January 2, 2018 /
Finance & Commerce

By Frank Jossi

Energy generation from wind and solar has grown significantly in Minnesota. Utilities have announced the retirement of thousands of megawatts of coal plants in the next decade. Popular technologies such as electric vehicles, sophisticated thermostats, battery storage and rooftop solar hold great potential to produce cleaner energy. And they pose challenges to the electric grid.

Minnesota is entering a new era of energy production that promises to upend the traditional power grid in the same way the internet, the iPhone and deregulation transformed communications over the past 30 years.

What the future might look like is being debated and studied by several leading environmentally oriented nonprofits and by Minnesota regulators. In mid-December the Minneapolis-based Environmental Initiative, for example, held a conference on utility resource planning and “designing for disruption.”

The Minneapolis-based Great Plains Institute has led a multiyear project called the “e21 Initiative” that offers ideas on grid modernization, creating more consumer choice and changing incentives for utilities. Its two reports on different aspects of the energy infrastructure are helping to lead regulators and utilities to make changes to respond to consumer, business and government demands.

The Public Utilities Commission’s own “grid modernization” report came out last year with an eye toward preparing for a much different future.

“The issues involving the electric grid look very different now than they did even a decade ago,” said Meleah Houseknecht, the Environmental Initiative’s director of environmental policy. “We need to look at the policy and regulatory process, with input from utilities, to figure out what the system should look like in the future.”

Mike Bull, director of policy and external affairs for the Twin Cities-based Center for Energy and Environment, has watched how energy has been transformed for more than 20 years. He served in the Pawlenty administration, which in 2007 approved one of the nation’s leading renewable energy standards, and later was a resource planner with Xcel Energy.

“We’re at an inflection point,” he said. “We’re at a time when load growth is very flat, when consumers are asking for more services and clean power. It’s a disruptive time.”

How different the state’s energy future looks today compared with just a decade ago can be seen in just a few data points.

The state currently receives 22 percent of its electricity from renewable energy, most of that (18 percent) from wind power, according to a 2016 report by the state Department of Commerce. In 2006, renewable energy provided 6 percent of the state’s electricity. Over the decade, natural gas jumped from 5 percent to 15 percent. And coal? There has been a huge decline in market share, from 62 percent to 39 percent — and falling.

Also driving the need for planning are consumer and business preferences. The Minnesota Environmental Partnership reported this year that 71 percent of Minnesotans favor increasing the state’s renewable energy standard to 50 percent.

What clean-energy advocates want is the electrification of the energy grid, a move they believe will reduce greenhouse gases more rapidly than any other approach.

If transportation and heating become electrified, carbon levels should, in theory, decline. But that depends a lot on making electricity generation cleaner.

Utilities have been part of the planning efforts, and in some cases they like what they see. With energy sales basically flat, electrifying the grid with electric vehicles, for instance, could help their bottom lines.

Making that happen, of course, requires a lot of planning, white papers, conferences and discussions among energy leaders in Minnesota.

Planning for the revolution

Bill Grant, the state Commerce Department’s deputy commissioner of energy and telecommunications, spoke at the Environmental Initiative conference, held Dec. 15 at the TIES Conference Center in Falcon Heights. In 1993 the Legislature passed a bill requiring investor-owned utilities to provide an “integrated resource plan” every few years to the Public Utility Commission. The state’s four largest utilities all have resource plans due in 2019.

The idea was simple: Regulators wanted to see what utilities were thinking in terms of managing growth and determining whether new plants would be needed, Grant said. A preference for more renewable energy was added to the resource planning statute later, he noted.

In 2007 Minnesota passed a renewable energy standard that jump-started more investment in wind, solar energy and energy efficiency. The result? Xcel Energy has told Grant clean energy and efficiency have eliminated the need to build several power plants.

The question now is how far the utilities can go in embracing cleaner alternatives while having to “balance risk, reliability and affordability,” Grant said. “It’s like turning an oil liner around.”

The oil liner seems open to a change in direction. “There’s a massive opportunity over the next 20 years for decarbonizing at a pace climate scientists say we need to,” said Bull, who spoke at the event.

Bull argued 95 percent of the fossil fuel plants in Minnesota “are retiring or retireable over the next 20 years” — a total of 5,287 megawatts. How will that supply be replaced? Some of that demand might be filled by more deployment of renewable energy, energy efficiency and energy storage.

More “demand response” options — where customers reduce their energy use during peak times in return for financial incentives — could add another approach, Bull said.

Finally, new generation could include more natural gas, wind and solar, as well as hydropower from Canada and nuclear power. Care must be taken during the time of transition, he added, to deal with the impact fossil fuel plant closures will have on communities and workers.

Public involvement

The Environmental Initiative policy forum featured two panel discussions. One dealt with planning the electric system “we want tomorrow,” and the other focused on engaging more people in the process.

Leigh Currie, senior staff attorney for the St. Paul-based Minnesota Center for Environmental Advocacy, said Midcontinent Independent Operator Inc., or MISO, now manages the regional electric grid for several Midwestern and Southern states. The region has an energy surplus now, she said, and its future capacity should be considered before anything is built in Minnesota. Demand response programs and other approaches might eliminate the need for much new generation, Currie said.

Betsy Engelking, vice president at Minneapolis-based Geronimo Energy, pointed out Xcel Energy’s two nuclear plants provide more than 20 percent of the state’s energy. What will replace its two nuclear plants should be front and center moving forward on planning for the future grid, she said.

Xcel’s director of resource planning, P.J. Martin, added that investors are looking to support companies with sustainable growth objectives. Xcel’s “Renewable*Connect,” a program to sell clean energy to businesses and consumers, began this year to meet some of that demand, he said.

Many conference attendees pointed out that getting more people involved is difficult, especially low-income residents.

“It’s hard to keep track of energy legislation, and it’s even harder to do that in issues before the commission because it’s so technical,” said Annie Levenson-Falk, executive director of Minnesota Citizens Utility Board.

Halston Sleets, policy aide for sustainability and environmental justice for the city of Minneapolis, said engaging low-income groups with many demands on their time is an enormous challenge.

The racial makeup of people making energy policy today is still almost entirely white, despite the diversity of the Twin Cities. “I’m the only black woman in this room,” Sleets said. “I’ve got to call that out.”