American Experiment Releases Groundbreaking New Study on the High Cost of Renewable Energy Mandates in Minnesota

American Experiment is pleased to announce we are releasing a groundbreaking new study detailing the high cost renewable energy mandates in Minnesota. On the 2018 campaign trail, many DFL candidates, including Governor Tim Walz, said they would make obtaining 50 percent of Minnesota’s electricity through renewable energy sources by 2030 a top priority in their policy platform. Now DFL’ers in Minnesota are pushing their own version of the Green New Deal, mandating that Minnesota must get 100 percent of its electricity from “carbon free” resources by 2050.

Our study found that attempting to achieve a 50 percent renewable energy mandate would cost Minnesota $80.2 billion through 2050, and attempting to go 100 percent renewable with wind, solar, and battery technologies would cost exponentially more. Nuclear power, on the other hand, would achieve the same amount of carbon-dioxide-free electricity at a much lower cost than wind and solar power. We also looked at the impact of upgrading Minnesota’s existing coal-fired power plants under the Affordable Clean Energy (ACE) rule proposed by the Trump Administration. This rule would allow coal-plants to make efficiency upgrades to reduce their carbon dioxide emissions per unit of electricity generated.

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If you thought our mining paper, Unearthing Prosperity, was long, you’ve got another thing coming.

The executive summary and seven policy recommendations based on our findings are below.

Enacting a 50 percent renewable energy mandate by 2030 would:

Increase electricity costs by $80.2 billion to meet mandated renewable energy goals and maintain this electric system through 2050. This cost is far more than the Short-Term Nuclear, Long-Term Nuclear, or ACE scenarios. The 50 percent renewable energy mandate described under the Renewable scenario would cost an additional $80.2 billion through 2050 compared to 2016 costs. The Short-Term Nuclear scenario would increase costs by $58.2 billion, the Long-Term Nuclear scenario would increase costs by $27.7 billion. The ACE scenario would reduce costs by $7.5 billion through 2050.

Cost each Minnesota household $1,200 per year through 2050. Building and maintaining an electric grid built to accommodate renewable energy resources would cost each Minnesota household an average of $1,200 per year, relative to 2016 prices. Each Minnesota household would pay an additional $867 under the Short-Term Nuclear scenario, and $410 under the Long-Term Nuclear scenario, every year through 2050, compared to 2016 prices, but only a small portion of this will appear on their monthly utility bills. Maintaining and upgrading Minnesota’s existing coal-fired power plants under the ACE scenario would reduce electricity costs, saving Minnesota households an average of $112 per year.

Cause electricity prices to increase by more than any other scenario. The Renewable scenario would cause electricity prices to increase an average of 4.18 cents per kilowatt hour (kWh), increasing the total retail price of electricity by 40.2 percent relative to November 2018 prices. The Short-Term Nuclear scenario would increase costs by an average of 3.03 cents per kWh, the Long-Term Nuclear scenario would increase costs by 1.45 cents per kWh. In contrast, the ACE scenario would reduce electricity costs by 3.8 percent.

Increase household electric bills by $375 per year, a 32 percent increase compared to 2017. Increasing electricity costs will have far-reaching negative consequences for Minnesota families, especially low-income families and seniors, schools, hospitals, and businesses, and harm our economy as a whole.

Because doubling down on Minnesota’s renewable energy mandate would cause the price of electricity to rise by 4.18 cents per kWh under the Renewable scenario, the average Minnesota household using 748 kilowatt hours of electricity every month will see its monthly bill increase by $31.24 per month, or $375 per year.  Yearly electric bills would rise by $272 under the Short-Term Nuclear scenario, $130 under the Long-Term Nuclear scenario, and Minnesota households would save $35.10 per year under the ACE scenario through 2050.

Force the Edina school district to lay off 10 teachers to make up for higher electricity prices. Edina schools use 13.8 million kWh of electricity every year. Increasing the price of electricity by 4.18 cents per kWh would result in increased electricity costs of approximately $576,425. Edina would have to lay off more than 10 teachers making $56,000 per year to pay these higher electric bills, or raise property taxes to keep them on staff.

