Energy Doldrums

Energy Doldrums

by David Morris

Originally published in the Minneapolis Star Tribune, November 9, 2003

We’re coming up on the 10th anniversary of a Minnesota legislative session described by two veteran political reporters in this newspaper at the time as “one of the most divisive and emotionally draining in memory.” The key issue was the expansion of a permanent radioactive waste site at Prairie Island.

The debate was heated. But along with heat came light. State residents, in extended legislative hearings or on the op-ed pages of newspapers or on radio and TV, engaged in an intensive conversation about Minnesota’s energy future.

Out of that hard-hitting and far-reaching debate and the rough and tumble of the legislative process, a remarkably coherent energy strategy emerged. Minnesota would move away from a reliance on nuclear power and coal by rapidly expanding investments in energy efficiency and renewable energy. The law established mandatory deadlines for expanding the generation of electricity from renewable resources.

In the decade since the tumultuous and momentous legislative session of 1994, Minnesota has failed to live up to its promise. Spending on energy efficiency has actually gone down. Renewable energy goals have not been met. The delays and increasing uncertainty encouraged entrepreneurs to lobby the Legislature to change its energy policy to enable their own individual technologies. This has led to a dangerous and dispiriting dynamic in which Minnesota’s energy future has been hijacked by narrow interests pushing an even narrower agenda. And unlike the process in 1994, decisions have been and are being made with little or no public debate or participation.

The result? An increasingly incoherent energy policy that at times verges on the bizarre. The 2003 Legislature, for example, declared natural gas a renewable energy source. In Minnesota, garbage, too, is now considered a renewable fuel. Coal is defined as “clean energy” so long as the electricity produced generates lower emissions (excluding carbon dioxide) than “those of traditional technologies.” It’s certainly “cleaner,” but how can a major source of greenhouse gas emissions truly be considered a clean energy source?

In retrospect, the unraveling began several years ago when a British company called Fibrowatt came to America to sell the idea of incinerating poultry manure. It wasn’t an easy sell. Unlike wet manures from hogs and cattle, dry manures from poultry are easily transported and stored. In the last 10 years, the market for dry manure has expanded rapidly as farmers rediscovered its value as a fertilizer and soil builder. In 2002 all of the turkey manure generated in Minnesota was easily sold to Minnesota farmers.

Fibrowatt went first to Washington, where its lobbyists convinced the chairman of the Senate Finance Committee to add poultry manure to the list of renewable resources eligible for substantial federal tax incentives if used to generate electricity. The company then came to St. Paul, where it convinced the state Legislature to award it an even more handsome subsidy: a guaranteed long-term electricity contract with a price tag two to three times higher than that for conventional or even wind-generated electricity.

This year another newly formed company, Excelsior Energy, copied Fibrowatt’s strategy, although it went in the opposite direction for subsidies: state Legislature first, Congress second.

Excelsior has been wildly successful in its efforts. So successful that one could argue that in the process of giving Excelsior what it wanted, the Legislature, with little debate, has dramatically changed energy policy and, conceivably, Minnesota’s energy future.

The Excelsior project, as conceived, will be the largest electricity-generating complex in Minnesota and by far the largest coal gasification plant in the world. The 2,000-megawatt project could meet virtually all of Minnesota’s electricity growth for decades, diminishing the market for wind energy and forestalling any expansion of high efficiency on-site electrical generation technologies like microturbines and fuel cells.

The Excelsior law overturns regulatory and public oversight measures painstakingly developed over the past 30 years. The Legislature has bypassed the normal competitive bidding process for electricity supply by requiring Xcel to buy 450 megawatts of electricity from Excelsior. That is almost twice the amount of wind-generated electricity the 1994 Legislature required Xcel to purchase — even though wind energy eliminates pollution, while coal gasification reduces some pollutants but has no impact on what is becoming one of the most important pollutants of all, carbon dioxide.

The Legislature also gave Excelsior the right to expand the size and footprint of its power plants and all associated transmission lines without asking state agencies (or its neighbors) for permission.

Even more shocking, the Legislature granted Excelsior the right of eminent domain, that is, the right to seize private property. Eminent domain is usually reserved for use by governments, not private corporations.

The recent changes in energy policy will be expensive. Fibrowatt, which has not yet broken ground on its incinerator, has a contract that gives it a direct subsidy of some $20 million a year, almost half a billion dollars over the life of the contract. The contract for Excelsior’s electricity has not yet been negotiated but the subsidy (that is, the price above which competing electricity is available) may well be higher than that given to Fibrowatt.

These subsidies will be paid by consumers on their electricity bill rather than their tax bill. But it is the same people who will be paying. At a time of budget cutbacks the Legislature has awarded more than a billion dollars in out-of-pocket subsidies to two companies to undertake activities that have little or no public benefit. It’s an energy policy we can all do without.