Minnesota's carbon-free electricity bill: 8 questions, answered

Posted: Feb. 2, 4:00 a.m. | Updated: Feb. 3, 6:00 a.m.

A bill that sets ambitious standards for clean energy in Minnesota over the next 17 years cleared its final legislative hurdle late Thursday night, and is headed to Gov. Tim Walz for his signature.

It will require Minnesota's electricity to be carbon-free by 2040, with some exceptions. The Senate approved the bill on a 34-33 vote along party lines after hours of debate. The House already passed the measure last week. 

Here’s a closer look at the bill, and what it will mean for electric utilities and their customers.

1) What would the bill do?

It includes two separate standards for renewable and carbon-free energy.

A 2007 Minnesota law already requires utilities to get at least 25 percent of their electricity from renewable sources. The state achieved that goal early, in 2017. This bill would bump that amount up to 55 percent renewable by 2035.

It also creates a new carbon-free standard. It requires utilities that do business in Minnesota to get a percentage of their electricity from carbon-free sources, starting with 80 percent by 2030, 90 percent by 2035 and finally, 100 percent by 2040.

2) What's driving lawmakers to push this bill now?

It’s being driven mainly by concerns about climate change. 

In Minnesota, burning fossil fuels like coal and natural gas to produce electricity is one of the biggest sources of carbon and other greenhouse gasses that contribute to climate change.

It's no longer the biggest culprit, as utilities have moved toward cleaner energy sources such as solar and wind. Transportation and agriculture are now the largest contributors of greenhouse gasses in Minnesota.

However, Gov. Tim Walz, DFL lawmakers and environmental groups want to see utilities make the transition to cleaner electricity more quickly. The carbon-free electricity measure is part of an action plan to combat climate change the Walz administration released last fall.

The proposal has been debated for a couple of years. DFL lawmakers, who now control both the House and Senate, made it a key priority to pass this session.

3) How do renewable and carbon-free energy differ?

The bill defines renewable energy as solar, wind, hydropower, hydrogen and biomass, such as a plant that burns garbage or wood to produce electricity.

There is one exception in the bill — the Hennepin Energy Recovery Center, or HERC, which burns trash for energy in downtown Minneapolis. It's been a source of environmental justice concerns over the years because of the air pollution it emits.

The bill’s authors say that facility should not be considered in the same category as other renewable energy sources such as solar or wind.

Another change: Previously, only energy from small hydropower projects under 100 megawatts qualified as renewable. The bill lifts that restriction, so large, existing hydropower projects would now qualify.

That’s significant, because it would now include electricity that Minnesota Power gets from a large hydro facility in Manitoba, Canada, which has been controversial among some environmental and tribal groups.

4) Is nuclear power in the mix?

Carbon–free energy sources are those that don't release any carbon dioxide, such as solar, wind, hydropower or nuclear. Under the bill, nuclear power is not considered a renewable energy source, but it is carbon free.

Minnesota has two nuclear plants, at Prairie Island and Monticello, owned by Xcel Energy. Xcel has said it plans to continue to operate those plants at least for the next couple of decades to help its carbon-free goals.

Minnesota law currently bans building new nuclear plants in the state. Some Republican lawmakers have argued that the ban should be lifted to allow new nuclear energy production, especially smaller modular technology.

5) Can utilities really meet these new standards?

The state's largest utilities, including Minneapolis-based Xcel Energy and Duluth-based Minnesota Power, have been cautiously supportive. They already have goals of being carbon-free by 2050, so this would move up that date by a decade.

“We're actually excited about being pushed to go faster,” Chris Clark, Xcel’s president in Minnesota, North and South Dakota, said in an interview. “We also recognize, though, that it's a challenge.”

A big reason why major utilities aren’t opposing the bill is because it includes exemptions and ways they can meet the standard without ditching fossil fuels altogether. 

For example, a utility could buy renewable energy credits to offset electricity generated by a natural gas plant.

Also, the bill contains so-called “off ramps.” The state Public Utilities Commission could allow a utility to delay meeting the standard if doing so would have big impacts on electric rates or create reliability issues.

“It is an offset mechanism to add flexibility, and address that there is some uncertainty about how to reach a fully carbon-free electric system top to bottom,” said Allen Gleckner, clean electricity director for the nonprofit Fresh Energy. But he thinks utilities will be able to meet the standard by adding more solar and wind and adopting new technologies, such as battery storage.

Another exemption gives utilities leeway for what's called “beneficial electrification” — for example, if a utility needs more capacity to switch people using natural gas to heat their homes to electricity.

6) How do member-owned co-ops view the bill?

Some cooperatives have voiced concerns about whether they'll be able to meet these standards while keeping their costs in check. They tend to be smaller, and often have contracts to buy power from fossil fuel plants.

As a compromise, the bill was amended to give co-ops and municipal power agencies a little more time to make the transition. 

They would need to be 60 percent carbon free by 2030, instead of 80 percent like the investor-owned utilities. But all utilities would need to reach the 100 percent standard by 2040.

7) Why is North Dakota involved in the debate?

North Dakota produces a lot of power from coal and gas. Top officials in that state have threatened a lawsuit over Minnesota’s bill, saying it would illegally restrict interstate commerce and hinder their ability to develop technology to capture carbon.

This isn’t the first legal spat the two states have had over the issue. 

North Dakota officials sued Minnesota over its 2007 law that essentially banned the state from importing power from new coal plants outside of the state. A federal court sided with North Dakota.

8) What’s next?

The bill is headed to Gov. Tim Walz, who has said he will sign it.

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