Renewable Energy and Conservation

Issue

How can Minnesota implement its renewable energy and energy efficiency goals and mandates such that the competitiveness of our energy costs increases relative to other states?

Policy

• Policies that propose to expand the state’s commitment to renewable energy or conservation should undergo a neutral economic study of their costs and benefits, including the net statewide impact on Minnesota’s economy, by industry sector. New policies should not be enacted unless the study shows that there is a substantial likelihood that energy costs will improve relative to the region.

• The Legislature should perform or direct the Department of Employment and Economic Development to complete an analysis of the effect of Minnesota’s Renewable Energy Mandate on development and growth of Minnesota’s economy. The analysis should investigate whether the policy has created a net benefit for electric energy customers, and whether there has been a net increase in Minnesota jobs due to the policy. The study also should consider the nature of any jobs lost or created (i.e. Full-time? Temporary? Wages? Industry?).

• Customers support the use of the most cost-effective way to meet utilities’ Renewable Energy Standard (RES). To the extent that their plans represent the least-cost way to meet utilities’ mandates, utilities should be allowed to own and maintain renewable energy generation. Other parties must demonstrate that their delivered energy costs are lower than utilities’ proposals, without jeopardizing reliability, to be considered in the public interest.

• Energy technologies and systems that do not contribute to, or substantially reduce, the state’s long-term net greenhouse gas emissions should be included in the state’s definition of “renewable” energy if they compare favorably to other technologies in terms of cost and reliability. Examples include: sub-pipeline quality natural gas used on-site; steam; other utility or industrial byproducts that are used rather than disposed of; and large hydro facilities.

• Customer dollars used to finance Conservation Improvement Programs (CIPs), including alternative CIPs, should be spent on programs designed to directly help customers conserve energy. State-directed CIP expenses should be eliminated. Utility regulatory filings should demonstrate an everincreasing percentage of their program budgets for programs that directly benefit customers, unless it can be demonstrated that another program achieves more savings at a lower cost.

• Energy “incentive” and/or “decoupling” programs should be required to demonstrate value to customers before approved.

• Utility changes that result in customers using energy more efficiently (“load management”) should be counted toward a utility’s conservation goal. For example, if a utility can avoid building new generation due to its successful attempt at getting customers to change usage patterns, the utility – and its customers – should receive credit toward the state goals.

• The Legislature should establish a working group to investigate more efficient methods of providing financial assistance to businesses for their conservation investments. One possibility is to allow businesses a credit against their CIP charges for making a qualified and verified conservation investment. The current mechanism of rebates takes so long that small business owners have little ability or incentive to make qualifying investments. Furthermore, it adds to the administrative cost of CIP. A credit is one way to streamline the process, especially for investment in proven conservation strategies. The work group should consider this and look for other time and money-saving strategies. The overall goal should be to increase the percent of CIP dollars that go toward energy-saving improvements and the speed at which business projects are developed and completed.

• The Renewable Development Fund (RDF) is currently funded through a charge paid only by Xcel Energy customers, while the funds support research and other endeavors of benefit to all Minnesotans. The Legislature should re-examine the Renewable Development Fund’s (RDF) purpose and financing. One of three avenues should then be taken:
  
  
  1. If state laws and programs passed since the fund’s creation in 1994 effectively address the objectives of the RDF, the program should be discontinued.
     
     
  2. If the RDF continues to be funded solely by Xcel rate payers, then the funds should be directed toward projects or programs that benefit Xcel ratepayers primarily or exclusively.
     
     
  3. If the RDF continues to be used to support projects with statewide benefits, it should be financed through the state’s general fund.

The 2010 report from the Office of the Legislative Auditor presents the problems inherent in the current RDF structure and financing; a summary is included in the Chamber’s Energy Background.

Business Impact

Minnesota’s nation-leading commitment to renewable energy and conservation could be an opportunity for our state, but it isn’t guaranteed to be so. If economic development promised from Minnesota’s nation-leading investment in renewable energy is jeopardized by energy costs that become uncompetitive, the policy will have failed. Many companies, including “green” companies, rely on competitively priced energy as a key factor when making decisions to build new facilities or expand existing ones. To fulfill the promise of the legislation, all parties need to carefully implement the policies to ensure that the state’s economy stands to benefit, and that well-intentioned energy policy doesn’t hinder the state’s economy. Now that the Legislature has set its long-term policy goals, stakeholders – customers, utilities, policy-makers, regulators and environmental advocates – should work together to ensure they are met at the lowest possible cost to the economy.