Michigan Clean Energy and Economic Development Policies
February 23, 2012
by Ann McCabe
Five years ago, Michigan studied growth industries and identified advanced battery, wind, solar and bioenergy as sectors of opportunity given the state’s core competencies of advanced manufacturing work force and infrastructure. The Michigan Economic Development Corporation (MEDC)21 hired experienced talent, and each sector determined the best approach given needs, gaps, funding and capabilities.
Michigan is positioning itself to become the advanced battery capital of the world22 and has attracted an extensive network of wind and solar companies, both power generators and parts manufacturers. A local CEO refers to Michigan’s trifecta: great wind, manufacturing capability and need for electricity in-state.23 The state, being a peninsula, tends to use the power it generates since access to the transmission grid is difficult.
Michigan offers R&D, manufacturing expertise, award-winning university training programs, a highly-skilled tech-savvy workforce, and business financing, retention and relocation tools. In 2011, Governor Rick Snyder enacted a flat 6% corporate tax for C corporations.24 The state has a number of business development programs; some have allocated all their funding.
- Since 2006, the 21st Century Jobs Fund has helped reshape and grow the high-tech economy through investment to rapidly create companies and jobs in four areas. From 2000-2009, $15.7 million went to Alternative Energy companies and $46.2 million to Advanced Automotive, Manufacturing and Materials companies.25 The state invested $500 million in the 21st Century, Venture Michigan and InvestMichigan! Funds. A “pre-seed” fund provides help to start ups in automotive, alternative energy, and other high-tech areas.
- The Centers of Energy Excellence (COEE) support development, acceleration and sustainability of Michigan’s energy sector by leveraging state-appropriated dollars with private. The two rounds of funding include allocations through 2011. Program benefits include a 1:1 match for federal funding of up to 50% of the total project’s cost.26
- The state has designated Renaissance Zones that allow a company in the zone to operate free of virtually all state and local taxes over the life of the designation.27
- The 2009 Michigan Supplier Diversification Fund loaned more than $191 million to 23 companies and created or retained 1,800 jobs overall.28 In 2011, three new business growth funds replaced the fund with the approval of $79.1 million from a new federal program Michigan officials championed.29
Ann Marie Satry, CEO of Sakti3 and COEE recipient, says “The concept behind the Centers of Energy Excellence is simple: to locate a strong cohort of young and existing companies to capitalize on our existing strengths and to grow them in the alternate energy domain. There’s no clearer intersection of those two things than in electric vehicles because of our strong automotive R&D and execution and our strong interest in clean tech.”30
Eric Shreffler, Advanced Energy Storage Director for the MEDC, said that job creation and diversifying the state’s most important industry, automotive manufacturing, were key drivers for the battery sector focus, although electric vehicles also help lessen dependence on foreign oil and reduce greenhouse gas emissions. Based on MEDC’s research, the state developed and in 2008 passed the nation’s first battery tax credit legislation amending the Michigan Business Tax Act to provide four tax credits to stimulate the development of high-power energy batteries needed by hybrid, plug-in hybrid and fuel cell vehicles.31 The credits helped attract vertically integrated businesses, minimizing shipping, and supporting innovative products such as electric vehicles. The state expanded the credit program twice since its authorization. As of early 2011, the state has allocated all of its cell battery credits.
In Michigan, a combination of state and federal incentives and the proximity to customers helped attract six advanced battery companies: A123, LG Chem, Dow Kokam, fortu Power Cell, Johnson Control-Saft and Xtreme Power received $100 million state battery cell manufacturing credits.32 Michigan companies A123, LG Chem, Dow Kokam, and Johnson Controls-Saft (JCS) received four of the six federal cell manufacturing awards from the American Recovery and Reinvestment Act (ARRA), which made $2.4 billion available nationally. DOE’s ARRA support helped jumpstart and grow this sector in the U.S. and make Michigan the center of American cell manufacturing.
A123 is one of the world’s largest suppliers of high-power lithium-ion battery cells and packs. In 2008, Michigan convinced A123’s Watertown, Mass.-based management to locate its operations in Michigan rather than Asia. In 2009, A123 received the second-largest DOE stimulus grant, $249 million, to build battery plants in Michigan.33 The company has invested more than $600 million in manufacturing operations in Livonia and Romulus, creating more than 800 jobs. Their Michigan office is located in a building that was vacant for 10 years, right across from the MEDC. The state approved-Renaissance Zone in Romulus allows the company to operate free of virtually all state and local taxes over the life of the designation.
Wind and Solar Energy:
Michigan’s renewable portfolio standard requires 10 percent of utilities’ electricity to be renewable by 2015. Passed in 2008, the RPS has been critical in moving renewable energy forward according to Loch McCabe of Shepherd Advisors. The state has about 200 solar and wind supply chain companies, about 50 of which supply both industries.34 Solar is eligible for an additional two Renewable Energy Credits (RECs) for each MWh generated. Hemlock Semiconductor and Dow Corning, its majority owner, have made a huge investment in Michigan solar; Hemlock is the world’s largest manufacturer of polycrystalline silicon used in solar cells and modules.
Given the state’s automotive expertise and its good onshore wind resources, Michigan attracts wind generators and manufacturers of wind turbine parts and structures. The MEDC strategy focuses on the state’s manufacturing strengths and filling gaps to attract wind energy companies. The state has developed a wind supply chain of over 100 firms in the last four years through a public/private partnership with the assistance of NextEnergy and Kinetik Partners and manufacturing and technology innovation support. From 2010-2011, the state awarded over $45 million for process improvements and solutions to fill critical value chain gaps and created over 4,700 jobs.35 The large size of some wind turbine components makes geographic proximity a major advantage.
22 http://www.michiganadvantage.org/Advanced-Energy-Storage/, “Granholm signs legislation positioning Michigan to become advanced battery capital of the world,” January 14, 2009 MEDC press release, http://bit.ly/kPqjbs, and “ State approves Renaissance Zone to support A123 Systems’ Advanced Battery Facility,” May 26, 2010 MEDC press release, http://bit.ly/isrfGu.
23 Cascade Engineering’s CEO in MEDC video, http://www.michiganadvantage.org/Targeted-Initiatives/Wind-Energy/Default.aspx
25 P. 3 http://www.michiganadvantage.org/cm/Files/21st-Century-Jobs-Fund/21stCJF_invest_portfolio.pdf ;
27 A123’s Romulus facility is in a Renaissance Zone. http://www.michiganadvantage.org/cm/Files/Fact-Sheets/GeographicRenaissanceZones.pdf . Michigan has designated over 150 Renaissance Zones, including some for renewable energy, http://bit.ly/cX9R7l.
29 The three new programs are part of the Michigan Business Growth Fund. Ibid.
30 Sakti3 is developing rechargeable lithium-ion battery technology. Their CEO is quoted in a video on the MEDC website, http://www.michiganadvantage.org/Alternative-Energy-Sectors/.
31 MEDC factsheet, “Michigan, Battery Capital of the World,” May 2009 and http://www.michigan.gov/documents/recovery/Timeline_308823_7.pdf.
35 May 19, 2011 email from Steve Bakkal, MEDC.