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Minnesota lawmakers look to boost wind energy exports

(Photo by PXLated via Creative Commons)

(Photo by PXLated via Creative Commons)

A legislative reform moving ahead in Minnesota aims to better position the state to become a wind energy exporter.

Minnesota has long been a wind energy leader. The state has nearly 3,000 megawatts of installed wind capacity, ranking it seventh in the nation.

Almost all of it’s been built for Minnesota customers. The state exports relatively little wind energy compared to neighboring Iowa or North Dakota.

It’s not for lack of resources. Minnesota has enough land and wind to conceivably generate nearly 500,000 megawatts of wind power.

“We have more [potential] wind energy in the state than we can develop ourselves, and we should use that resource,” said Ben Gerber, energy policy manager for the Minnesota Chamber of Commerce. “If we didn’t develop this it would be like North Dakota only developing the oil they needed in their state to meet their own needs.”

Over the last several months, Gerber worked with the wind industry and environmental groups to identify and target a potential regulatory barrier that may be deterring developers from trying to sell Minnesota wind energy into other states.

The bill they helped draft would exempt wind and solar power exporters from having to petition regulators for what’s known as a certificate of need — a determination that a project meets a need and is in the public’s best interest.

“The purpose of certificate of need is to protect electric ratepayers from unnecessary projects that a regulated utility would want to build to increase their rate base but not for the benefit of the electric system. It’s a protection against the monopoly power of the utility,” said Joe Sullivan, a regional policy manager for Wind on the Wires, a St. Paul nonprofit that works on wind and transmission issues. “If an [independent power producer] builds a project, it, not the electric ratepayers, takes on all the risk of failure or redundancy.”

The proposal’s chief authors were Sen Julie Rosen, R-Vernon Center and Rep. Pat Garofalo, R-Farmington. Co-authors include Democratic state senators Scott Dibble of Minneapolis and John Marty of Roseville.

Not just utilities anymore

Generally, utilities collect a rate of return on any projects or infrastructure they build, and so the more they build, the more money they make. The certificate-of-need process is meant as a check on that financial motivation.

Minnesota’s certificate-of-need statute was written at a time when most large energy facilities were built by utilities, but over the last two decades more projects are being developed by independent power producers, which sell the electricity to utilities.

The current law also requires large independent projects to prove a need to regulators, which Sullivan says gives developers an incentive to avoid Minnesota and build projects for export in neighboring states, which have similar or better wind resources.

“It’s not just a little headache. It’s kind of like a migraine headache,” Sullivan said, describing the certificate-of-need process that large projects have to go through.

The process can add around $200,000 in legal expenses and delay projects anywhere from six to 18 months, Sullivan said. The best example of a wind export project that encountered delays and expenses from a certificate-of-need process is the 205-megawatt Lakefield Wind Project in Jackson County, Sullivan said.

EDF Renewable Energy had a power purchase agreement to sell electricity from the wind farm to Indianapolis Power & Light Company. Questions about whether and how to apply the statute caused the process to stall at one point.

“We kind of got into a Catch-22 situation,” said Shanelle Evens Montana, a regulatory and legislative affairs associate with EDF Renewables.

The project was large enough to trigger a certificate of need proceeding, but Minnesota wasn’t necessarily in need of wind power at the moment, nor did it seem like that should apply, Evens Montana said. Meanwhile, it couldn’t prove a need in Indiana either because that state doesn’t have a certificate-of-need process.

‘It’s a big deal’

Iowa, North Dakota and South Dakota do not require a certificate of need for independent projects that will sell out-of-state or to wholesale markets. Wisconsin combines the process with its site permit process.

The Minnesota legislation would put the state in line with its neighbors. It unanimously cleared a committee vote in both the House and Senate and has been incorporated into an omnibus energy bill.

The certificate-of-need reform doesn’t appear to be controversial, though Carol Overland, an attorney who has represented clients in wind farm need cases, said she is concerned the change will mean less opportunity for public input.

“Generally, I favor certificate-of-need review on all projects because we need to take a hard look at whether a project is needed, whether it is in the public interest, and what the real costs are,” Overland said.

Under the legislation, exempted projects would need to need to prove they have a power-purchase agreement with an out-of-state utility or give a notice to regulators that they intend to sell the power on the wholesale market. They would still be required to obtain site permits and conduct environmental reviews, if applicable.

Sullivan said it’s hard to guess how big an impact the legislation would have, but based on what he’s been told by wind developers, “it’s a big deal,” he said.

“It sends a signal that Minnesota is serious about exporting its wind resources,” Sullivan said.

Evens Montana said EDF is seeing growing interest in wind power across the country, including southeastern states such as Mississippi and Louisiana, which are being integrated into the Midwest’s electricity grid. The quality of Minnesota’s wind means projects in the state compete in those markets even after considering higher transmission costs, she said.

“Minnesota does have an opportunity to be very competitive with exports,” Evens Montana said.

Wind on the Wires is a member of RE-AMP, which publishes Midwest Energy News.

Comments (7)

Carol Overland’s comments demonstrate exactly why this change in law was needed. There is too much abuse in the CON process to unnecessarily delay projects by abusing the review process in Minn. Stat. 216B.243. There are ample opportunities for public input, however, this statute exists purely exists for developers/utilities to prove the need in Minnesota to protect ratepayers. We do understand the importance when ratepayers in Minnesota are on the hook, however, this is solely for exported energy paid for by people not in Minnesota. There is no reason to prove the need in Minnesota when the energy will be exported.

