Minnesota Democrats successfully passed a bill for a carbon-free electric grid by 2040, directing a speedy energy transition in at least one sector of the state’s economy.
But that raises a question for lawmakers focused on climate change: Uhh, now what?
Of course, DFLers are considering big plans for reshaping transportation, building codes and more. But there is a thorny debate emerging at the Capitol over whether to intervene further in the electricity sector, which is Minnesota’s third-largest source of emissions and will be responsible for powering electric vehicles, home heat pumps and more in a changing world.
The House’s Climate and Energy Finance and Policy Committee heard a bill last week that would require most utilities to build energy storage systems like batteries in order to hold renewable energy for when the sun isn’t shining and the wind isn’t blowing. The current version of the measure would also create a target for 3,000 megawatts of storage statewide by 2034.
The bill’s sponsor, state Rep. Athena Hollins, DFL-St. Paul, said the legislation — which is backed by solar and energy storage businesses — would jump start the battery industry in Minnesota and nudge utilities hesitant to adopt new technology that could be central to the energy transition away from fossil fuels.
But Hollins’ legislation has drawn sharp opposition from electric utilities, who argue the sector should be allowed the elbow room to more freely pursue carbon-free energy within an existing and rigorous planning process overseen by state regulators.
The idea of new mandates has been met with skepticism by Republicans. And perhaps more important in a DFL-controlled Legislature, at least one key Democrat isn’t sold on the idea of new regulations.
What the bill would do
Hollins’ bill has several parts, some of which have broader support than others. For instance, it aims to standardize some regulations around energy storage.
But the legislation notably says the PUC would determine how much energy storage utilities should build and order them to build it. And the bill says the statewide capacity for those energy storage systems must be at least 3,000 megawatts by the end of 2033.
Minnesota has 32 megawatts of energy storage capacity operating and less than 20 megawatts under construction or in advanced development, according to an analysis of market data by the American Clean Power Association, a national trade group.
Hollins said the amount of energy storage each utility would need to build would depend on how many customers it serves, so the burden is shared equally. “The deployment of energy storage would overcome one of the biggest obstacles in renewable energy, its cycling between oversupply and shortage,” Hollins testified in the climate and energy committee. “By smoothing imbalances between supply and demand, batteries could eventually replace fossil fuel plants that have to kick in for a few hours when energy demand peaks.”
Energy storage is not a new concept in Minnesota. Utilities are even experimenting with emerging battery technology. The cooperative Great River Energy plans to build a 1.5 megawatt “iron-air” battery system in Cambridge, and Xcel Energy hopes to install a 10-megawatt one in Becker where the utility is planning a large solar project. The batteries use the process of rusting to store power.
Missouri River Energy Services, which includes 25 municipal electric utilities in Minnesota and others in North Dakota, Iowa and South Dakota, is hoping to use renewable energy to pump water uphill, and then release it during periods of high demand to create carbon-free hydroelectric power. That reservoir-as-storage project is planned to have a much larger 1,800 megawatts of capacity, enough to supply power to more than 1.3 million homes for up to 26 hours, but isn’t expected to be operating until 2035.
Still, Hollins said the storage requirements will ensure utility companies that have other concerns — like cost to customers and, for some, shareholders — won’t avoid emerging technology until it’s too late to hit the 2040 carbon-free target.
Logan O’Grady, executive director of the Minnesota Solar Energy Industries Association, which represents 140 companies working in solar and energy storage, said there are “business signals within this bill.”
“The procurement targets tell everybody throughout the country that we are a great place to do business for energy storage companies,” O’Grady said. The American Clean Power Association wrote in a letter to the Legislature that states with energy storage deployment targets are far outpacing Minnesota.
Still, utilities expressed deep concerns about the bill.
Rick Evans, director of regional government affairs for Xcel Energy, testified that the utility supports the use of batteries and is already planning to build them. But he said the existing long-range planning process in front of regulators on the PUC is the best way to determine Xcel’s energy mix with an eye on science, engineering, affordability and reliability.
“It is a very sophisticated program, it is very detailed and it is also a very public program,” Evans said.
Evans said the Integrated Resource Planning process would be usurped under the bill by “arbitrary number in an arbitrary year for a certain kind of resource regardless of whether it is the most affordable or reliable way to reach 100% carbon free by 2040.”
Great River Energy, Duluth-based Minnesota Power, and the Minnesota Municipal Utilities Association, all had issues with Hollins’ bill, too. One main concern was the idea of government determining how they can reach 100% carbon-free energy by 2040.
“The new law was enacted to give utilities flexibility in meeting the standard,” wrote Stacey Fujii, director of governmental affairs for Great River, in a letter to lawmakers. “A mandate dictating a specific resource does not provide flexibility.”
More mandates ahead?
That flexibility was indeed a selling point for many Democrats as the carbon-free standard moved through the Legislature.
“The bill does not require a certain energy mix,” said Sen. Nick Frentz, a DFLer from North Mankato who was a key architect of the legislation. His comments came at an early February press conference, where Gov. Tim Walz signed the measure into law. “You don’t have to have this percent of solar, this percent of hydro, this percent of wind or any other.”
Frentz’s statement is not totally true. The standards do include some restrictions for renewable energy, and new nuclear plants are banned in Minnesota, effectively determining some aspects of a utility’s energy mix.
But at a panel hosted last week by the Minnesota Rural Electric Association — which represents cooperative electric utilities — Republicans argued Hollins’ bill was breaking the spirit of Frentz’s comments.
“If you view carbon-free by 2040 as the solution to all of our problems we certainly are coming up with a lot of bills to put more mandates on the docket,” said Ghent Rep. Chris Swedzinski, the top Republican on the House’s Climate and Energy Finance and Policy Committee. Sen. Jason Rarick, R-Pine City, told the cooperative group that lawmakers should “help free your hands” by allowing new nuclear projects in the state.
Frentz chairs the Senate’s Energy, Utilities, Environment and Climate Committee, meaning he will be crucial to determining how the Legislature moves ahead on energy policy. And at the panel, he echoed Republicans on the idea of additional mandates. Frentz said while lawmakers will work to approve matching funds to unlock federal cash in the Inflation Reduction Act and the infrastructure bill, flexibility for utilities to determine their own path to carbon-free energy was important.
“I don’t think that there will be significant additional mandates in the energy sector,” Frentz said. “I think we’ve set a good framework.”
Frentz’s counterpart in the House, DFL Rep. Patty Acomb of Minnetonka, said she is “a believer in carrots, rather than sticks,” and hopes to incentivize outcomes rather than demand them.
Hollins, for her part, told MinnPost that she’s open to negotiating the energy storage target and other aspects of the bill. And the PUC would, under the legislation, direct construction of projects if the investments would be “reasonable, prudent, and in the public interest.”
Hollins also said the 3,000 megawatt number was based on a similar goal in Virginia, and isn’t arbitrary. She maintained giving utilities a reason to build more storage would be good. Those utilities are “less likely to want to move forward on something until you are absolutely certain that it makes economic sense or that it is going to make you money as opposed to lose money.”
“The reality is we have 17 years to get to 100% clean energy,” Hollins said. “And if we don’t have energy storage as a part of it, what’s going to happen is we’re going to just be purchasing energy from outside of our state.”