Utah State University

Renewable Portfolio Standards: Michigan

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The United States has no federal mandate for “renewable” power production, so a majority of states, including Michigan, have created their own state laws called Renewable Portfolio Standards (RPS). These laws require certain renewable sources be included among the overall menu of options from which electricity companies produce power.

In October 2008, Public Act 295, also known as the Clean, Renewable and Efficient Energy Act, was enacted in Michigan, which called for utilities to generate 10 percent of retail electricity sales from renewable energy sources by 2015. In 2015, Michigan legislators and the governor propose differing bills dealing with the future of the RPS, ranging from doubling the standard to repealing it entirely.

The Utah State University’s Institute of Political Economy report analyzes how the changes in electricity markets caused by RPS alter the functioning of a state’s economy and institutions, with a specific focus on Michigan. The report uses a tax-based model, an empirical analysis, and a survey of legal rules to determine final conclusions.

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Common Questions About Renewable Portfolio Standards (RPS)

Updated September 27, 2015

What is a renewable portfolio standard?

Simply put, an RPS is a state law that mandates a certain percentage of statewide electricity be provided by various government-subsidized, alternative sources of energy production – also known as “renewables.” Many states, like Pennsylvania, Michigan, Kansas, North Carolina, Ohio and Colorado have created their own mandate. Most of these laws require that states attain target percentages of electricity that must be utilized by a certain date.

Why research renewable portfolio standards (RPS)?

Utah State University’s Institute of Political Economy (IPE), does research on a variety of subjects related to energy, environmental and land topics. A number of states have recently implemented their own RPS, which uses a combination of mandates and subsidies to promote renewable energy resources. The study looks at real costs and the impact of economic incentives within the states where RPS has been implemented. We examine the impact on consumers and the prices they pay for energy, the impact on jobs, and other economic consequences of these mandated standards. Our academic focus and standard is to examine a spectrum of economic factors and provide information based on verifiable academic data. We also have ongoing research on a variety of energy sources, including coal, wind, solar, bio-mass, natural gas, and others.

Where do you find data to use in your research?

The RPS study is an academic, peer-reviewed research report intended for public consumption. The bulk of data for our RPS analysis comes from the federal Energy Information Administration (EIA), which is considered the most reliable data publicly available.

How is your research funded?

The Institute of Political Economy receives funding from a variety of sources including individuals, foundations, corporations, and government grants. Our research process is the same, regardless of the funder or topic of our research. Organizations who provide funding, for this or any of our studies, are completely walled-off from the research and the process for the study’s completion. Funding sources do not provide input into how the study is conducted or what conclusions are reached. Our researchers and their teams come up with their own projects and follow a strict focus on empirical, straightforward academic research of the highest quality.

What is your publication process?

Utah State University’s Institute of Political Economy develops questions and ideas that are relevant to the public and policymakers. These questions and ideas are tested according to academic rigor using both time-tested and innovative methodologies. In order to achieve the greatest accuracy and insight, the methods are peer-reviewed and fact checked for accuracy. Our research is intended to be timely and responsive to current issues and trends.

What are the major takeaways of the RPS studies?

The RPS study findings utilize an innovative method of analysis originally developed by the Federal Reserve Bank of Philadelphia. Through econometric analysis and modeling, the methodology isolates the effects of policy mandates like RPS and outputs general impacts. Our findings show that states with RPS have a significantly higher set of negative economic impacts than states without RPS. Specifically, our research shows that across RPS states, industrial production (measured by electricity sales) is greater than a 13% decline. Additionally, real personal income declines in RPS states by almost 4 percent.

What is the Institute of Political Economy (IPE)?

Originally founded by Professor Randy Simmons at Utah State University, The Institute of Political Economy is a research and policy analysis center. IPE has grown to include several scholars interested the intersections between free markets, natural resources, public lands, and energy. Scholars also working with IPE include Dr. Chris Fawson, Dr. Ryan Yonk, and a variety of other professors and experts with expertise in our core areas.

When your first RPS study on the State of Kansas released, and then North Carolina and Ohio afterwards, the wind-industry trade group, AWEA, and others like the Sierra Club, said your methodology was flawed, is that true?

It is not surprising that an industry trade group that represents renewable energy interests would try to rebut the study, however we stand confidently behind the study methodology and validity of the findings. The RPS studies from Utah State University’s Institute of Political Economy use practices and processes that are the industry-standard in the academic research community. The methodology used in each RPS study underwent a double-blind review process. During this verification process, anonymous and unbiased subject-matter experts provided challenges and feedback to study’s authors. Before the process concluded, the authors reconciled each individual challenge and piece of feedback before moving forward with the RPS studies.

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