Where MN’s Renewables Stack Up
When it comes to lowering carbon energy emissions, states have become key actors at creating momentum for clean and renewable energy. This is one of those cases where it's tough to have strong federal standards because each state's energy generating capacity is so unique. Having said that, some states are excelling while others are failing to capitalize on their potential. So how about Minnesota?
With potential economic and environmental benefits that generate bipartisan support, Renewable Portfolio Standard (RPS) policies have been the policy tool of choice, adopted by twenty nine states, Washington D.C., and two territories. Eight other states and two other territories have adopted voluntary renewable energy goals as well.
Passing the wind and biomass mandates in 1994, Minnesota was one of the first states to enact legislation resembling a renewable portfolio standard. Now, nearly 20 years later, how does Minnesota’s commitment to diversifying our energy grid to reduce our environmental footprint stack up nationally?
Across states, these policies are, at face value, very similar. In most cases, utilities are mandated to generate a certain percent of their retail electricity sales by renewable means or attain a specific amount of renewable power generation by a certain date. Presumably these goals reflect how “green” a states’ energy supply will be at the end date—but this is misleading. Dig a bit deeper and in reality, details in each states’ RPS starts to set apart the green energy champions from those with symbolic policies.
For example, Arizona’s RPS sets a 15% goal, but excludes distribution companies with more than half of their customers outside Arizona. Moreover, early installation generates bonus “multipliers” toward each utility’s goal. As a result, only 59% of the total retail electricity sales fall under the RPS, meaning Arizona’s RPS really only sets a goal of, at best, 8.8% by 2025.
Other states, such as Nevada and North Carolina, allow demand reduction or energy efficiency to count toward renewable generation goals. This reduces RPS mandates by as much as 25-40% of the stated goals. Though demand reduction and energy efficiency are alternative strategies at reducing a state’s energy-borne environmental impacts, including these provisions changes the incentive structure for renewable energy generation adoption and reflects a lower overall commitment to diversifying a state’s energy generation portfolio.
In total, six states have RPS policies that cover less than 80% of their total load, and of the states who have a percent goal (all but Texas and Iowa), three have goals that, after adjusting for the percent of the load the law applies to, amount to less than 10% of total retail sales coming from renewable sources. Where does Minnesota fit into all of this?
Minnesota’s RPS has separate goals for Xcel energy, other large investor-owned utilities, and non-investor-owned utilities, ranging from 25-30% of total retail sales. Based on 2011 data from the Department of Energy’s Database of State Incentives for Renewables and Efficiency (DSIRE), the Energy Information Administration Annual Electricity Retail Sales, and the Minnesota Department of Commerce’s compliance reports, Minnesota is on track to have 27.4% of total electricity sales generated from renewable resources by 2025.
Compared to other states with RPS policies, Minnesota is one of only 7 states with an RPS that covers 100% of total demand and ranks 5th for total adjusted goal, coming in behind Hawaii, Maine, California, and Massachusetts. When projecting renewable energy development based on state RPS policies, a report released by the Union of Concerned Scientists labeled Minnesota as one the largest new markets for renewable energy in the United States along with Illinois, Texas, and New Jersey.
However, this number excludes the new solar 1.5% solar standard placed on public (investor-owned) utilities, passed earlier this year as exceptions to the standard are still under deliberation. The bill exempts retail sales from iron mining and extraction, paper mills, wood products manufacturers, sawmills, and strand board manufacturers. According to a source at the Department of Commerce, this makes up about 2-3% of most IOUs retail sales with the exception of Minnesota power whose customers in these industries make up around 70% of retail sales.
So where do we go from here? RPS policies, though similar from state to state, are not easily compared, nor is there a simple way to determine if they set "appropriate" targets. However, giving context to these goals does shed some light on which states potentially have room for improvement.
One way to do this is to compare the percent of in-state production generated by renewable sources to the percent of total consumption covered by renewables. From this metric, it is possible to identify the states that will likely have to rely on imported renewable energy versus those that may have greater control to shift their in-state consumption and production (see table). In the former category, smaller states in New England and Washington D.C. with a high percent of renewable in-state production but low amount of renewable energy covering total consumption will likely be constrained by their lack of generation capacity. States like Colorado, New Mexico, Pennsylvania and Illinois, on the other hand, have a low percent of renewable energy generation and a low percent of renewable energy consumed, indicating the potential to shift their portfolio in-state. Minnesota falls into the latter category.
* The Massachusetts RPS increases every year without a final goal in mind, but the
Department of Energy uses 32.1% as an estimate which adjusts to 27.61%.
**Texas and Iowa have RPS goals measured in total capacity installed. Estimates of the
percent of sales covered by these capacity goals changes year to year with demand.
Another way to give the states's goals context is by assessing renewable energy technical capacity – that is, the generation potential that a state’s space and renewable energy resource endowments allow. This metric is not only influenced by geography and natural resources, but also by population and total land area. Adjusting the total gigawatt hours of renewable energy potential by population and area for each state, Hawaii, Texas, New Mexico, Montana, and Kansas top the charts. Though Hawaii has the highest RPS goal and Texas has a considerable amount of installed capacity, the latter three only have modest RPS goals.
These states with greater renewable energy technical potential have, in theory, the most potential to contribute to shifting the U.S. to a cleaner energy system (this of course ignores the economic feasibility which is another important piece not discussed here). Adjusting either for size or population, Minnesota is toward the upper-middle of the pack, meaning that, at least relative to other states, our potential contribution is considerable. Based on this measure, relatively speaking, Minnesota's goal is appropriate if not on the high end.
So what does this all mean? In reality, it’s hard to compare RPS policies and even more difficult to understand what the optimal relative goals should be from state to state in order to make the most progress toward a clean energy portfolio nationwide.
Despite these limitations, Minnesota is clearly a leader in this policy arena with an early adoption of the policy, and a high total goal. However, though 27% renewable energy is an admirable goal, it should not be the end of the discussion. With increasing energy demand, that 27% is going to represent a smaller total amount of electricity over time and our environmental footprint from traditional generation is going to continue to increase. With relatively high per-capita and per-square mile renewable energy potential, our state's goals do have room to grow.
Actions like 1.5% solar standard passed earlier this year and the study authorized by the same "Omnibus Energy Bill" to determine the feasibility of moving the RPS goal to 40% are steps in the right direction, but should become a part of an ongoing, iterative process of policymaking that reevaluates how to utilize the renewable resources we have to power our future.