Good Things Come to Those Who Wait?

by Bruce Goodman, Energy Lawyer

In May 2011, in front of 40 of Michigan’s top leaders in clean energy manufacturing, Governor Snyder presented the first Reinventing Michigan Award to Energetx Composites. Having waited impatiently for four months, this group of entrepreneurs (ready to unleash their economic gardening skills, resources, and innovation) asked the Governor for his energy policy. Answer: his energy policy would be forthcoming “in the fall”. In August, when Valerie Brader was named the state’s energy policy officer, Mike Finney stated “Energy concerns are at the center of our economic future, whether we are talking about its cost and availability or job creation and new business potential in green energy manufacturing.”  Then word went out that the Governor’s energy policy statement would be pushed to the first quarter of 2012. More waiting for those concerned about: RPS, standby rates, distributed energy, bioenergy, offshore wind, deregulation, customer choice, coal-fired generation, solar manufacturing, and advanced energy storage. The State of the State message last week yielded another setback: energy policy is being pushed off until “this fall”. Michigan has been treading water on energy policy for over a year. We are in a policy twilight zone. Elected officials need to hear from the clean energy manufacturing community now. Policy delayed is policy denied.

New Bio-economy Research Center at MSU

by Bruce Goodman, Energy Lawyer 

With an initial goal of developing cost effective, off-the-shelf anaerobic digestion technology for small and medium-sized farms, Michigan State University has established its Anaerobic Digester Research and Education Center. The Center brings together resources that were spread across four laboratories on the East Lansing campus. There are already 150 manure digesters at large dairy farms across the nation, with the potential for 8,000 more according to EPA estimates. If all sites implemented biogas systems, they could generate 1,500 MW of renewable energy. Michigan has 6,000 small to medium dairy farms that are being targeted under the MSU effort.

Pioneering Technology to be Used at Cellulosic Biobutanol Refinery

by Bruce Goodman, Energy Lawyer 

Cobalt Technologies and American Process Inc. have agreed to build the world’s first industrial-scale cellulosic biorefinery to produce biobutanol in Alpena.  The continuous fermentation and distillation technology will convert cellulosic biomass feedstock into fermentable sugars that will be used to produce ethanol and biobutanol.  The biobutanol can be used “as is” in paints, coatings and blended with gasoline, diesel and ethanol, or it can be converted into bio-based plastics or full performance jet fuel.  Ethanol production will begin in early 2012, with a switch to biobutanol later in the year.  Funding for the project includes grants of $18 million from the U.S. Department of Energy and $4 million from the State of Michigan.

Demo Energy Crops Planted in Midland

by Bruce Goodman, Energy Lawyer 

Dow Corning Corporation will soon have a bio-mass energy facility built at its Midland location which will  supply steam and up to 40 MW of electricity.  To be owned and operated by Midland Power Station, formerly Cirque Energy, the electricity and steam will be generated through the gasification of such feedstock as tree waste, energy crops and agricultural waste.  Experimentation with ten test plots of various perennial energy crops has begun as employees recently planted giant miscanthus, switch grass, big bluestem, Indian grass, sorghum, willow, and poplar trees on adjacent properties.  ”It saves money; it saves the environment, ” explains Cameron Fryzel, a summer intern working on the project. 

Mascoma to Raise More Money in IPO?

by Bruce Goodman, Energy Lawyer

Mascoma Corporation, yet to break ground on its Kinross, Michigan non-food cellulosic ethanol facility, plans to raise up to $100 Million in an initial public offering (IPO) of stock.  The company has developed technology and genetically modified yeast with the potential to cut the cost of breaking down cellulose and fermenting the sugar.  It is already producing ethanol from wood on a demonstration scale at its facility in Rome, NY, and its affiliate Frontier Renewable Resources is developing the commercial operation at Kinross.  The air permit for the facility was issued in July.  Investors in the parent company include General Catalyst Partners, Kleiner Perkilns Caufield & Byers, VantagePoint Venture Partners, Atlas Venture, Valero, General Motors, Pinnacle Ventures, Flagship Ventures, Khosla Ventures, U.S. Department of Energy, State of New York, and the State of Michigan.

