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If Efficiency Is No Longer Cost Effective, We Shouldn’t Subsidize It

The Minnesota Department of Commerce released a study on Tuesday saying that electric and natural gas utilities could continue to meet their current efficiency mandates, but that it will become more expensive to do so over time.

Under the Next Generation Energy Act, passed in 2007, electric utilities are mandated to reduce their electricity sales by 1.5 percent annually. Electric utilities have reached this goal, but according to the Commerce report, the days of easy, low-cost energy savings are nearing the end.

In order to keep up the energy savings, utilities will have to pay higher “incentives” and subsidies to get consumers to adopt more energy efficient technologies. The problem is, utility companies will be reimbursed for these subsidies, and all Minnesotans will end up paying for energy efficiency subsidies for a few who cash in on them.

I am all for free-market energy efficiency. If you can save money by shutting off the lights when you leave, or purchase a more efficient refrigerator when your old one no longer works, that’s all to the good. But efficiency should be its own reward, and the savings realized by Minnesota families should be the primary incentive for becoming more efficient.

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