Economic Development & Growth through Energy

Efficiency (EDGE2)

An overview of the Michigan State Government efforts to “lead by example”

Energy EfficiencyClean Technology

INTRODUCTION: Steve Kulesia, DEQ, ESSD

• The EDGE2 Initiative • Executive Directive No. 2005 – 4• “Energy Efficiency in State Facilities and

Operations”• MPSC efforts in RE/EE• Clean Technology…what is it?

The EDGE2 Initiative• Economic Development & Growth

Through Energy Efficiency

• DEQ, DLEG (Energy Office, MEDC, MPSC), DMB, MDA, DNR, DOC, DOT

• Next Energy, SBAM, NWF, Ecology Center, American Council for an Energy Efficient Economy, Shepherd Advisors, Sustainable Research Group, Delta Institute

EDGE2 Goals

• Promote Energy Efficiency and Renewable Energy

• Attract Clean Technology Businesses To Michigan

• Support Research And Development Of Clean Technology

Executive DirectiveNo. 2005 - 4

• Effective April 22, 2005 • Energy Efficiency Savings Target

• 10% Reduction in Energy Use by 12/31/08• 20%Reduction In Grid-Based Energy

Purchases by 12/31/15• DMB to Implement Energy Conservation

Measures in State Facilities• Changes in Vehicle Fleet: Hybrids & Use

of Alternative Fuels

Executive DirectiveNo. 2005 - 4

• Require Purchase of Green Goods/Supplies Where Feasible

• New Buildings for State Agencies, Universities/Colleges to Comport With LEED Standards

• By 6/30/05 DMB, DEQ and DLEG to Recommend Additional Opportunities for Energy Efficiency/Clean Technology

The Benefits of Energy Efficiency/Clean Technology

• Energy Efficiency/Clean Technology Key To Michigan’s Economic Development … .

• Business And Residential $$ Savings• Jobs Creation• Business Diversification• Energy Independence

• … And Environmental Policy• Reduced Adverse Health Impacts• Improved Air And Water Quality• Greater Reliance On Renewable Energy

MPSC Role in Renewable Energy

● Section 10r(6) of 2000 PA 141 directs MPSC to “establish the Michigan Renewables Energy Program… to inform customers of the availability and value of using renewable energy generation and the potential for reduced pollution… promote the use of existing renewable energy sources and encourage the development of new facilities.”

Current MPSC Efforts: MREP

● Over 100 participants in 6 committees: biomass, solar, wind, economic impacts, financing, ratemaking & net metering

● Open meetings seeking consensus on policy analysis and recommendation functions, as assigned by the Commission or determined by participants

● Email distribution list (155 subscribers) and Web site: www.michigan.gov/mrep

Current MPSC Efforts: LIEEF

● Under Low-Income & Energy Efficiency Fund, created by 2000 PA 141, Section 10d(6), MPSC funded:• GVSU MAREC, http://www.gvsu.edu/marec• NextEnergy Center & Micro grid,

http://www.nextenergy.org• Ford “fumes to fuel” fuel-cell project• DTE/Plug Power fuel cells in CHP installations• STM Power (Ann Arbor) beta test Stirling engine CHP

at Belleville landfill, http://www.stmpower.comAlso, MDEQ/NextEnergy RE/EE analyses on net

economic benefits to Michigan

Capacity Need Forum

● MPSC established CNF process in Case # U-14231

● Interim report July 1, 2005. Final report issued January 1, 2006.

● CNF assesses how Michigan renewable energy and energy efficiency potential can be blended with all other supply & demand options, to develop the best “balanced portfolio” by 2020 and beyond

21st Century Energy Plan –Executive Directive 2006-02

Passed in April 2006, directs MPSC (and other state agencies) to develop a comprehensive energy plan for Michigan by December 31, 2006Four (4) workgroups formed as part of process, involving variety of stakeholdersEfforts will complement the CNF Reporthttp://www.cis.state.mi.us/mpsc/electric/capacity/energyplan/index.htm

Alternative Energy Options

Emerging Technologies

● Renewable power plants (wind, solar, biomass)● Renewable fuels (energy crops, manure)● Waste fuels (Municipal, industrial)● Synthetic fuels

• Coal gasification; coal gas to liquids• Biomass to liquids; natural gas to liquids

● Hydrogen/fuel cells

Benefits of Increased RenewableEnergy Penetration

● Shift state balance of trade deficit by utilizing indigenous resources

● Reduce vulnerability of our energy system • Larger number of distributed resources• Reduces fuel imports (LNG – 16X increase

projected)

Benefits of Increased RenewableEnergy Penetration (cont.)

