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Recent trends put Minnesota in good shape to comply with tighter CO2 rules

Annual generation from renewable sources in Minnesota – mostly wind – grew from 12% in 2008 to 21% five years later.

As the U.S. Environmental Protection Agency prepares its final rules to drive down greenhouse-gas emissions from electric power generation, an analysis published today suggests that Minnesota’s utilities may be able to meet the requirements with relative ease.

The report, prepared by Bloomberg New Energy Finance, lists the shift in boiler fuel from coal to natural gas as perhaps the state’s largest single advantage:

Coal is the largest generation source, but natural gas is becoming more important in MN’s power mix, providing 14% of electricity and accounting for 33% installed capacity in 2012, while coal is trending downwards. Coal-fired electricity generation fell from 59% in 2008 to 46% in 2013, and 396MW of coal plants have announced plans to retire between 2015 and 2017.

Courtesy of Bloomberg New Energy Finance and The Business Council for Sustainable Energy
Minnesota’s renewable generation capacity is on the rise.

But there are other factors working in Minnesota’s favor as well:

  • Annual generation from renewable sources – mostly wind – grew from 12% in 2008 to 21% five years later.
  • Minnesota also has become a national leader in energy efficiency, ranking fifth out of the 50 states in one respected assessment, as a result of strong mandates that “have driven state utilities to outspend many of their peers in neighboring states.”
  • Power generation from biomass and waste-to-energy operations are becoming increasingly important, with nine generating plants already doing WTE.
  • Rapidly falling prices mean that it now costs less to build new wind capacity than new coal capacity, even without subsidies; similar trends are gaining momentum on the solar side.
  • Speaking of solar, the report anticipates that utility-scale generation, which quadrupled from four megawatts to 16 between 2012 and 2014, will grow to 644 megawatts in the next five years – at costs comparable to power from advanced natural-gas plants, and lower than for nuclear-powered electricity.

Report's sponsorship

Today’s report was prepared by Nathan Serota, an analyst at Bloomberg New Energy Finance. It was commissioned by the  Business Council for Sustainable Energy, a 23-year old trade and advocacy group devoted to “implementing market-based approaches for reducing pollution and providing a diverse, secure mix of energy resources."

The council’s board members include top executives from organizations with shared interests but sometimes different stakes in the nation’s energy future, including the Worldwatch Institute and the Alliance to Save Energy, the American Gas Association and United Technologies Corp. (I admit I didn’t see any coal companies on the roster, but several utilities are represented.)

An earlier BNEF/BCSE fact book published in February looks at the national picture; the Minnesota report published today is the second in a series of state-level close-ups.

I asked Serota for his take on the positions staked out by Xcel Energy and Minnesota Power, in particular, in arguing that the EPA’s initial proposal failed to credit all of their past investment against the coming curbs.

He told me that the analysis didn’t look at data for individual utilities, but rather at the state’s overall performance and capabilities in areas important to comply with the EPA rule. The regulation is to be finalized sometime this summer. (Of course, it is also being challenged in court.)

I wondered, too, about the observation in his analysis that Minnesota is a net importer of electricity – producing 51 million megawatt-hours in 2013, while consuming 67 million.

Does that make this one of those rare times when Minnesota might benefit from being at the end of all the pipelines, or in this case a powerline, if the other end is where the emissions assessments are made and the controls applied?

Not necessarily, he said, because compliance strategy will depend not only on the final terms of EPA’s Clean Power Plan but also on how each state elects to comply. Minnesota could partner with another state or states in a joint emissions-reduction plan, or participate in a wider program of trading in emissions credits.

Key power system metrics, Minnesota vs. US average, 2013
MetricUnitsMinnesotaUS averageCommentRank
Total retail electricity salesTWh6773Below average
electricity demand
Total generationTWh5180Below average
in-state generation
Retail electricity sales per capitaMWh12.411.6Above average
per capita demand
Retail electricity prices¢/KWh9.510.1Below average
electricity prices
Generation from gas%1328Below average
reliance on gas for electricity
Generation from gas and renewables%3341Below average
reliance on gas and renewables
Energy efficiency scoreACEEE index25.519.2Above average
on efficiency efforts
Utility energy efficiency budget% state revenue2.421.13Above average
utility efficiency budget
CO2 emissions ratetCO2/MWh0.560.52Dirtier than average
generation profile
'Adjusted' emissions rate cut%4238Above average
'ask' under the Plan
Source: Bloomberg New Energy Finance and The Business Council for Sustainable Energy, EIA, US Census Bureau, ACEEE

Experience counts

The main point to keep in mind, he said, is that Minnesota already has a strong framework of policies and requirements in place on most aspects of reducing emissions, expanding renewables and promoting efficiency.

So it benefits from experience in knowing how things work and what they cost, where to find flexibilities and where to look for tradeoffs. This applies across the board – from efficiency standards to renewables to experience with high-efficiency plants using combined-cycle gas turbines, or CCGTs.

On the latter point, he said, the analysis shows that Minnesota ranks last or nearly last among the states in utilization of its CCGTs, meaning the percentage of generating capacity that is actually being used to make power. So there’s significant capacity as yet unused.