By Ben Gerber on Apr 3, 2014

It is sad that while Minnesota is planning to generate energy for export, its neighbor, Wisconsin is focused on importing raw material and energy instead of developing renewable energy.

By Delroy Leslie on Apr 3, 2014

Their must be public input. As for the environmental process-wind is exempt. Saying there is one is purely lip service to pacify the public. Even with signed petitions environmental studies DO NOT HAPPEN. Industrial wind turbines kill birds and bats by the thousands-yet wind continues to be exempt. While some parts of Mn. may generate some windpower-most of it is trumped up to look better than it actually is.

By C Mueller on Apr 3, 2014

The wind industry could grow faster and generate less opposition if properly regulated. Just letting wind industry lobbyists–regardless of whether they are sailing under false colors as “environmental” advocates–write the laws betrays the public.

By Alan Muller on Apr 3, 2014

“Too much abuse in the CoN process to unnecessarily delay projects.” Please cite one instance of abuse of process! What I’ve noticed in my representation of nearby landowners directly affected by projects is that developers are the ones abusing the process, and that delays are caused by the applicants failure to provide information required, or providing demonstrably false information, making false claims of “eagle baiting” and even to the extent of attempting to get a restraining order against a landowner which the judge angrily tossed out of court as … ABUSE OF PROCESS! What also was noteworthy in the PPSA Annual Hearing this year was that 5 or 6 wind permits have been revoked, meaning that the PUC is permitting projects that shouldn’t have been permitted. If projects permits are being revoked, isn’t that an abuse of process by the developers? The Commission should establish a Task Force to look into the high number of revocations.

As to the quotes above, There’s more to the story, policy wise, because if you’re building in one state, for another, how does electricity generated get to the other state? TRANSMISSION! And do Minnesota landowners and ratepayers want to be paying for transmission to elsewhere? NO! And that’s at issue right now in an ongoing ITC case for transmission in MN from Lakefield Jct. to a new Huntley substation and then down to Iowa (PUC docket 12-1053), another “it’s for wind” NOT transmission line.

This CoN exemption bill is not controversial in the sense that no one’s storming the gates about it, but it’s a trend which many of my clients would not approve. I believe that some of the landowners/residents who were opposing the Goodhue Wind Project (permit revoked recently) are contacting legislators about it because I was asked what it means, and they also weighed in on the Bent Tree Wind Project which was a project for export, with comments that it isn’t in the public interest to be exporting wind across state boundaries. The incentive and disincentive arguments are stronger against transmission for these projects, but are as applicable for generation.

Two issues compressed:

1. Wind projects in MN but sold elsewhere disincents development of generation in the target state. Policy wise, I think it’s a problem, because states generally would rather do renewable within their own state, strongly stated by MidAtlantic governors against JCSP/UMDTI transmission from the Midwest to the East Coast, where they said:

The build-out of the national transmission corridor implicit in S. 1462 is estimated to cost at least $160 billion, the majority of which would be paid for by East Coast states, costing our ratepayers hundreds of dollars per year. In its current form, this legislation would harm regional efforts to promote local renewable energy generation, require our ratepayers to bear an unfair economic burden, unnecessarily usurp states’ current authority on resource planning and transmission line certification and siting, and hamper efforts to create clean energy jobs in our states.
http://media.washingtonpost.com/wp-srv/politics/documents/governor071210.pdf

This was also an issue with Bent Tree Wind Project, where a wind project’s generation was sold to Wisconsin. CUB of Wisconsin raised this issue in the PSC approval of that Power Purchase Agreement, and challenged the Bent Tree project because they thought wind generation should be developed in WI, not in MN for WI. The state went forward with it, not addressing the self-sufficiency policy issues.

2. Wind and solar shouldn’t be shipped over great distances because it’s inefficient. Wind and solar are lower capacity factor generation, and transmission is inherently inefficient. With line loss a physical fact, which increases over distance, what percentage of a low capacity factor generator would actually arrive at the destination? 40% at best capacity factor – (X% lineloss/mile x Y miles) = _________ (a lot less than what you started out with). This inefficiency isn’t justified — you could probably build it at the destination with the same or better result! How much generation will have to be built to compensation for losses? And if people are serious about achieving efficiency, which is, as we know, the cheapest resource on the market, why is this inefficient scheme being promoted?

An interesting aside, on the way up to OAH today for a prehearing conference on that “it’s for wind” NOT line, 12-1053, the Secretary of Defense was on the radio, and he said, “If you can produce energy where you use it, you save lives.” Well put!

Anyway, generally, I favor Certificate of Need review on all projects because we need to take a hard look at whether a project is needed, whether it is in the public interest, and what the real costs are. Without CoN review, there’s no opportunity, it won’t happen.

By Carol A Overland on Apr 3, 2014

There is nothing wrong with developing wind energy if it can be where it will not destroy a neighbor’s property value. put someone’s health at risk, or kill birds and bats.
As for CON, need should be based on actual proof that construction of an alternative energy generation facility will produce a worthwhile reduction in CO2. This proof should be based on actual production data of similar equipment installed where wind conditions are equal or worse. Rosy claims based on optimistic projected results should not be allowed as “proof”

By Rick Conrad on Apr 3, 2014

Relying on the weather to produce energy is a disastrous way to go. The attempt to export wind energy means more visual blight and lowered property values, not to mention numerous dead birds. I bet if a fossil fuel technique was chopping up birds the enviers would be all over that to stop it!
The CoN is a minimal avenue to hold the proponents to some standards. The two republicans authoring the bill is a sad commentary.
What I always ask of the wind and solar proponents is to show me the economic return for your project. Crickets!

By Tony Pederson on Apr 4, 2014