● Provide a hedge against variability in fuel pricesStabilize prices

● Protect the environment• Hedge unknown compliance costs• Alternative to utility-installed pollution control

● Diversify Michigan’s employment base

Renewable Energy and E2 & Job Creation

● More dollars remain in Michigan’s economy• “Multiplier” effect

● Provides new income sources to rural communities• Energy crop production, lease revenue, value-added products

● Provides new manufacturing opportunities• Including exports (esp. to developing world)• Michigan has been identified as among the top 20 states for wind

and solar component manufacturing potential (REPP, 2005)

● Provides new R & D, engineering, construction, and maintenance jobs

Case Study:New York Energy $martSM Fund

● State investment (12/31/03): $350 Million● Public and private investment attracted (12/31/03):

$850 Million● Expected Total Invest. Attracted (full implementation):

$2.5 Billion● Actual annual average job creation (1998-2003):

3,500/year● Est. annual average job creation (1998-2006): 5,500/yr● Clean energy projects funded (12/31/04)

• 41.8 MW wind, 900 kW PV• 5 manure digesters (another 25 under development)• 8 fuel cells at 4 facilities

7%

2%

1%

8%

5%7%

7%

West Coast30%

Northeast23%

Midwest10%

Eastern CanadaMidwestNortheastNorthwestRockies/PlainsSoutheastSouthwestWest CoastWestern CanadaOther

• California & New England receive over 50% of cleantech venture capital

• The Midwest received only 10%

Cleantech Investment by Region (Q1 2002 – Q3 2004)

Energy technology investment is drawn to markets with proactive policies

Non-punitive goal

*PA: 18%¹ by 2020*NJ : 6.5% by 2008

CT: 10% by 2010

MA: 4% by 2009 + 1% annual increaseWI: 2.2% by 2011

IA: 105 MW

MN: 1,125 MW wind by 2010

TX: 2,880 MW by 2009

*NM: 10% by 2011*AZ: 1.1% by 2007

CA: 20% by 2017

*NV: 15% by 2013

ME: 30% by 2000

State RPS

*MD: 7.5% by 2019

*Minimum requirement and/or increased credit for solar¹ PA: 8% Tier I, 10% Tier II (includes non-renewable sources)

HI: 20% by 2020

RI: 15% by 2020

*CO: 10% by 2015

*DC: 11% by 2022

Interstate Renewable Energy Council, January 2005

Example Policy: Renewable Portfolio Standard (RPS)

Example Policy: Public Benefits Funds(e.g. Michigan’s LI/EE Fund)Public Benefits Fund Map (Dec 2004)

(Not Shown: DC)

State has a PBF for renewablesFunding through voluntary contribution

U. S. Job Potential

● “U.S. to save $49 Billion and create 355,000 jobs by 2020 with 20% RPS (*)

● “MI to create 4,950 new jobs, $50 Million in income, and $80 Million in gross state product by 2020 with 20% RPS (*)

● “1.4 Million new jobs created in U.S. by 2025 with comprehensive reduction in fossil fuels” (**)

(*) Union of Concerned Scientists, Aug/Sep, 2004(**) Redefining Progress, Blue-Green Alliance, October, 2004

● “Additional 440,000 jobs per year created by 2025 by 50% vehicle electrification” (*)

● “Over twice as many jobs created with 20% renewables, by 2020” (**)

● “217,000 jobs in Michigan are generated by environmental expenditures; annual sales of $12.9 Billion, growing 1-2 % annually” (***)

(*) Rochester Institute of Technology, Spring, 2003(**) UC Berkley, April, 2004(***) Management Information Services, September, 2004

U. S. Job Potential

Clean Technology Opportunities

● What is “Clean Tech”?● Why focus on Clean Tech?● Michigan’s Clean Tech Landscape . .

• Entrepreneurs• Challenges• Opportunities• Best Practices

What is “Clean Tech”?

● Short for “Clean Technology” … a product, process or practice that increases economic and social value and environmental quality at the same time through more efficient and effective use of natural resources.

● “Clean Tech Marketplace” includes . . . Clean manufacturing Alternative energy Water conservation/purification Energy efficiencyPollution prevention Recycling/recovery Green products Green constructionSustainable transportation Green chemistry

Why focus on Clean Tech?

● Changing Environment● Changing Markets● Changing Opportunities● The Race is On!

Our Changing Environment

● Resources are becoming scarcer . . .

