And other companies on the hunt for renewable energy sources to power Michigan operations include Google, Nestlé, Ford Motor Co. and Whirlpool Corp.
There also is interest for consumer-oriented retail space when it comes to going green.Ikea has built the state’s largest solar array, a 977-kilowatt project, at its Canton Township store. And other retailers, such as Target and Wal-Mart, have said they intend to build more rooftop solar.
George Heartwell, the former mayor of Grand Rapids, said the city is one-quarter of the way toward its 100 percent municipal renewable energy goal by 2020.
Construction is slated this spring for a 3-megawatt, $18 million solar array at the former Butterworth Landfill superfund site, he said. The facility, which would save the city $200,000 annually, is a private-public project with American Capital Energy of Lawrence, Mass.
“We will use that power on 38 acres to power the wastewater treatment facility across the river, rather than put it on the grid,” Heartwell said.
Grand Rapids also is planning to expand rooftop solar programs and use of geothermal power for many city properties, he said.
Rob Threlkeld, GM’s global manager for renewable energy, said the Detroit automaker is poised this summer to increase its target of 125 megawatts of renewable energy production. GM has invested $31 million in 13 solar projects in Michigan.
“It is the right thing financially, and the right thing for the environment,” said Threlkeld, who said GM has saved $80 million using renewable energy since the mid-1990s. Because wind and solar prices have dropped, Threlkeld said he expects GM to announce more renewable investments in Michigan, Texas and Mexico.
Steelcase, meanwhile, one of the largest furniture manufacturers in the nation, has met its 100 percent renewable energy pledge by equal amounts of production and renewable energy credit purchases. John DeAngelis, energy program manager, said many corporations like Steelcase are looking to increase renewable energy production.
But as Steelcase made decisions to increase its renewable energy production, DeAngelis said, Michigan was a poorer investment than Oklahoma, where wind production is much less expensive and the regulatory environment more welcoming.
Later this year, Steelcase will begin purchasing 25 megawatts of wind energy in a 12-year power purchase agreement with Apex Clean Energy, which operates a 150-megawatt wind plant in Oklahoma.
“For us, it didn’t make as much sense to invest in wind in Michigan because of the economics,” DeAngelis said.
DeAngelis said Steelcase is closely watching the power purchase agreement and green tariff being negotiated between Switch and Consumers.
“Michigan has come a long way in the renewable energy landscape. The prices continue to come down, and I expect that will continue to encourage more development,” DeAngelis said.
Jay Greene: (313) 446-0325. Twitter: @jaybgreene