Doubling Down on Failure

How a 50 Percent by 2030 Renewable Energy Standard Would Cost Minnesota $80.2 Billion

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Minnesota currently has a law mandating that 25 percent of the state’s electricity come from renewable energy sources, like wind and solar, by 2025. Some lawmakers have proposed doubling the renewable energy mandate (REM), requiring that 50 percent of our electricity be generated by renewable sources by the year 2030, and Governor Walz has proposed a 100 percent carbon-dioxide-free electric grid by 2050.

This report chose to calculate the impact of a 50 percent REM, rather than a 100 percent REM, because research from the Massachusetts Institute of Technology shows using wind, solar, and batteries to achieve 100 percent of electricity generation would be exponentially more expensive than a 50 percent renewable benchmark.

Doubling down on the REM will increase electricity costs by $24.6 billion by 2030, and the additional costs of maintaining this electric system through 2050 will be nearly $80.2 billion.

In contrast, building new nuclear power plants would provide the same amount of carbon-dioxide-free electricity at a much lower cost than wind and solar. This is likely a key reason Xcel Energy announced its electricity would be 100 percent “carbon free,” and not 100 percent “renewable,” by 2050.1

Policymakers have a duty to the hardworking people of Minnesota to enact policies that maximize benefits while minimizing costs. If lawmakers enact a 50 percent renewable energy mandate, they will be doubling down on a failed and expensive policy that imposes significant harm on Minnesota families and businesses with negligible environmental benefits.

We have calculated the high cost of doubling the renewable energy mandate in a “Renewable” scenario, and offer two lower-cost and more effective alternatives, Short-Term Nuclear and Long-Term Nuclear, that maximize cost savings for Minnesota families and businesses while still reducing carbon dioxide emissions. Lastly, we present a scenario based on the proposed Affordable Clean Energy (ACE) rule promulgated by the U.S. Environmental Protection Agency that establishes new regulations designed to reduce carbon dioxide emissions from existing coal-fired power plants.2

We offer this executive summary and seven policy recommendations based on our findings. 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.3

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.4^{, 5}

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.6 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.7

In contrast, the economic modeling software IMPLAN shows higher electricity prices from renewable energy will destroy 20,950 more permanent jobs through 2050.8 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 2050.9

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.

Our research in Doubling Down on Failure 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.

A full copy of the report can be viewed here.