If I Ruled the World (or maybe just the State)

by Bruce Goodman, Energy Lawyer

Five elements to include in an energy policy for Michigan:

BIOMASS ENERGY: Make use of the energy in biomass that is going to waste in this state. The BTU content of the “unused biomass” in the state of Michigan is enormous. 

ENERGY EFFICIENCY/CONSERVATION: Make better use of our existing energy resources. Because our energy costs are so low, citizens and industry are not very aggressive in avoiding the “waste” of electricity and fuels. Increasing the price of energy (a carbon tax would be a start with a redistribution of the revenues to accomplish energy efficiency) is an option that deserves serious consideration.

DEREGULATION/CUSTOMER CHOICE ON ELECTRICITY: Reintroduce competition into the purchase and production of electricity. The deregulation of Michigan’s electric industry which was begun in 2000 was reversed in 2008. Just as competition in the telephone industry drove down prices and fostered innovation, the same competitive effect could drive Michigan’s electric industry.

ENCOURAGE ELECTRIC VEHICLES: Make electric cars work in Michigan. The state has placed a huge bet on the success of the electric vehicle industry; it is time to lead the nation in electric vehicle ownership. State government should fill its fleets with electric vehicles and the infrastructure for electric vehicles needs to be built out. Consider tax incentives for vehicle purchases.

BE A MODEL FOR RENEWABLE ENERGY: Made-in-Michigan renewable products and technology could lead the world. Michigan already is a leader in the solar energy field with Hemlock Semiconductor and  United Solar Ovonics; we need to demonstrate how this technology can be adapted for integration into buildings, the electric grid, and society. Similarly, Michigan has fledgling biofuels, biomass, wind, and geothermal industries and technologies that need to be strongly encouraged, whether with grants, tax incentives, or other assistance. To make Michigan a showcase for the implementation of these technologies, we need a larger renewable portfolio standard (from 10 percent to 25 percent) and the removal of barriers to self generation (i.e.  unreasonably high standby rates and unreasonably expensive interconnection charges).

These may not be the top five, but they deserve to be near the
top of the list.

Biofuel Catalyst Technology Funded

by Bruce Goodman, Energy Lawyer

NextCAT, Inc, a Wayne State University startup company, has received a Phase II Small Business Innovation Research Award of $498,830 from the National Science Foundation. The goal of the company is to commercialize a catalyst that will cost effectively convert waste vegetable oil, animal fats, and residual corn oil into biodiesel fuel. Economic projections are that the catalyst would provide a production cost savings of at least one dollar per gallon, dramatically changing the economics of a biodiesel plant.

Should the Governor Go Beyond Fuel Taxes to an Overall Carbon Tax?

 by Bruce Goodman, Energy Lawyer

It is being reported that Governor Snyder intends on seeking a change in the transportation fuels taxing structure, shifting the application of the tax from the retail to the wholesale level. If true, is it time to consider a more general fossil fuel carbon tax? It has long been recognized that transportation fuels lead to “externalities” for which a tax is appropriate. These include the need to build and repair roads, bridges and other infrastructure. Gasoline and diesel tax revenues are intended to cover these costs. Similarly, fossil fuels used for electric generation also have externalities. For example, coal-fired generation has long-term health and environmental impacts (and the need for regulatory oversight) which ultimately costs the state and its citizens money. Without putting the Michigan economy at risk, the Governor could seek a modest carbon tax on coal and natural gas used to produce electricity that would reward the move toward 10 percent renewable, made-in-Michigan, energy. It would create a new economic rationale for increasing our dependence on locally-produced electrons and pursuing the cheapest form of energy—conservation. Let’s start the conversation.

