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RES/REO Testimoney

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This story continues the string of posts following the Senate Energy Committee and its deliberations about strengthening the current Renewable Energy Objective (that utilities supply 10% of their electricity from renewable sources by 2015) or replacing it with a Renewable Energy Standard (stronger language to require compliance).

Tuesday, 23 Jan saw more testimony and no deliberations (Real Media video or Windows Media video). Committee counsel John Fuller reported on progress by the stakeholder group that is trying to reach compromises. He noted that nearly everyone agrees that they should eliminate the biomass set-aside in order to fully allow the market to choose which renewable energies are best suited to supply electricity. Similarly, everyone seems okay with changing the upper hydro limit from 60WM to 100MW. Qualifying "small" hydro will likely become bigger.

He defended the idea of giving the PUC authority to impose a penalty that would equal the cost of compliance. He argued that this would encourage compliance, but I think that is a poor argument. A penalty larger than cost of compliance strikes me as a penalty. Ideally, it would never have to be assessed, but it clearly sends a stronger message to utilities - especially when the language in Senator Tomassoni's bill (the one the Minnesota Municipal Utilities Association - MMUA - is pushing) says the penalty can be up to that amount. This means the penalty could also be below it.

He also added that the PUC's requirements and responsibilities should be clear and uncomplicated. This will reduce confusion and allow for more accurate planning by the utilities.

Several people (mostly from industry, utilities, and the Chamber of Commerce) testified against a standard, saying an objective is preferable to a standard due to its flexibility. There has been a lot of discussion about the "offramp" provisions of the standard and whether it is sufficiently flexible to prevent catastrophe in the face of unintended consequences in a time of rising steel prices, tight transmission planning, changing production tax credit policy, and the years it takes to order turbines in a time of high demand.

Bill Grant (head of Izaak Walton League of America) spoke on behalf of Clean Energy Minnesota. He gave a strong presentation in defense of a 25% by 2020 standard. A reason for creating a standard is to draw the wind industry into Minnesota. He argued that a standard offers a much stronger signal to the market than an objective.

As he spoke, I couldn't help but think of players in the wind market and their motivations. If choosing where to build factories and create jobs, why would you pick Minnesota, with its flexible objective when you have more than 20 states with full standards? Of course, Minnesota's objective will likely site more turbines and projects than other states that have standards (many of which are far less ambitious than Governor Pawlenty's proposal), but I have to believe those executives want to tie themselves into a location that requires wind in the strongest possible language.

One of Grant's strongest arguments - and one that has not been discussed in front of the committee to my knowledge - is that a high standard gives the utilities strong incentive to lower demand. If they have a 25% requirement of power sold, they will have to build fewer turbines if they encourage their consumers to conserve. Less power sold overall means fewer new generation facilities. If utilities were to actually work to lower demand, it would make the renewable sources we build go further and actually reduce greenhouse gas emissions rather than merely keeping them steady (as one of our diligent contributors has noted several times). This also fits within Pawlenty's plan to reduce demand growth across the state.

He also noted ironically that many of the utilies had argued in previous years that 20% by 2020 was too ambitious and they could not do it. Now they are saying they can but anything beyond that is too much. A person from the utility later claimed their argument was more nuanced - that they just wanted to wait for the wind integration study to be completed. My recollection comes closer to Grant's, so I tried to locate some form of historical record from previous Senate Energy Committees and testimony. However, the Senate's web site does its citizens a disservice by offer to little information in too disorganized a format. If anyone else has any hard evidence of what has been said in previous years, please let us know.

My favorite moment came when Greg Oxley, from MMUA) encouraged the legislature to require the PUC to act more promptly on issues of transmission. Janet Gonzales from the PUC said these processes take time because they are complex and the PUC wants to do work that will hold up in court. If they were to rush it, it may end up costing more and require more time. At any rate, Oxley said something about how nothing ever gets done without a deadline. Senator Olseen then asked him about that comment. He noted that this was why he supports a standard - the utilities need a deadline to bring more renewables into the system. This is one of those moments that make attending committee meetings entertaining.

I have not heard any changes to Chair Prettner Solon's desire that the committee vote on the RES/REO bills by next Tuesday so I hope Thursday will actually feature discussion and parliamentary pranks rather than 2.5 hours of trying testimony that mostly repeats what we have heard.