How Can Minnesota’s Electric Sector Be Decarbonized?

EPRI Delves into the Tradeoffs of Various Pathways

By Michael Matz

Across the electric power industry, many utilities are pursuing aggressive decarbonization goals. Concurrently, states are enacting policies to decarbonize their economies, prompting the question: how can these policies reinforce and augment utility initiatives? Prior EPRI research has shown that different policies with the same carbon reduction goals can have dramatically different consequences for a state’s energy system. For instance, while some policies may increase revenues for out-of-state power providers, other policies may boost financial benefits for in-state companies.

These were among the issues that Great River Energy—an electric power cooperative that serves 28 distribution cooperatives and 700,000 customers in Minnesota—was examining in early 2019 as policy makers and power industry stakeholders were discussing the possibility of making the state’s renewable energy standard more stringent. Enacted in 2007, the state’s original renewable energy standard requires Xcel Energy, the state’s largest utility, to generate 31.5% of its electricity from solar, wind, and other specified renewable energy sources by 2020. (Today, Xcel has a goal to reduce carbon emission 80% by 2030 and 100% by 2050.) The state’s other power providers, including Great River Energy, have a 25% by 2025 requirement. The state has an economy-wide greenhouse gas emissions reduction goal of 80% by 2050.

In January 2019, Great River Energy asked EPRI for help in gaining a better understanding of how various decarbonization policies might change Minnesota’s energy system.

“EPRI is an industry leader and brings an immense wealth of resources as well as expertise to the topic,” said Zac Ruzycki who manages power supply planning for Great River Energy. “This project was formative in helping us to better understand what types of financial trade-offs would present themselves under multiple different potential policies aimed at reducing carbon emissions.”

EPRI used its U.S. Regional Economy, Greenhouse Gas, and Energy (US-REGEN) model to compare the economic outcomes and costs of two different policies intended to achieve the same decarbonization targets:

• Renewable energy standard: A Minnesota electric sector requirement for 60% wind, solar, hydropower, and other renewable energy resources by 2030 and 95% by 2050. EPRI showed that these targets could reduce carbon dioxide (CO₂) emissions of Minnesota’s electric sector by 85–90% in 2030 and 90–95% in 2050 relative to 2005 levels.
• Technology-neutral CO₂ standard: A Minnesota electric sector requirement to achieve the same CO₂ reductions while allowing all energy resources, including nuclear power and fossil generation with carbon capture and storage.

The modeling analysis revealed that the technology-neutral policy could save Minnesota $2.7 billion in electric sector costs between 2015 and 2050. The higher costs of the renewable energy standard were largely due to the significantly greater purchases of wind power and associated renewable energy credits from the Dakotas and Wisconsin. Relative to the renewable energy standard, the technology-neutral CO₂ policy would support approximately the same amount of new in-state wind generation and lead to more overall in-state generation investment as well as 30% greater in-state electric sector revenues.

“We found that a technology-neutral approach takes much greater advantage of Minnesota’s existing generation resources and could enable in-state nuclear power plants to continue operating for a least a decade longer than under a renewable energy standard,” said EPRI Senior Technical Leader Dr. Nidhi Santen, who conducts research on energy systems, environmental policies, and electricity sector resource planning. “Our modeling showed that while an additional 3 gigawatts of interstate transmission capacity would be needed to meet the renewable energy standard, only 200 megawatts would be necessary under the technology-neutral policy.”

A Closer Look at Technology-Neutral Policies

During the next Minnesota state legislative session in early 2020, the focus of policy discussions shifted from renewable energy standards to technology-neutral clean energy standards—in other words, policies that are less prescriptive about technologies permitted to achieve decarbonization goals. Great River Energy asked EPRI to conduct a follow-up analysis to delve deeper into the implications of a less prescriptive policy for Minnesota’s electric sector.

EPRI researchers again used the US-REGEN model to characterize the outcomes of three increasingly stringent clean energy standards, in which 60%, 80%, and 100% of Minnesota’s load uses carbon-free energy resources by 2050. For all three scenarios, researchers added a few restrictions to reflect on-the-ground realities in Minnesota:

• Carbon capture and storage would not be deployed due to a lack of suitable geological reservoirs.
• Wind and solar capacity would be capped at 10 gigawatts and 6 gigawatts, respectively, to reflect siting and permitting constraints.
• New nuclear plants would not be built because they are banned by state law.

All scenarios also assumed that no hydrogen-based generation would be built because it is still a nascent technology. The 100% standard had an additional restriction: fossil generation capacity would not contribute to the state’s backup capacity beginning in 2050.

The analysis revealed that Minnesota can cost-effectively meet the 60% and 80% standards by using existing in-state wind resources, by expanding in-state wind and solar generation, and by extending the operations of in-state nuclear power plants. However, the 100% standard would be much more costly because the state would be unable to meet all its load using the technologies examined in the scenarios. It would require significant investments in a combination of new carbon-free generation resources, transmission, and load-reducing technologies—such as demand response and advanced, high-efficiency heating and cooling. Deployment of about 6 gigawatts of battery storage by 2050 could help the state comply with the standards more cost-effectively by reducing the need for natural gas generation and for load-reducing technologies (in the 100% scenario).

“We found that Minnesota’s existing zero-carbon fleet can play a key role in meeting 60% and 80% clean energy targets,” said Santen. “But under a 100% target, we could not find a cost-effective pathway to meet the state’s load in the absence of nascent technologies such as carbon capture and storage, advanced nuclear power, and hydrogen.”

“This analysis begins to shed light on the future states of energy policy in Minnesota and helps us understand the effects of those policies on the design of generation portfolios and energy resource options,” said Ruzycki. “Research of this type is incredibly important for utilities, legislators, and policy-makers to more deeply understand the relative costs and benefits of various policy alternatives and how those policies may—or more importantly—may not impact decarbonization.”

Great River Energy recently announced plans to phase out its remaining coal resources and add significant renewable energy, reducing the CO₂ emissions of its direct power generation resources by 95%.

“A key insight from this research is that the more a decarbonization policy broadens technological options, the less it may cost to reach the targets,” said Dr. John Bistline, an EPRI expert on the analysis team who conducts research on the economic and environmental effects of policies and technology development. “To help balance high levels of renewable energy, it’s important that utility planners have the ability to select the most cost-effective, technically suitable technology from a diverse set of options, such as energy storage, dispatchable nuclear power, and fossil generation with carbon capture. This insight is potentially generalizable to other states and can inform utilities, policy makers, and regulators across the country as they consider various decarbonization pathways.”

Artwork by David Foster Graphics

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