Some other interesting points from Serota’s analysis:

  • While Minnesota ranks a little below average among the 50 states in total electric consumption, it ranks a bit above average in per capita consumption. (We use less than California, more than the average Californian.)
  • The retail price of electricity in Minnesota was about 9 cents per kilowatt hour in 2013, up 23 percent over the preceding 5 years. That was still somewhat below the national average, but the national number has been rising more slowly so the gap is narrowing.
  • Although the share of Minnesota electricity produced by burning coal is dropping significantly, the state’s generating profile remains “dirtier” than the national average as measured in carbon dioxide emissions.
  • Pointing to an Xcel Energy study, Minnesota is positioned to achieve efficiency gains equivalent to 7 million megawatt hours a year by 2020, at economically justifiable costs, and up to 10 million if the economics change.

 Which is pretty important because, after all, the cleanest (and cheapest) megawatt-hour is the one you don’t consume at all.

Comments (6)

  1. Submitted by Thor Underdahl on 04/28/2015 - 11:15 am.

    CCGT Clarifiication

    Thank you for your article. I felt compelled to pose a few points. I would counter the argument from the report that MN having converted to a significant amount of CCGT generation is a positive attribute in regards to meeting the CPP requirements. As a matter of determining our overall goal (41%) reduction, which is much higher than most in our region, it led to an incredibly high weighting in “building block 2” of the draft Clean Power Plan. It did so because this block assumes a utilization rate of 70%. The MN average is around 25%. Now to the average person this may seem like a great thing, just run them more! This is where understanding the dynamics of each utility is important. For example, Xcel’s CCGT’s are used to back up its significant supply of wind, this “companion resource” is essential to ensure capacity during times of intermittency in wind. Reallocating this resource to a different purpose will disrupt this balance. This is one of the items not considered by the EPA and something that many states brought forward as a concern to EPA.

    States that have not moved to CCGT, such as ND, have greatly benefited from this lack of action, due to the fact that there “block 2” requires little to no action, thus they have an 11% goal.

    MN has made great strides in reducing CO2 emissions, and those efforts and investments should be recognized rather than punished. We will continue to lead and we are only advantaged by our experience in this arena, but understanding the nuances and complexity of the grid, and each of the utilities integrated resource plans is essential to deciding how difficult or “easy” it will be to comply.

  2. Submitted by joe smith on 04/28/2015 - 12:44 pm.

    Not knowing the nuances and complexity of the grid, is the electricity we use cheaper with wind power than coal/gas fired plants? This is without subsidies.

  3. Submitted by Tom Karas on 04/29/2015 - 06:34 am.

    Thanks Ron

    for another good effort in keeping Minnpost readers up to date on the challenging subject of energy generation and the associated impacts. EPA regulations make this an even more daunting task but keep at it. It may help to keep things clear to get folks thinking about installed cost and cost over time. If solar is getting closer to the cost of advanced natural gas, is that a construction cost or a life cycle cost? Its like paying extra from the hybrid car and saving money over the operational life. Some folks may scream about the cost of solar, but their view becomes short sighted when that fuel cost catches up to the equation. Thanks for your work

  4. Submitted by Mark Ohm on 04/29/2015 - 11:03 am.

    Solar vs. Turbines

    Thanks seconded from me as well on your thoughtful articles on energy and climate.

    I thought this article from Vox was intriguing:

    A solar future isn’t just likely — it’s inevitable

    Premise: Solar is getting both cheaper AND more efficient. And solar is the only form of energy production that doesn’t require powering a turbine. All other forms of energy are basically powering a turbine to generate electricity (coal, gas, hydro, nuclear).

    “These spinning turbines, in turn, provide mechanical force to an electric generator, which translates it into electrical current (this is done by moving electrical conductors through magnetic fields — see Faraday’s Law).

    Solar PV works differently: it converts sunlight directly into electricity. Photons of light excite the surface of a semiconductor, knocking electrons loose to become part of a charged electrical field, generating electromotive force that can be tapped by wires. (See: the photovoltaic effect.)”

  5. Submitted by rolf westgard on 04/29/2015 - 06:49 pm.

    Pipe dreams

    Then there are those long winter nights and days with little sun. Even if it is clear the sun is only up about 5-6 hours to generate much power. Last night, today, and tonight not much wind in MN.
    Traffic lights, factories, and hospitals go dark. Fortunately we have those three powerful nuclear reactors running night and day, wind or calm, rain or shine. And those natural gas plants cycling up and down, wasting fuel, to balance the erratic output from wind and solar.

  6. Submitted by Tom Karas on 05/01/2015 - 06:41 am.

    smoking the nuclear pipe

    Like Mr. Westgard, I too think we need nuclear energy. But we should be truthful. As long as all the cost of that nuclear energy shows up on your bill. Like the friendly fossil folks who only show you the cost of mechanical generation and conveniently suck the rest of the cost of fossil fuel from you by way of taxes, nuclear does the same. Waste and insurance costs are backed by the government and the cost is hidden in your taxes. You bet, more nukes for all, and I am sure Mr. Westgard will be responsible in making sure that everyone sees all the costs on their bills not just the favorable ones, he could even teach a class about the real costs of different energy technologies. Full cost accounting, its the American way. I would also hope that Mr Westgard research and report the estimated cost of new nuclear plants in total terms and expressed in a per kilo-watt hour cost. But I expect not. Once that horse leaves the gate all those pesky renewables look like a real bargain and that would not be good for a die hard fossil friend. Be well.

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