Minnesotans paid $70 million in 2011 for green energy they didn’t need
posted at 11:46 am on April 19, 2012 by Ed Morrissey
In March, we found out that taxpayers in the state of Washington had to pay for wind power that never got produced. Why should Minnesota be any different? The industry group for Minnesota power distributors report that taxpayers in my state paid $70 million more than necessary for their electricity, thanks to mandates on distributors to buy from green-energy producers (via Rob Port):
Taxpayers already pay a high price to subsidize wind energy through billions in federal grants, loan guarantees and tax credits that prop up the “windustry”. Now the bill for state renewable energy mandates is coming due with hundreds of thousands of Minnesota electric co-op and utility customers picking up the tab.
Going green cost rural electric ratepayers in Minnesota more than $70 million last year, according to the Minnesota Rural Electric Association (MREA). The MREA represents about fifty mostly small, rural electric co-ops and utilities which serve more than 625,000 Minnesota homes and businesses.
“It’s an enormous subsidy. You have to add wind power, whether you need it or not,” said Mark Glaess, MREA executive director. “Right now we’re paying for wind we don’t need, we can’t use and can’t sell.”
In 2007, the Minnesota state legislature mandated that an ever-increasing percentage of power must come from green-energy sources, topping out at 25% in 2025. That mandate, unlike in other states, included co-ops — which supply power not just to rural customers but also to suburban customers as well. (I get my electricity from a co-op, for instance.) The requirements pushed distributors into signing long-term deals to buy output in order to ensure compliance in outlying years — and those contracts got negotiated before the economic downturn that significantly damaged demand.
The result? Minnesota distributors are now on the hook to buy green power whether they can sell it or not. Since they can’t sell at the predicted demand levels, they are producing less from traditional and cheaper sources, which means prices have had to go up:
The RES exists in a sort of price vacuum. No matter that coal-generated power costs considerably less than wind. Dozens of Minnesota co-ops are stuck with higher, pre-recession prices for surplus wind power which must be bought and distributed. The difference between what the wind power costs and what it resells for now adds up to tens of millions of dollars a year statewide with rural residents caught in the middle.
“It’s a well-intentioned law that did not contemplate the inexplicable law of unintended consequences because it never considered resource planning to meet energy load and demand. What happens when the load goes down? Our members still have to buy it,” Glaess said. “And we’re going to have to increase rates to pay for our incumbent coal generation, which is getting smacked by the EPA (Environmental Protection Agency).”
The Minnesota Public Utilities Commission (PUC) directed electric coops and utilities to report the cost to ratepayers of complying with the RES. The top three wind loss leaders in 2011 were Great River Energy ($35 million), Minnkota ($27.5 million) and Dairyland Power ($18.1 million in Minnesota and Wisconsin combined). That’s a steep increase from 2010, when Great River Energy (GRE) reported a $22 million loss on wind energy sales, while Minnkota reported a $28.2 million loss the previous year.
Spare us, please, from “well-intentioned” laws. The legislature attempted to dictate market supply and demand, and it produced the failure that this kind of central planning always produces. As a result, Minnesotans have to pay energy costs above current market levels at a time when their disposable income has become more and more restricted, thanks to price increases in gasoline and food. It’s yet another demonstration of the folly of central planning.
Breaking on Hot Air