I am grateful to the Minnesota Reformer for the opportunity to respond to the article written by Ben Gerber, and to share Center of the American Experiment’s vision for conservative energy policy in Minnesota with its readership. I sincerely believe the Reformer’ readers will find that we have more in common than they probably thought.
First and foremost, all Minnesotans must realize that there is no free market for electricity in our state. If there were, we wouldn’t be having this discussion.
Instead of a free market, Minnesota’s electricity system is an interconnected web of mandates requiring renewable energy, subsidies for these technologies, and perverse incentive structures for government-approved monopoly utilities.
The Next Generation Energy Act (NGEA), Minnesota’s renewable energy mandate, requires 25 percent of the state’s electricity come from renewable energy sources (except large hydro) by 2025. The Solar Energy Standard requires 1.5 percent of the state’s electricity be generated by solar.
Federal renewable energy subsidies incentivize their construction, and Xcel Energy, one of Minnesota’s government-approved monopoly utilities, is seeking to build as much wind and solar as possible to maximize their government-guaranteed profits (called a rate of return in energy industry lingo).
In short, the only reason we build wind and solar is because of government intervention in energy markets.
As a result, there is simply no intellectually honest way for Mr. Gerber to argue his support for wind and solar stems from a “principles first,” sense of integrity. The more plausible explanation for his position on renewables is simple self-interest.
Mr. Gerber works as the Executive Director for the Midwest Renewable Energy Tracking System (MRETS), which tracks the trade of renewable energy certificates (RECs) used to ensure states are meeting their renewable energy mandates.
In essence, his entire job is dependent upon state renewable energy mandates. His paycheck is derived from bean counting the NGEA. This information should have been disclosed in his article, or in his byline.
Not only are Mr. Gerber’s appeals to principles disingenuous, but so are his numbers. Wind and solar are not lower cost than Minnesota’s existing coal, natural gas, or nuclear power plants, which means we are simply adding electricity generation sources that are more expensive and less reliable to the grid.
According to the Federal Energy Regulatory Commission (FERC), Minnesota’s coal plants generated electricity for about $32-$33.50 per megawatt hour (MWh). Natural gas produced electricity for about $34 per MWh, and the same is true for nuclear power in 2018.
In contrast, Bloomberg New Energy Finance estimated the unsubsidized cost of wind in Minnesota to be $38 per megawatt hour, and solar to be around $60 per MWh in the same year.
Furthermore, these cost estimate don’t include the billions of dollars that would need to be spent on additional transmission lines for wind and solar projects, additional utility profits that drive up costs for consumers, or the cost of generating electricity from traditional power plants when the wind isn’t blowing, or the sun isn’t shining.
All these factors add more costs to operating the grid, which is a key reason Minnesota’s electricity prices have increased nearly 30 percent faster than the national average since then-Governor Tim Pawlenty signed the NGEA into law.
Regarding North Dakota coal plants, these plants have seen their profitability undermined by the subsidies received by wind turbines. When the wind is blowing, it can cause so much electricity to be placed on the grid that prices go negative. Because of the subsidy, wind plants can still make money even if the price is -$23 per MWh.
Coal plants have a hard time increasing our decreasing their output quickly. Because of this feature, coal plants incur losses by continuing to sell power to the grid when prices are negative. Coal plants stomach losses in this scenario. Thanks to subsidies, wind producers still make money.
Mr. Gerber likely knows this, but, self-interest.
Regarding the future, Center of the American Experiment has been the leading advocate of legalizing new nuclear power plants in Minnesota, and we have also called for the Minnesota legislature to recognize electricity generated by large hydroelectric dams to count as “renewable” under the NGEA. Both technologies are superior mechanisms for reducing Minnesota’s emissions in the future.
For one thing, nuclear power plants can last 80 years. Wind turbines last 20 years, and often need significant repairs before then. Solar panels generally have a 25-year warranty. Nuclear power plants do not need large transmission investments like wind and solar, and they can also run irrespective of the weather, meaning they don’t need “backup” generators for when the weather isn’t cooperating.
If Minnesotans want to be carbon free for the long haul, Center of the American Experiment believes nuclear and hydroelectric power are the most sensible ways forward.
If Mr. Gerber truly cares about the climate, his advocacy of wind and solar means he is attempting to tackle the issue using the most expensive and least effective means possible.
Again, naked self-interest, rather than a sober analysis of the energy landscape, does a better job of explaining his positions.
Hats off to the Minnesota Reformer for allowing this debate.