Destroy 20,950 jobs by 2050 and reduce Minnesota’s GDP by $3.1 billion every year to create temporary construction jobs. Renewable energy advocates
claim the renewable energy industry has created 7,241 jobs in Minnesota, but nearly all of these jobs are temporary construction jobs. In contrast, the economic modeling software IMPLAN shows higher electricity prices from renewable energy will destroy 20,950 more-permanent jobs through 2050. Higher electricity prices in the Short-Term Nuclear scenario would result in a loss of 13,916 jobs, and the Long-Term Nuclear scenario would result in a loss of 6,745 jobs through 2050.

By reducing the cost of electricity relative to 2018 prices, the ACE scenario would result in an increase in employment of 1,518 jobs.

Harm energy-intensive industries, such as agriculture, healthcare, manufacturing, and mining, the most. As electricity prices rise, job losses would likely be most significant in industries where electricity use is a large expense, such as agriculture, healthcare, manufacturing, and mining. These job losses would hit hardest communities like Austin, Rochester, St. Cloud, and Hibbing.

Cement our need for fossil fuels for decades. Despite the common belief that wind and solar power can replace reliable forms of electricity like coal or natural gas, renewable energy makes fossil fuel energy indispensable. This is because regardless of how much wind or solar power is built there will be times when they produce zero electricity. During these times, we would still rely on natural gas and coal-fired power plants to generate the electricity we all depend upon.

Both nuclear scenarios would reduce Minnesota’s reliance on fossil fuels because nuclear energy does not need backup coal or natural gas generation. Nuclear power can therefore reduce, rather than merely periodically displace, our reliance on fossil fuels.

Fail a cost-benefit analysis, as determined by the Minnesota Public Utilities Commission. The cost of reducing one metric ton of carbon dioxide while providing reliable electricity using wind and solar would eclipse $135 through 2050, while the Short-Term Nuclear and Long-Term Nuclear alternatives would cost $113 and $125 per metric ton of CO2 averted, respectively. The cost of reducing CO2 emissions in each of these scenarios vastly exceeds the Social Cost of Carbon (SCC) values assigned by the Minnesota Public Utilities Commission (PUC), which range from $15.20 to $69.48 per short ton by 2050.

This means the Renewable scenario, the Short-Term Nuclear scenario, and the Long-Term Nuclear scenario would each spend more money to avert carbon dioxide emissions than the anticipated economic damages of each marginal ton of carbon dioxide emitted into the atmosphere; thus, failing a proper cost-benefit analysis.

Reduce Minnesota’s share of carbon dioxide emissions by only 0.0006 of the global total by 2030. Doubling Minnesota’s renewable energy mandate would reduce CO2 emissions from Minnesota’s electric generating plants from 0.0283 gigatons (28.3 million metric tons) in 2017 to 0.0052 gigatons (5.2 million metric tons) in 2030. In 2018, global fossil-fuel-related CO2 emissions reached 37.1 gigatons, meaning Minnesota’s entire electric sector accounted for 0.00075 of global CO2 emissions.10 Therefore, doubling Minnesota’s renewable energy mandate would bring our emissions down from 0.00075 to 0.00013 of global CO2 emissions. These reductions in CO2 would potentially avert 0.0006° C of warming by 2100, an amount far too small to be measured.

Because greenhouse gases mix evenly in the air, Minnesota would still incur 99.94 percent of the warming impact caused by rising greenhouse gas emissions from other states and countries. This is not to say we should throw our hands up and do nothing, but we must be realistic about the costs that will be borne by Minnesotans and the comparatively small benefits they or anyone else would reap.

Policy Recommendations

Our research leads us to seven common-sense policy recommendations that would reduce the costs of electricity in Minnesota and offer more affordable, and more effective, options for reducing carbon dioxide emissions than renewable energy sources such as wind and solar. If adopted, these recommendations would save Minnesota electricity consumers billions of dollars in the coming decades.