Biomass Plant for Sale

by Bruce Goodman, Energy Lawyer  

Cliffs Natural Resources Inc. is selling its Renewafuel operations near Marquette and returning its $500,000 Community Development Block Grant to Marquette County. The plant has been up and running, producing high-energy, low emission biofuel cubes from wood and agricultural feed stocks designed to help meet renewable portfolio standards and/or air emission limits. Before shutting down, the plant delivered its first supply of biofuel cubes in July to the Marquette Board of Light and Power as a coal substitute.

President Gerald R. Ford had an Energy Vision

 by Bruce Goodman, Energy Lawyer

On his last day in office, January 19, 1977, President Gerald Ford issued a clarion call on energy: 

“America cannot permit the excessive delays associated with the commercialization of unconventional energy technologies.  New production is essential.  Our national security and economic well-being depend on our ability to act decisively on energy.”

More than three decades have passed since President Ford and his energy czar, Frank Zarb, worked to develop the nation’s first comprehensive energy policy and put the United States on the rocky road to rethinking energy technology.  At the time the first energy policy was developed, Ford’s administration was responding primarily to the oil embargo crisis of the early 1970s.  A major goal was to drive the amount of imported oil used for transportation down from the then-current 35 percent of national consumption.  Despite the President’s warnings, and the recognized negative influence that oil dependency has on foreign policy and defense policy options, current statistics show that 49 percent of our oil consumption is from foreign sources.

As to the production of electricity, since Ford’s call to action some of the “unconventional energy technologies” have matured, and some have not.  While unlimited fusion energy remains a far-off dream, renewable energy technologies are being deployed.  Wind energy has gained a strong foothold in our nation’s energy portfolio, and solar energy is finally on the brink of becoming a major energy source.  Bioenergy, in a variety of forms, has both near-term economic applications and long term possibilities, such as airplane fuel from algae.

Under President Ford’s leadership and Frank Zarb’s foresight, the Energy Research and Development Administration was created as part of the Energy Reorganization Act of 1974. This agency, which was replaced three years later by the Department of Energy, was an important step in bringing together the diverse energy activities across the federal government.  It produced a series of national energy plans that advocated experimentation and energy leadership to stimulate private-sector commercialization.

So where are we on President Ford’s vision thirty-four years later? The alternative energy effort had plodded along with the help of National Renewable Energy Laboratory (another offspring of the Ford Administration’s pioneering efforts) and a mixed bag of partial governmental energy policies still aiming for the “commercialization of unconventional energy technologies.”  No one can doubt the government’s role is critical.  As with many new technologies that have yielded benefits across the nation over time, such a large undertaking requires “encouragement”.  The Union Pacific and Central Pacific railroads were given twenty square miles of land plus mineral rights for every mile of track built as the encouragement that ultimately led to the interstate railroad system (and tangentially to the development of the steel industry).   The fledgling airline industry was able to grow due in large measure from the U.S. post office paying to carry the mail at rates which allowed the growth of passengers carrying capacity.  Oil and gas companies lease federal lands at rates intended to encourage these industries.  Who can argue that these governmental policies have not been important to the nation’s overall economic development and ultimate strength and well-being?  

Electric utility companies are not going to voluntarily adopt renewable energy technologies merely because they will improve air quality (and thus national health) or because they will utilize abundant, locally available, and free resources (such as the energy of the wind and the sun) or because they will improve national security (through distributed generation and providing transportation alternatives to imported oil).  No, a national energy policy, such as the one envisioned by President Ford, is needed to further encourage and drive renewable energy technologies.  Just as seat belts and air bags would likely not have reached the marketplace without governmental requirements, and gas mileage improvements were not on the horizon until governmental standards were devised to drive innovation, a national energy policy is needed to finally realize the goals of unconventional energy technology implementation envisioned by President Ford.

On Tuesday, September 20, Frank Zarb will in Grand Rapids to give a free lecture at 7:30 pm at the Ford Museum entitled:  Our Most Important Policy Failure – Energy. If you would like to attend, please contact the Gerald R. Ford Presidential Foundation at events@38foundation.org or call 616-254-0393 to reserve your seat.