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RES Update

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I have been meaning to write something about the 18 Jan, 2007 Senate Energy Committee meeting. Minutes are not posted as of now, but will be linked to from that page when they are available. I don't think they have made an audio version of the hearing available, but you can stream video of it (Real Media format or Windows Media Player format).

I previously analyzed two of the RES bills that are under discussion in the committee. There are two others. Committee Counseler John Fuller created a really handy spreadsheet that shows how each of the four bills differ and where they agree (pdf). I want to thank him for making that available to us.

For those unfamiliar with a Renewable Energy Standard or Renewable Energy Objective, both require utilities to generate a certain percentage of the electricity they sell within MN from renewable sources. The standard provides more stringent penalties for failing to meet the requirements; the objective requires a good faith effort to meet it.

Committee Chair Prettner Solon has suggested that these bills will be merged into a single bill based on stakeholder agreement. It would appear that they will delete-all of S.F. 4 (Anderson's bill) and create a new whole new RES or REO proposal based on the pieces of the existing four. They will use S.F. 4 out of deference to Senator Anderson who has worked on this issue for 6 years. A group of stakeholders is meeting to guide this process.

I'm not really sure how this all works; Senator Dibble was also a bit concerned and wanted to make sure the Committee would still discuss the big issues. I think the idea is for the stakeholders to work behind the scenes to make it easier for the committee to create a popular, effective bill.

The rest of this post will cover the discussion in the committee as the bills were officially introduced and my thoughts on the issues that each brings up. Don Davis wrote an article for The Forum news about these bills also.

Senator Anderson introduced S.F. 4 first. She noted that mandating renewable energy helps the economy, saying it creates 40% more jobs per unit of energy when compared to fossil fuels. Later she said Minnesota lost 1000 good jobs on the Iron Range because a wind company chose Pennsylvania instead because it had a more aggressive standard than us. Also, Minnesota imports more electricity than any other state (apparently 1000 MW from Canada (Manitoba Hydro) and 1000 MW from the Dakotas alone).

Anderson tackled the big question in front of the committee - objective or standard? Minnesota's current "objective" is unique; many other states have embraced the standard. She noted that her bill features an "offramp" which I'll quote:

The commission must delay or modify the standard for an electric utility if it finds that
compliance with a standard is not in the public interest because compliance will either
produce undesirable impacts on the reliability of the utility's system or on the utility's
ratepayers or if it finds that compliance is not technically feasible.

Those who say that a standard is too inflexible often fail to note that the PUC can excuse a utility which has good reasons for failing to meet the requirements. Anderson suggested that the "good faith effort" language of the REO is too lax and difficult to interpret. The Department of Commerce objects to this, saying they have defined what a good faith effort is - more on that debate in a later post.

Senator Anderson's last argument for the word 'standard' argued that the "word in law" matters. The very word 'standard' sends a clear signal to wind developers that Minnesota will be a reliable market for them.

One of Anderson's other changes with S.F. 4 is to limit eligible renewable facilities to those built after 1974. She justifies this, saying we need to reduce emissions, stimulate jobs, and avoid disadvantaging some utilities over others.

Senator Anderson finished by saying this will not cost ratepayers more. It will save them money in the long term because "we all know the cost of coal will go up." This relies upon Congress creating either a cap & trade program for carbon emissions or implementing a carbon tax. Though she didn't phrase it in these terms, she was basically saying that those the wind strength may be variable, its cost is not. The fuel for wind turbines will remain zero cost for the life of the turbine.

Anderson's bill was followed by S.F. 129, introduced by Senator Tomassoni. Because the committee is hearing only RES specific provisions now, they are only discussing sections 2-7.

I feel that this is the weakest bill by a considerable margin, despite being a standard rather than an objective. First, I'll summarize Tomassoni's comments.

He started by pushing for the IGCC coal plant, saying that even with renewables, we still need coal and IGCC lends itself well to sequestion (capturing the carbon dioxide emissions and storing them deep underground). Greg Oxley, from the Minnesota Municipal Utilities Association then argued that utilities cannot meet 25% by 2020. He said they don't have enough transmission or time to build the needed amount.

To those who say we cannot make 25% by 2020, I refer you to John Tuma's post on Loon Commons which essentially reminded the committee that no one thought we could hit the moon in 10 years when Kennedy told us we were going to.

Tomassoni's bill suffers from many weaknesses and I hope it is mostly ignored when the committee puts together the final RES/REO proposal. Weaknesses include:

  • Instead of a list of eligible renewable technologies, it says all renewable energy technologies may be counted. Thus, the PUC will have to decide if hydrogen produced by natural gas counts as being renewable or not (for example). This is not a good idea.
  • 20% by 2020 is too lax. If we are not going to push as hard as possible, let's use Governor Pawlenty's 25% by 2025.
  • My favorite: the penalty for noncompliance cannot be more than the amount the utility would have expended to meet the requirements. This is not an incentive to meet the requirements. Penalties should exceed the cost of compliance (though we need an offramp like the one proposed by Anderson).
  • Finally, this bill significantly limits what evidence the PUC can use when considering the offramp provision - giving a big advantage to the utilities.

Committee Chair Prettner Solon next introduced one of her bills, S.F. 145 and Mike Bull, Deputy Commissioner for the DoC discussed it. Like S.F. 129, this is an omnibus bill and the committee is only looking at sections 2-8 currently.

Bull noted that this is the most progressive energy package ever by a Minnesota Senator - something to which Anderson later agreed. She and Bull actually complimented each other several times as the committee exuded bipartisan vibes.

At any rate, Bull noted that the Governor would prefer signing an omnibus bill but recognizes the committee will do as the committee will do. This bill calls for a 25% objective by 2025 with a fine of $.05 per kilowatt/hour of unmet requirements when utiliies do not meet the good faith effort bar. The PUC may count large hydroelectric sources if absolutely necessary (large hydro is usually not counted due to the damage to surrounding ecosystems). Compliance fines would be used to fund renewable energy projects in Minnesota.

Senator Dibble questioned what new generation would be if the Governor's proposal is implemented because it counts renewable sources built before 1975. The committee is supposed to be informed how this breaks down - essentially, the question is how many renewable MW MN has from before 1975.

Chair Prettner Solon then introduced S.F. 74 - an objective with blank % to be met by blank. The idea is to figure out the max we can do and fill in the blank with those numbers. It also allows the PUC to increase the requirement for some utilities who are better poised to add renewable capacity than others. This is a unique idea though I wonder if the PUC would actually do that.

The other major unique provision for this bill is that it allows utilities that go above and beyond the required CIP (Conservation improvement programs - these are intended to reduce electricity demand) to get credit toward their objective requirement. This could be tricky in practice to measure.

Wow. That was fun. Another exciting Saturday night for me. If you read this far, thank you. There will be more coming eventually.