1) Direct the Minnesota Public Utilities Commission and electric companies to study the feasibility of fully implementing the ACE rule. The ACE scenario is the only scenario examined that passes a cost-benefit analysis based on Social Cost of Carbon estimates established by the Minnesota Public Utilities Commission through 2050. Therefore, Public Utilities Commissioners should examine and instruct electric utilities to study the feasibility of the ACE rule and, if appropriate, implement it as a means of complying with Minnesota state statutes that direct utilities to aim for electricity rates to “be at least five percent” below the national average.

2) Legalize the construction of new nuclear power plants in Minnesota. Minnesota state law has prohibited the construction of new nuclear power plants since 1994. If Minnesota lawmakers want to show true leadership on reducing CO2 emissions, they should seek to provide the greatest and most sustainable reduction in emissions for the lowest possible cost. Ending Minnesota’s nuclear ban is the only way to provide reliable, affordable baseload power with no carbon dioxide emissions.

Minnesota lawmakers should designate a task force to explore least-cost solutions for nuclear power—including Generation III reactors built by South Korean firms that recently have been granted key safety and design approvals by the Nuclear Regulatory Commission (NRC)—and Small Modular Reactors (SMR).

3) Utilize existing coal and natural gas plants for the entirety of their useful lifetimes. Minnesota ratepayers have financed billions of dollars in existing coal and natural gas infrastructure and deserve to reap the benefits of their investment through lower electricity prices: $52.8 billion under the Long-Term Nuclear scenario, or $88.1 billion under the ACE scenario over the coming decades, compared to doubling Minnesota’s renewable energy mandate.

If Minnesota lawmakers are truly serious about reducing emissions and providing a just, equitable, and affordable transition to carbon-dioxide-free electricity, they should legalize new nuclear power plants and pursue the Long-Term Nuclear scenario, which would save Minnesota households $790 every year compared to renewable energy without compromising environmental quality.

Furthermore, using existing power plants until they reach the end of their useful lives allows for advances in nuclear technology, such as the SMR that are currently being planned for construction at the Idaho National Laboratory, to reduce costs and increase unit flexibility while providing safe, reliable power.

4) Require utility companies to factor in the cost of “load balancing” with natural gas backup for renewables in their Renewable Energy Standard Rate Impact Reports. Utilities must report the cost of renewable energy in their Renewable Energy Standard Rate Impact Reports, but they currently are not required to detail the cost of natural gas sources needed to ensure reliable electricity. These are significant costs that should be attributed to Renewable Energy Standards, along with additional property tax expenses and the impact of these policies on utility profits. Minnesotans deserve to know the total cost of renewable energy.

5) Repeal the Next Generation Energy Act, or amend it to include all sources of electricity that do not emit carbon dioxide. If Minnesota lawmakers are sincere in their belief that we must reduce carbon dioxide emissions as soon as possible to limit the warming impact of greenhouse gases, they must end special carve-outs for wind and solar and include all carbon-dioxide-free sources of electricity such as nuclear, large hydroelectric power, and fossil fuel technologies that utilize carbon capture and sequestration, all of which would be more reliable and provide value superior to wind or solar.

6) End the Community Solar Garden program. Community Solar Gardens (CSG) in Minnesota would provide just 3 percent of electricity production if a 50 percent renewable energy mandate is imposed, but represent 7 percent of the costs (see the idle capacity discussion in Appendix I). This program is a liability, not an asset, and guaranteed payments to CSG operators should be phased out by 2020.

7) Acknowledge that increasing Minnesota’s renewable energy mandate would be doubling down on failure. Mandating that 50 percent of Minnesota’s
electricity come from wind and solar would be doubling down on an expensive policy that would cost Minnesotans $80 billion and avert only 0.0006° C of warming by 2100. If the main reason lawmakers want to enact this mandate is to prevent global warming, they will cost Minnesota families $1,200 per year while failing to make a measurable dent in global temperatures.