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4 Reasons Why The ACE Rule Is Good For Minnesota

Yesterday, we reported that President Trump’s EPA released the final version of the long-awaited for Affordable Clean Energy rule (ACE rule), set to replace the Obama Administration’s Clean Power Plan.

Here is a run-down of the new rule and the 4 main reasons why the it could be a win for Minnesota ratepayers.

The ACE Rule: What Is It?

While the ACE rule will still regulate emission levels, it will essentially allow electric utilities an easier pathway to continue operating coal facilities by improving their heat efficiencies, resulting in a reduction in the rate of CO2 emissions per megawatt hour (MWh) of electricity produced at coal-fired power plants.

Doing so would be far more affordable than retiring coal facilities in favor of building brand new renewable energy facilities, which states like Minnesota and Colorado have been doing for years.

For Minnesota specifically, if policymakers changed course and strictly adhered to the ACE rule, it could result in the following:

1. Ending Expensive Investments For Renewable Energy Sources Causing Rates To Increase In The State

Since 2004, demand for electricity in Minnesota has remained largely flat, increasing by merely 3 percent. As such, no new sources of electricity were required since 2004 to reliably meet electricity demand.

However, due to renewable energy mandates forcing utilities to invest in new power facilities, the amount of total power plants in Minnesota has increased by nearly 170 percent since 2004, the year before Xcel Energy became the first utility company in Minnesota mandated to include renewable energy sources in its energy mix.

Because ratepayers have been forced to bear the cost of building these new power facilities, while also not increasing their electricity usage, the cost of these facilities is now being spread over fewer electricity sales, resulting in skyrocketing electricity rates and monthly electric bills for electricity consumers.

The result? As shown in the graph below, Minnesotan’s now pay 26 percent more per month on electric bills than they did in prior years for using the same amount of electricity, in inflation-adjusted dollars.

If adhered to, the ACE rule would end this incredibly expensive pursuit of green energy sources that the state simply doesn’t need.

2. Decreasing The Amount of Generating Capacity On Minnesota’s Electrical Grid, Reducing the Amount of Capital Expenses Minnesota Ratepayers Must Pay For

If the ACE rule was implemented in Minnesota, ratepayers would also save money by not repowering the renewable energy facilities currently on the grid.

In 2005, Minnesota had 12,957 megawatts (MW) of generating capacity on the grid. Today, thanks to mandates requiring the construction of renewable energy sources, Minnesota now has more than 18,100 MW – a 40 percent increase – even though electricity sales have remained flat during this time.

This has resulted in a large amount of “excess capacity” on Minnesota’s grid, which is incredibly expensive to maintain.

Based on findings from our most recent energy report, “Doubling Down on Failure,” Minnesota could reduce the amount of generating capacity on the grid back down to 2005 levels by the year 2043, decreasing at a rate of about 1.2 percent per year, and still reliably meet electricity demand.

This would result in enormous savings for Minnesota ratepayers, who would no longer be forced to bear the cost of maintaining and operating excess and expensive energy sources in the state that sit idle for large periods of time.

3. Roughly $88 Billion In Savings For Minnesota Ratepayers Alone Compared To A 50% Renewable Energy Scenario by 2050

In our “Doubling Down On Failure” report, we found that a 50 percent by 2030 renewable energy standard would cost Minnesota ratepayers $80.2 billion to implement and maintain through 2050.

Contrarily, our same report found that the ACE rule would actually save ratepayers close to $7.5 billion through 2050 by simply upgrading our existing energy sources, retiring excess and unnecessary renewable energy sources, and running coal, natural gas, and nuclear plants at ideal capacity factors that fully utilizes their potential to produce inexpensive electricity.

If the ACE rule was implemented in Minnesota, it would result in a cumulative savings of about $88 billion through 2050 compared to a 50 percent renewable energy standard – which is the path that Minnesota policymakers seem headed towards.

4. Allowing Minnesota Ratepayers To Utilize Fully Depreciated Power Plants, Reducing the Cost Of Electricity For Everyone

The main reason why the ACE rule would result in savings of nearly $7.5 billion for Minnesota ratepayers compared to current costs is because it would allow ratepayers to reap the benefits of fully depreciated coal facilities that no longer have construction expenses to pay off.

Depreciating power facilities was a main driver in reducing the cost of electricity from 1990 to 2004, which saw electricity rates decrease by 20 percent in inflation-adjusted dollars.

This trend of decreasing electricity prices completely reversed course after 2004 when the state first mandated Xcel to incorporate renewables in their energy mix. Electricity prices only continued to grow after the passage of the Next Generation Energy Act (NGEA) in 2007, which mandated the remaining utilities in Minnesota to incorporate renewables into their energy portfolio, as well.

The ACE Rule Is Good For Minnesota

With all that said, the ACE rule would undoubtedly be a benefit for Minnesota ratepayers, who would end up paying far less for electricity if implemented in the state.

But what about increasing CO2 emissions? Won’t that be bad for the planet and increase the threat of global climate change?

Unlikely.

Global CO2 emissions continue to increase annually despite America reducing emissions substantially in recent years, primarily because developing countries need reliable electricity that produces electricity 100 percent of the time. As such, these countries are building coal and natural gas plant’s at accelerating rates. The fact that developing nations literally can’t use renewables to provide reliable electricity is a striking example of why relying solely on wind and solar for electricity is a fool’s dream.

In case no one has told you, because renewable energy sources need a substantial amount of backup generating sources on the grid to cover for when the wind isn’t blowing and sun isn’t shining, they are largely “luxuries” of developed nations that already have stable electricity markets capable of incorporating them.

If Minnesota lawmakers were concerned with Minnesota ratepayers in the slightest, Trump’s new ACE rule would be cause for celebration.

 

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