Michigan is well positioned to benefit from the growing demand for advanced energy, given its strength in advanced manufacturing and engineering, leading universities and research facilities, and skilled labor force.
With investments totaling $2.9 billion, Michigan brought approximately 1,450 MW of new advanced energy projects online between 2008 and 2014. Opportunities to leverage this momentum to further serve growing regional, national, and global markets offer real benefits for Michigan’s economy and good-paying jobs for the state’s residents.
Extensive research and more than 40 interviews with local stakeholders and experts have helped the American Jobs Project identify two economic sectors that show particular promise: smart buildings and solar energy.
There are several barriers hindering Michigan’s advanced energy industries and preventing supply chains from reaching their full potential. Michigan must address these roadblocks if it is to grow the state’s advanced energy sectors and fully realize potential economic gains. In order to take full advantage of these opportunities, Michigan’s leaders can enact policies to increase demand for smart buildings and solar technology and help the state’s businesses grow, innovate, and outcompete regional, national, and global competitors. Indeed, with the right policies, these sectors can support nearly 12,000 jobs per year through 2030.
This project serves as a research-based roadmap for Michigan leaders who seek to develop smart policies focused on leveraging the state’s resources to create skilled, good-paying jobs.
Summary of Policy Recommendations
The analysis presented in this report culminates in recommendations for Michigan’s policymakers based on best practices in the United States and abroad. Each set of recommendations identifies opportunities for removing barriers and growing the advanced energy sector. While the recommendations are intended to be complementary and would be especially powerful if adopted as a package, each can also be viewed as a standalone option.
Smart Building and Energy Efficiency Technology
Allow On-Bill Financing for Energy Efficiency Improvements: Allow utilities or financial institutions to finance energy efficiency improvements through loans that are repaid on customers’ monthly utility bills. Michigan law allows municipal utilities to offer on-bill financing. The legislature could expand access to this critical tool by repealing the on-bill financing ban for investor-owned utilities, which serve nearly 90 percent of electricity customers in Michigan.
Expand Dynamic Pricing to Promote Demand Response: Create incentives for customers to adjust their demand for electricity in response to system conditions. This can reduce long-term costs by reducing the need to build expensive “peaking” power plants. The Michigan Public Service Commission (MPSC) could make dynamic pricing the default electricity rate structure for all commercial and industrial customers in the state, expanding beyond existing pilot programs, and allowing residential customers to opt into dynamic rates.
Allow for Decoupling of Electric Utility Revenues: Create incentives for regulated utilities to promote investments in energy efficiency improvements by allowing utilities to receive a certain level of revenue regardless of electricity sales. Michigan can grant the MPSC the authority to implement decoupling for electric utilities.
Integrate Demand Reduction into the Capacity Planning Process: Require utilities to investigate low-cost demand reduction alternatives before authorizing new generation to be built under centralized planning processes. Alternatively, if Michigan moves towards a market-based approach for capacity planning, the MPSC could ensure that demand reduction proposals have the ability to bid directly into wholesale markets.
Remove Spending Limits for Energy Waste Reduction Programs: Eliminate spending caps on utility waste reduction programs by requiring utilities to show an expected minimum return for consumers on every dollar invested in energy waste reduction efforts.
Streamline Solar Permitting: Decrease solar installation costs by cutting red tape and streamlining the solar permitting process.
Remove Restrictions on Solar Net Metering: Alleviate individual and system-wide restrictions for solar projects to qualify for net metering by raising the cap on individual solar projects to encourage larger distributed projects, and by raising the system-wide cap to signal to solar developers that the state is open for business.
Allow Local Communities to Access Solar Power: Allow for more local control for delivering solar power to customers who wish to purchase it by offering community choice aggregation.
Ease Taxes on Solar Projects: Extend tax exemptions to residential solar projects to put them on an equal footing with commercial and industrial projects, and clarify the commercial and industrial solar tax-exemption measure so the Michigan State Tax Commission and Department of Treasury understand its intent.
Combine Solar and Electric Vehicle Charging Infrastructure: Help meet the increased energy demand driven by the transportation electrification process by combining solar with electric vehicle charging infrastructure.
Innovation Ecosystem and Access to Capital
Facilitate Partnerships within the Energy Innovation Ecosystem: Align Michigan’s research universities, private companies, nonprofits, and government to stimulate a private market for energy innovation that will create jobs for Michiganders. The state could build on existing coordination efforts by allocating funding to jumpstart an energy innovation network.
Create a Technology Investment Tax Credit: Offer a technology investment tax credit to grow the emerging startup hubs in Ann Arbor and Detroit, attracting business investment and boosting economic activity.
Capitalize on Digital Manufacturing to Drive Job Creation: Build on existing strengths by facilitating public-private partnerships that increase the competitiveness and innovation capacity of small- and medium-sized manufacturers, promote advanced manufacturing technology, and develop corresponding workforce training.
Invest in and Retain Michigan Science, Technology, Engineering, and Math (STEM) Talent: Give tax breaks to STEM-educated students graduating from four-year universities to encourage them to remain in Michigan.
Help Dislocated Veterans Transition to the Advanced Energy Sector: Establish a program for retooling veterans’ skills for jobs in high-tech sectors, such as STEM and advanced energy.