Fashioning Minnesota Energy Policy: The Legislature’s Role
By David Morris
February 7, 2002
Testimony before the Minnesota Senate Telecommunications, Energy and Utilities Committee
On S.F. 2672 – Minnesota Economic, Environmental and Energy Security Act of 2002
My name is David Morris. I am Vice President of the Minneapolis-based Institute for Local Self-Reliance. I have worked on energy policy for almost 30 years. I have been a consultant or advisor to the federal energy departments of Presidents Ford, Carter, Clinton and the current Bush administration. I have been actively involved in Minnesota energy policy work since consulting with Mark Dayton when he was Commissioner of the Department of Energy and Economic Development in the early 1980s. I am the author of three books and over a dozen monographs on energy technologies and energy policies at the local, state and national policies.
Having, I hope, presented my bona fides to discuss this issue with the Committee, I want to spend my few minutes talking about the bill before you in a larger context.
This Committee and its predecessors have been making energy policy in incremental fashion for several decades. In the last few years the focus has been on electricity. The legislature has appropriated and presumably spent over $500,000 to intensively educate its members about electricity technologies and regulatory changes in order to inform your policymaking initiatives.
That education did inform this Committee last year when it developed and passed an energy bill that developed a more expedited and coherent system for transmission line planning. Unfortunately, the state’s utilities decided last October not to use that new planning process. As a result, the Public Utilities Commission has delayed by a year or more the implementation of this expedited process.
The Committee would do well to understand the problems attendant to developing an expedited approval process it has already designed before imposing another type of expedited process in this bill.
Often this Committee has acted in reactive fashion and crafted bills designed to benefit a single company or technology without examining the implications of those bills on overall state energy policy. The result is an incremental, often contradictory and sometimes just plain incoherent state energy policy.
Last year this Committee, if memory serves me right, unanimously passed out a bill that declared that the highest and best use of turkey manure was for generating electricity and formally declared this to be in the public interest. Although developed in response to a state biomass mandate, the bill was consciously designed so that only one company could qualify.
This bill before you today is another case of incremental decision making in response to the interests of an individual company. This time however, an incremental decision could profoundly affect the structure and direction of Minnesota electricity policy for the next decade or longer.
The title of the bill is broad, the Minnesota Economic, Environmental and Energy Security Act but it is written so as to allow only one technology and one company to qualify. It declares by legislative fiat that the state will need some 2,000 MW of new baseload capacity by 2012, when I am aware of no projection by utilities or regional power pools that Minnesota will need such an increase in baseload capacity as opposed to peak load capacity. Moreover, this bill states, also by fiat, that state policy is to give very large scale centralized electrical generation a priority over decentralized electricity generation. This is the implication of the sections that allow the coal gasification plant to bypass existing public review and require an unusually long power contract of 25 years and allow a premium of 10 percent in the price utilities pay for the electricity generated.
The gasification plant is being justified as an economic development project. But the premium permitted in the bill translates into $40-60 million a year in subsidies when the plant becomes fully operational, or about a billion dollars in subsidy over the life of the power contract. Power plants are the most capital intensive business in the economy. Thus if jobs were indeed the goal, the $40-60 million in subsidies would be better spent on other economic ventures in northern Minnesota.
I may surprise you by saying that I am in favor of coal gasification as a way to avoid an increasing reliance on natural gas. We have hundreds of years of coal supply in the upper midwest. If we can harness the energy the coal contains in a way that is environmentally benign, I would favor it. The gasification process is indeed far less polluting than the conventional coal combustion process.
But there’s no reason to support a 2,000 MW coal gasification plant. It would be the largest such power plant in the world. And would constitute the largest single electric generation facility in Minnesota. It would require an entirely new transmission infrastructure from northern Minnesota to southern Minnesota. It would inhibit the development of decentralized and renewable electric generation in the state for some time to come.
I would favor a much smaller coal gasification project, something in the order of 200 MW, the size of existing gasification plants in Tampa, Florida and Wabash, Indiana. Such a plant would not require an extensive new transmission system.
I would also strongly recommend that the plant also be required to store the carbon emitted underground. Carbon dioxide is the single largest greenhouse gas and coal gasification only marginally reduces CO2 emissions. Underground storage of CO2 has been done in Canada by natural gas pipeline companies and in Norway by electric power companies. It will raise the cost of electricity generation modestly, but it is a premium that Minnesotans may well be glad to pay for a project that demonstrates that coal can be used to generate electricity with little or no greenhouse gas impact. Indeed, the commercial trading of “carbon offsets” has already begun around the world. We can expect that as it expands, power plant owners that store carbon emissions will be rewarded. Thus the premium paid could be tied to the value of the stored carbon and as the latter goes up, the former would go down.
Institute for Local Self-Reliance