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Energy Policy in Minnesota: The High Cost of Failure

This report evaluates Minnesota’s energy policy and reaches five main findings that buttress one conclusion: Minnesota’s aspirational energy policy is a grand exercise in virtue signaling that does little to reduce either conventional pollution or greenhouse gas emissions.

Executive Summary

In recent years, the state of Minnesota has pursued a series of increasingly aggressive renewable energy and “clean energy” policies that cost electricity consumers billions of dollars, without achieving its ambitious environmental protection goals.

Minnesota law sets out ambitious state energy policy goals. The primary goal would have the state reduce greenhouse gas emissions 15 percent below 2005 levels by 2015, 30 percent by 2025, and 80 percent by 2050. State law incorporates a number of additional energy policy goals aimed largely at supporting these greenhouse gas reduction targets. In particular, the state’s renewable energy standard requires utilities to generate a substantial portion (25 to 30 percent) of electricity from renewable sources, mostly wind.

Historically, Minnesota enjoyed the advantage of relatively cheap electricity, with rates typically 18 percent less than the national average. However, since spending an estimated $10 billion on building wind farms and billions more on new and upgraded  transmission lines, Minnesota has lost this competitive advantage with little to show for it, except higher electric bills. As electricity generation from carbon free wind approaches 20 percent of total generation, Minnesota has not experienced any appreciable reduction in greenhouse gas emissions relative to the U.S. average.

This report evaluates Minnesota’s energy policy and reaches five main findings that buttress one conclusion: Minnesota’s aspirational energy policy is a grand exercise in virtue signaling that does little to reduce either conventional pollution or greenhouse gas emissions.

Minnesota has lost its advantage on electricity pricing. Between 1990 and 2009, the retail price of electricity in Minnesota was, on average, 18.2 percent lower than the national average. However, in just seven years, this price advantage has completely disappeared. February 2017 marked the first month the average retail price of electricity in Minnesota rose above the U.S. price. (Data are available dating back to 1990.) If in the past seven years Minnesota would have maintained its historic price advantage versus the rest of the country, the state’s consumers would have paid nearly $4.4 billion less than what the actual cost of electricity turned out to be.

Minnesota’s energy policy primarily promotes wind power. Minnesota’s energy policy emphasizing renewable energy is mostly an electricity policy, which represents only about 40 percent of the state’s total energy consumption. Because Minnesota’s geography is not suitable for large-scale solar power, it aims, to date, for only modest increases in solar. As such, Minnesota’s energy policy is primarily a wind-energy policy.

Minnesota’s energy policy is failing on its own terms, as it has not achieved a significant reduction in CO2 emissions. While Minnesota was losing its advantage on electricity pricing, it did not see any significant decreases in CO2 emissions. CO2 emissions in Minnesota declined by 6.6 percent from 2005 (the peak year for CO2 emissions in both the U.S. and Minnesota) to 2014 (before starting to rise again). This decline is one-third less than the decline experienced by the nation as a whole, which saw greenhouse gas emissions drop 9.3 percent during the same time period. Looking at just emissions from the electric power sector, emissions in Minnesota dropped by slightly more than the U.S. However, since 2009, the state has made little to no progress
on emissions even as electricity generation by wind increased by 92 percent.

To satisfy Minnesota’s renewable energy standard, an estimated $10 billion dollars has been spent on building wind farms and billions more on transmission. In the past five years, Minnesota utilities have reported using wind power from wind farms totaling 5,000 megawatts of nameplate capacity to meet the requirements of the state’s renewable energy standard. Based on industry cost estimates for building new generating capacity, ratepayers are committed to covering an estimated $10 billion for constructing these wind farms and billions more for the transmission needed to move this new power to market. On top of these upfront costs, ratepayers are on the hook for ongoing wind energy maintenance costs, property taxes, and replacement power needed when the wind doesn’t blow.

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OCT 12 2017
http://www.windaction.org/posts/47329-energy-policy-in-minnesota-the-high-cost-of-failure
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