The high cost of Minnesota's Renewable Energy Standard

Minnesota businesses require competitive energy rates to compete both nationally and globally.  Paycheck-to-paycheck families need affordable energy to meet all their other basic needs.  So, you’d think that Minnesota lawmakers would have wanted to measure and track the impact of the state’s new green energy regulations on current and future energy prices.  After all, many of these regulations were intended to steer utilities away from low-cost energy investments. 

You might think so, but you’d be wrong.  Despite the fact that Minnesota recently implemented one of the most aggressive renewable energy mandates and energy efficiency mandates in the country, there’s very little effort made to estimate the actual cost of these mandates.   Fortunately, some folks are taking note of this oversight and doing something about it.  

The Minnesota Free Market Institute and the American Tradition Institute commissioned some economists at the Beacon Hill Institute to estimate the impact of Minnesota’s renewable energy standard on electricity rates and jobs. Their just released findings estimate that Minnesotans will pay an additional $15.04 billion for electric power between 2016 and 2025 due to Minnesota’s renewable energy mandate.   In percentage terms, this translates to a 24 percent increase in prices by 2025.  Businesses will shed 11,271 jobs on account of these higher rates.

Some legislators are also taking important steps to address the oversight.  Rep. Peggy Scott and Sen. Michelle Benson introduced legislation that would require utilities to report on the “rate impact of activities of the electric utility necessary to comply with [the renewable energy standard].”  Sue Hegarty with the Minnesota House of Representatives Public Information Services reports that there is bipartisan support for the idea.  I hope she’s right.  It’s time to start measuring the impact of Minnesota’s aggressive green energy regulations.

This is especially true because there is so much misinformation bandied about on renewables and green energy.   For an example, just look at how Finance & Commerce reported on the Minnesota Free Market Institute study.  The reporter, Brian Johnson, made an honest attempt to cover both sides of the issue.   However, Johnson made a familiar mistake of referencing the 2006 Minnesota Wind Integration Study to suggest “a more optimistic view of renewable power.”   The trouble is, unlike the MN Free Market Institute study, the wind integration study was not a comprehensive study of the cost of wind.  It never addressed the cost of energy itself or the cost of transmission upgrades.    I know this is getting a bit technical, but the 2006 integration study focused on only one slice of the cost equation—the cost of scheduling and operating conventional generating resources to accommodate the intermittency of wind.  Nonetheless, for five years the study has been held up by some as proof that wind energy is cost competitive.  That was never the point or conclusion of the study.   (I made this point in footnote 60 of my February 2011 report on energy.  Don’t tell me that footnote 60 escaped your attention.)

The fact is, policymakers need reliable information to make sound energy policy decisions in the future.  That’s why four of the thirteen energy policy recommendations in our American Experiment Blueprint report on energy involve transparency and accountability.