Without Much Straining, Minnesota Reins In Its Utilities’ Carbon Emissions

Source: By MICHAEL WINES, New York Times • Posted: Friday, July 18, 2014

Construction on the Minnesota Vikings stadium in Minneapolis. Lawmakers agreed to pay for roughly half of the stadium’s $1 billion cost but required, among other things, that it be energy efficient.CreditJenn Ackerman for The New York Times

MINNEAPOLIS — When city leaders and state legislators agreed last year to fund roughly half the $1 billion cost of a new stadium for the Minnesota Vikings, they attached the usual strings for such projects: It had to be architecturally iconic, employ steel made from Minnesota iron ore and offer at least a few cheap seats.

It also had to be energy efficient, from lighting to building materials to the sources of its power. In this state, that is not unusual. Minnesota has mandated sharp reductions in energy use in every new state-financed building for more than a decade, and in renovated buildings for more than five years.

While other states and critics of the Obama administration have howled about complying with its proposed rule slashing greenhouse gas emissions from power plants, Minnesota has been reining in its utilities’ carbon pollution for decades — not painlessly, but without breaking much of a sweat, either.

Today, Minnesota gets more of its power from wind than all but four other states, and the amount of coal burned at power plants has dropped by more than a third from its 2003 peak. And while electricity consumption per person has been slowly falling nationwide for the last five years, Minnesota’s decline is steeper than the average.

A solar array was installed at St. John’s University in Collegeville, Minn.CreditDwight Jelle/Best Power International

The Obama administration’s proposal would reduce power plants’ carbon pollution 30 percent from 2005 levels by 2030. Minnesota set similar nonbinding goals for its entire economy seven years ago: a 15 percent reduction by 2015, 25 percent by 2025 and 80 percent by 2050. (Minnesota measures carbon differently; by federal standards, its reductions would most likely be greater.)

The state swings some regulatory sticks in its carbon-cutting effort. Minnesota has not only set deadlines for utilities to increase the amount of electricity generated from renewable sources, but it has also required minimum shares for certain renewables like wind and solar energy. Minneapolis, which issued a hefty clean energy blueprint in February, is using its utility franchise negotiations to bargain for further carbon-cutting measures.

But it dangles carrots, too. Voracious power consumers like iron ore mines, for example, can sidestep a regulatory mandate by showing a commitment to reducing electricity use. And the state jump-starts green energy efforts by striking deals with utilities: This year, the state and its private utilities agreed to jolt the slow-growing electric-automobile market by offering discount recharging rates.

“We’re going to push the utilities harder than they want to be pushed, but we want them to make money while they’re doing it,” said State Senator John Marty, chairman of the environment and energy committee. “People don’t think it serves us well if we force-feed them.”

Utilities must produce 27.5 percent of their electricity from renewable sources by 2025. And they must wring enough waste out of their service areas — for instance, by helping customers insulate buildings or install efficient lighting — to reduce electricity sales every year by the equivalent of 1.5 percent of their revenues.

Some economic sectors like housing and farming so far have failed to meet the carbon reduction targets. Not so the power industry. “The utilities are on track to meet both the renewable energy standard and those emission reduction targets,” said Frank L. Kohlasch, the environmental analysis manager at the Minnesota Pollution Control Agency. Some utilities intend to beat the 2025 goal handily, he said.

The same is true of the 1.5 percent efficiency mandate, said Sheldon Strom, the president of the nonprofit Center for Energy and Environment, an adviser on energy issues.

In 2012, the Legislature considered eliminating the efficiency standard. “The utilities showed up at the Legislature and said, ‘It’s the lowest cost resource, best thing for our customers, we think it’s great,’ ” he said. “It surprised a lot of our elected officials.”

Minnesota has enjoyed some lucky breaks, notably a fleeting bipartisan moment in 2007 when the Republican Gov. Tim Pawlenty proposed far-reaching energy overhauls — including the renewable energy and carbon-emissions standards — that legislators in both parties readily voted into law.

But one crucial factor, many agree, is that regulators have given utilities flexibility to reduce their emissions. One result is that many major power companies have embraced and even profited from the standards — and kept rates low.

Minnesota has long allowed utilities to sidestep onerous rate hearings related to pollution-cutting measures if they can show the projects are cost-effective. That alone has helped utilities convert two coal-fired power plants to natural gas and upgrade pollution controls on several others, state officials say.

And while the state oversees the utilities’ renewable energy and carbon-reduction goals, the market largely chooses how they are met.

Some of the winners are shockers.

When Minnesota’s largest power producer, Xcel Energy, needed a standby electricity source for peak periods of power consumption, the state asked an administrative law judge to evaluate the bids. Four companies competed, mostly offering to build natural gas-fired generators.

The winner, chosen in January, was a pioneering project to generate 100 megawatts of power from about 20 solar arrays across the state all near substations that funnel power directly to customers. A gas-fired plant would have relied on high-voltage lines that are often congested, and where electricity dissipates with distance.

A 30 percent federal tax credit given to solar-energy projects provided a crucial edge. But plummeting solar panel costs also helped make a once-unthinkable project competitive, said Blake Nixon, the president of Geronimo Energy, the Minnesota company that will build the arrays.

“Two years ago, people blinked and looked up, and costs for the primary component in the system, solar panels, had dropped 75 percent,” he said. “And the overall cost dropped 50 percent.”

Then there is wind, which has bested the competition.

In the mid-1990s, regulators required Xcel to provide a modicum of wind-based power in exchange for concessions on storing nuclear waste. “Xcel had to pay premium for wind power, but that put in place a premium for wind producers,” said State Representative Melissa Hortman, chairwoman of the Minnesota House Committee on Energy Policy. “What’s happened now is that the wind industry has become competitive.”

In fact, state officials say the renewable energy requirements have created an industry that builds, erects and services turbines and their transmission lines throughout the state’s blustery west. Cheap steel and more efficient turbines have made wind the low-cost power source here. On a single day in February 2013, wind turbines supplied nearly one-third of the power sent to Xcel customers in the Upper Midwest. On average, the utility gets 13 percent of its power from wind — the same as from natural gas.

“We’re adding 750 megawatts of wind in the next couple of years, and we’re getting that for a price that’s below the competing alternatives,” said Frank Prager, the vice president for environmental policy at Xcel Energy.

Bill Grant, the deputy commissioner of Minnesota’s Commerce Department, said he believed that the federal tax credit for wind-energy projects was increasingly irrelevant. “My hunch is, given prices right now, we’d be building wind with or without the subsidy,” he said.

Today, energy consumption is growing more slowly than Minnesota’s robust economy, and greenhouse-gas emissions have basically been level since 2000. And some legislators have begun dreaming big. Last year, the Legislature approved another clean-energy measure: a study of the prospects for making Minnesota’s economy carbon-free, from the power-hungry wheat and sugar beet fields in the west to Minneapolis-St. Paul’s car-clogged freeways in the east.

“There was some rolling of eyes,” said Mr. Marty, the measure’s sponsor, “but it passed. The states that are going to have the best economies are the ones that are planning ahead.”