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Refuting “Local View: Minnesota Must Aggressively Move to Less-Costly Renewables”

My piece in the Duluth News Tribune detailing how a 50 percent renewable energy mandate would harm the mining industry has generated quite the controversy, with at least three counterpoints from renewable energy special interest groups: Citizens Utility Board, refuted here, Minnesota Conservative Energy Forum, refutation forthcoming, and Citizen’s Climate Lobby. It’s this last article that I’ll be refuting today.

The author of the piece said he wanted to highlight real-life, market examples of why wind and solar can work in Minnesota, so he began by quoting prices for solar in…Colorado.

According to the author:

“Last year, Xcel put out a request for proposals to replace its coal-fired power plants with renewables, and more than 400 bids were received. The median price for wind, the point where half the bids were higher and half were lower, was just 1.8 cents per kilowatt. With storage, the cost was 2.2 cents per kilowatt — or what it barely costs Minnesota Power to produce electricity with coal.”

As always, the Devil is in the details. The problem with citing power purchase agreement (PPA) prices is that these prices include the federal subsidies heaped upon wind and solar generators. Battery storage projects also qualify for federal subsidies if it is charged with wind or solar. PPA prices also fail to account for the additional costs of transmission and load balancing, so this analysis leaves out a very substantial piece of the puzzle.

Furthermore, just 24 hours of battery storage would cost at least $133 billion in Minnesota.

The author then claims that Xcel competes for industrial users in Colorado with electric co-ops that use coal, but I would encourage the author to focus on Minnesota, where EIA data show Xcel’s industrial electricity price is the highest among the state’s investor-owned utilities, and Xcel’s industrial electricity prices exceed the state average.

Vibrant Clean Energy (VCE) appears to be the en vogue-group for producing studies that underestimate the costs of renewable energy sources, which is where the $2.5 billion figure cited below comes from.

“Colorado will save an estimated $2.5 billion and achieve a 55 percent renewable penetration statewide with just these actions.”

My colleague, Mitch Rolling, wrote a wonderful takedown of the VCE study. In essence, VCE assumes costs for wind, solar, and battery storage will fall by around 80 percent. Berkeley Labs shows we’ve already seen cost declines for wind and solar level off, so these assumptions are more wishful thinking than accurate analysis.

“Reinforcing the marketplace, a study recently was released by Energy Innovation and Vibrant Clean Energy. Using data submitted to the U.S. government by utilities, the authors found solar and wind power were often less costly than coal-fired electricity when located within 35 miles of an existing coal plant to use existing labor and transmission infrastructure. Renewables beat out coal 74 percent of the time, and by 2025, 86 percent of coal plants will be more expensive than renewables. The analysis was probably conservative as there was no way of knowing what the debt load of the plant was, etc.”

The VCE study cited here is widely cited among renewable energy boosters, but it doesn’t hold up to scrutiny. The problem with this study is that it isn’t an apples to apples comparison of energy costs. It gives subsidies to wind and solar, and takes zero consideration of the additional transmission or load balancing costs that will be incurred to ensure electricity customers have access to reliable electricity when the wind isn’t blowing or sun isn’t shining.

Pretending that wind and solar are cheaper than coal while ignoring the need to provide backup electricity is intellectually bankrupt. Moving on.

The author is correct that Clay Boswell, a large coal-fired power plant operated by Minnesota power which produced electricity for about $32 per megawatt hour in 2017, is more affordable than wind or solar, but he is wrong about the cost of coal in general. He writes:

Minnesota Power’s Boswell Energy Center is the only coal plant in Minnesota that is even slightly less expensive than renewables — for now. Even Boswell will be beaten within six years.

According to utility filings with the Federal Energy Regulatory Comission (FERC), the Sherburne County coal plant generated electricity for only $30 per megawatt hour in 2017, and A.S. King produced electricity for $36.83, meaning both of these plants, along with Boswell, produced electricity for less than the cost of unsubsidized wind or solar. These three coal plants represent 96 percent of the electricity generated from coal-fired power plants in the state, and 37.2 percent of all the electricity generated in the state.

In other words, 96 times out of 100, Minnesota coal produces electricity at lower cost than new wind, and at half the cost of new solar according to numbers from Bloomberg New Energy Finance.

I suspect the author knew his arguments, up to this point, were easily refutable, so he decided to bring up the subject of a carbon tax.

“Even when coal or natural gas-fired electricity gradually become more expensive with carbon pricing, a border carbon tax as in the Energy Innovation and Carbon Dividend bill before the U.S. House of Representatives will charge our going rate for carbon on the carbon content of foreign steel and paper upon entry to the country. So the playing field would be leveled for our industries anyway.”

A carbon tax is unworkable both politically and economically. The fact that Washington state, of all places, voted down a carbon tax and five Canadian provinces are fighting the idea demonstrates these taxes are politically toxic. Economically, the tariffs that would be charged in a carbon tax scheme would have the same negative impact on consumers as tariffs charged for any other reason.

Lastly, the author writes:

“We have only 12 years to reduce greenhouse-gas emissions by 50 percent, according to climate scientists. Ignore the fossil-fuel apologists. We can do this transition economically and quickly.”

Here, he couldn’t be more wrong. The most conservative numbers for complying with the Green New Deal assume at least $5 trillion would need to be spent, and this assumes nuclear power will have a major role. Our study found going to 80 percent carbon free with 23 percent nuclear and 57 percent renewables would cost $80 billion, or $1,200 for every Minnesota household, every year, through 2050. In contrast, nuclear power, of which the author makes no mention, would cost far less, especially if we used Korean APR 1,400 reactors, as shown below.

If people who are concerned about climate change want to argue that global warming is an existential threat that justifies skyrocketing electricity prices to reduce greenhouse gas emissions, then it’s possible to respect their intellectual consistency, even if you happen to disagree that spending $80 billion to avert 0.0006 degrees C of potential future global warming by 2100 is a good return on investment.

However, that’s not what renewable energy advocates, like the author of the Duluth News Tribune piece are selling. Their claims that it will be easy and affordable are based on looking at a small fraction of the costs and inflating the benefits. I challenge Eric Enberg, who wrote this piece, to a wager. If electricity rates are higher in ten years than they are today, then he owes me a month’s salary. If not, I owe him a month’s salary.

If renewables are really causing electricity prices to fall, he should consider this easy money.

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