● Earth is getting warmer . . .

Our Changing Markets● Rising

MaterialCosts

● EmergingMarkets

● Kyoto Protocol• Ratified by 122+ countries (Including Canada, Mexico, W.

Europe, Russia, China, India)

Our Changing Opportunities

But the Race is On!

● Clean tech could be a major Jobs Producer for Michigan • Estimates vary, but many predict hundreds of

thousands of new jobs over next two decades

● More and more states have major clean energy initiatives and funding

● Michigan is well behind the pack.● Michigan has a lot to gain - and to lose!

Michigan’s Clean Tech Landscape…

● Emerging clean tech companies● Bigger opportunities● Challenges● Best Practices

Michigan’s Clean Tech Landscape . . . Companies

● Some leading emerging clean tech companies• Energy Technologies• Water Technologies• Material Technologies

®

Energy Conversion Devices, Inc.Energy Conversion Devices, Inc.www.ovonic.com

50/50 Joint Venture with

ChevronTexaco

United Solar Ovonic LLC100% Owned Subsidiary

• Develops and sells cutting-edge energy technologies

• Selling solar power worldwide

• Manufactures NiMH batteries used in hybrid cars

• Over 650 employees

• Innovative Stirling Engine Design

• Utilizes waste heat to create powerand hot water

• Now in production and selling units,many of which are going to China

• Venture financed & 70 employees

• “Lab on Chip” Water Quality Testing• Real-time information management

of water quality over the web• Tech initially developed at UofM

• 38 employees today; 60 more in 2 years

• Venture funded

Important new technology● Great for the environnent, saves money,

and more hygenic • Saves 40,000 gallons of water per urinal/yr. • Save energy and treatment capacity• Reduces CO2 emissions• Qualifies for LEED points

Innovative young company• Moved to Grand Rapids from California in 2003• Over 30,000 urinals sold in U.S. & 50,000 worldwide• Sales more than doubled in 2004 with potential to

grow 10x in 5 years• Named a “21 Companies to Watch in 21st Century”

Michigan installations include:

• Foam packaging and insulation products made from cornstarch

• Technology developed at MSU• Growing sales. Customers includeToyota and Sony

• Same price/performance ratio as PE• Economics improve as oil cost rises• Located in Lansing, MI

KTM Industries, Inc.5597 W. Grand River Ave.Lansing, MI 48906Phone: 517-703-9140Website: www.ktmindustries.com

Sony PS/2 Game & Hard Drive

Manufacturer of WALLSEAL®, a spray-in-place cellulose insulation

• West Michigan manufacturerof cellulose insulation (using 150+tons/day of recycled newsprint)

• Innovative WallSEAL product can beblown in and stand up by itself!

• Installed in over 20,000 houses in theMidwest and Northeast in 2004

• Employs over 70

• German technology licensedby company based in E. Lansing

• Is bidding on projects nationally

• Provides roofing, stormwater, cooling and other benefits

• Can use Michigan turf farmers

Michigan’s Clean Tech Landscape . . . Opportunities

● Clean Cars● Industrial energy efficiency● Biomass fuels & products● Off-Shore wind power . .

• Saginaw Bay & Thumb are Major wind resources

• Wind turbine manufacturing?• “Free” Fuel and Jobs• Pennsylvania did it!

Michigan’s Clean Tech Landscape . . . Challenges

● Lack of Access to Local Michigan Markets• 18 Other States have renewable energy standards & goals• Energy efficiency, co-generation, & biomass face well

entrenched resistance and many unnecessary barriers• Manufacturers are more willing to cut jobs than to improve

productivity • State government hasn’t cared (until recently)

● Lack of Access to Capital• $1.2 billion of venture capital in 2003.• $19 million invested in Michigan (1.6% of total)• California had 30x more DOE SBIR I Awards in 2004

Best Practices from Other States

● Proactive Government• Governor’s Executive Directive is a helpful step• Set policies & regulations to reward clean tech solutions• Speed testing & approval of innovative clean tech solutions

● Actively encourage Michigan’s businesses and communities to adopt clean tech solutions• Provide know-how & incentives to buy clean tech solutions

● Greater Access to Capital• Greater access to investment and project financing capital• Assistance to go after Federal R&D and project funds

Next Steps?

Continuation of EDGE2 in concert with 21st Century Energy PlanContinue collaboration with post-secondary higher education institutions in Great Lakes AET AllianceActively promote 21st Century Jobs Fund to support RE/EE effortsPromote education and awareness