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CEO Forum: Facing the Future

Three CEOs, three business models, one shared outlook.

Fortnightly - June 2012

renewables, and efficiency.

For us, renewable energy is a little easier. We believe renewables should be part of a balanced portfolio, and that’s supported by the 2008 energy law, which says 10 percent of our power needs to come from renewables by 2015. Already 5 percent is being supplied by renewables. We’ve begun construction and this year we’ll complete our first large wind park, the Lake Winds project, which will bring our renewable percentage to 8 percent. We have another energy park on the horizon, and we’re entering supplier contracts. We’re moving ahead with renewable energy. Our total investment to achieve the 2015 target will be about $500 million. I think that’s about the right level until the costs come down, with the experience curve.

Fortnightly: Unlike most utilities, CMS has access to major storage capacity. How does that fit into your portfolio?

Russell: We operate one of the largest pumped-storage facilities in the world, the Ludington plant on Lake Michigan. We’re investing along with our partner DTE Energy to increase the capacity to about 2,200 MW. It’s a true engineering marvel. It not only allows us to serve peak load, but in the future it will help with balancing the intermittent nature of renewable energy being built in the state.

The Ludington plant was built on the premise that off-peak generation costs are low, because nuclear plants were running at night and load wasn’t there. So we could use off-peak power to pump up the reservoir with 27 billion gallons of fuel. But today in Michigan, wind generation is good at night, and we can use that energy at night to pump the reservoir. That’s where storage becomes an advantage—using energy with zero incremental cost, and putting it back into the system when demand and prices are high.

It would be very hard to duplicate a plant like Ludington, but we are expanding and upgrading it with more efficient runners and other equipment. The country would be well served by more pumped storage plants, but the siting is a challenge.

Fortnightly: How do EVs factor into CMS’s plans?

Russell: We believe in EVs. They are a component of the future, and we like the idea of the utility providing transportation fuel. Plus in Michigan the auto industry is part of our culture, and we support EVs as the evolution of that industry. We have EVs in our fleet, both Fords and Chevys, and we’re testing electric bucket trucks. It’s important for utilities to step up and facilitate EVs, and we are a part of that.

We offer incentive rates for Chevy Volt owners, with discounts on the electricity they use. We offered home chargers to the first 2,500 Volt drivers. Volts are made here in Michigan, and so are 80 percent of the batteries, and we’d like to see production continue. We’re offering incentives to help ensure this happens in Michigan, and the market reaches a critical mass. We install chargers for customers and we set up charging stations at many service centers and community areas.

The thing that’s held back