What Minnesota's new 100% carbon-free energy law means for the state

On February 7th, 2023, Minnesota Governor Tim Walz signed Senate File 4 into law, requiring all Minnesota utilities to procure 100% of the energy they serve to customers from carbon-free or renewable sources by 2040. This is the first change to the state’s renewable energy target since 2007 and makes Minnesota the 22nd state with a 100% clean energy target.

Not all of these state-level targets are created equal. Some are voluntary goals, while others are strict requirements with stiff penalties for non-compliance. The ideal version of a law like this is forward-looking, directing utilities to take steps toward a smarter, more interconnected grid and offering a hand up to ordinary citizens looking to take advantage of clean energy sources like rooftop solar.

Which kind of law is Minnesota’s, and what effects will it have for ordinary citizens in the state? Let’s examine what the law does and how it might affect you.

How the Minnesota carbon-free standard works

The most important parts of the new law are its goals for carbon-free and renewable energy. Importantly, the law covers all utilities in the state, including big ones like Xcel Energy and Minnesota Power and little ones like municipal and cooperative utilities.

The new law is an update of a 2007 law that required 25% of the state’s electricity to come from renewable sources by 2025. The state achieved that milestone eight years early (pdf).

Here’s what the law requires:

Date	Requirement
2030	80% of all electricity sold must from carbon-free sources for investor-owned public utilities; 60% for other electric utilities
2035	90% of all electricity sold must come from carbon-free sources for all utilities. 55% of all electricity sold must come from renewable sources by the end of the year
2040	100% of all electricity sold must come from carbon-free sources for all utilities

So all utilities must meet the 100% carbon-free requirement by 2040, but there are milestones along the way. Also, in recognition of the fact that small municipal and cooperative utilities aren’t as far along on working toward these goals as the big public companies, they get a reduced goal of 60% carbon-free by 2030, but must still meet the other goals for 2035 and 2040.

The difference between renewable and carbon-free sources

The second most important part of the law is how it defines both “renewable” and “carbon-free” sources of electricity. Here’s a guide:

What counts as renewable:

• Solar

• Wind

• Hydro (including some that wasn’t previously considered renewable)

• Biomass, landfill gas, wastewater sludge, and garbage burning (except in Minneapolis)

• Hydrogen made using the renewable sources listed above

What counts as carbon-free:

• All of the above except biomass, landfill gas, wastewater sludge, and garbage

• Nuclear

The note above about hydropower that wasn’t previously considered renewable refers to a large amount of power delivered to the Minnesota Power utility company from Manitoba Hydro. The 2007 renewable energy law specifically disincluded this power from counting as renewable because of concerns from the state’s Native American population, but the new law allows it to count.

Speaking of what’s allowed to count, a very large garbage burning facility in Minneapolis called the Hennepin Energy Recovery Center (HERC) was specifically disincluded from being counted as renewable energy because of ongoing environmental justice concerns. The HERC is located near neighborhoods that house traditionally marginalized communities, and people have been trying to shut it down for years.

As for nuclear power, Minnesota currently has two nuclear facilities, both owned and operated by Xcel Energy. Xcel has said it plans to continue operating the plants into the 2030s, and it makes sense that they will try to extend the life of these facilities at least to the 2040 end date of this law.

Minnesota state law currently bans new nuclear plants, and some politicians in the state have called for the ban to be lifted, but it’s unclear whether that is likely to happen or would even result in new facilities if it were.

Off-ramps and delays

Here’s where the law takes some of the teeth out of its regulatory scheme. The new law offers several ways for companies to delay or avoid full compliance with its requirements.

Specifically, the Public Utilities Commission (PUC) has the authority to modify or delay the standards if it finds that it’s “in the public interest,” and utilities can petition to delay compliance as long as they also file a plan to eventually reach it.

Another carve-out exists for “additional electric load from beneficial electrification.” In plain English, that means if power demand goes up because more people are using it to charge EVs or run appliances on electricity instead of gas, the PUC can allow utilities to get that extra power from fossil fuel sources as long as the greenhouse gas reduction benefits of the electrification are “substantial”.

Finally, utilities would be allowed to use purchased carbon offsets (in the form of renewable energy credits, or RECs) to meet the carbon-free requirements. This means they could conceivably continue to operate dirty facilities and buy RECs cheaply from, say, Iowa wind farms, to offset carbon emissions.

In general, the trading of emissions credits is full of problems, as John Oliver covered on his show “Last Week Tonight” in 2022. But the author of the law, state House Majority Leader Jamie Long, said on a clean energy podcast that he doesn’t think that RECs will make up a meaningful amount of the utilities’ compliance efforts.

What the new standard might mean for ordinary Minnesotans

Compared to some other state-level 100% clean energy standards, Minnesota’s bill is pretty light on new rules and regulations. Its standards include some broad guidelines as to how they could be achieved, but it does little to ensure direct benefits for ordinary Minnesotans outside of reduced carbon emissions and the economic growth that will occur as utilities work to meet the goals.

Speaking of economic growth, the law directs utilities to “maximize the availability of construction employment opportunities for local workers.” It calls on the PUC to “consider local job impacts and give preference to proposals that maximize the creation of construction employment opportunities for local workers.” But there is no clear guidance as to how utility plans might be analyzed for how well they support local jobs, and no penalties for projects that don’t meet the recommendations.

Minnesota is already one of the fastest growing states for solar employment. According to the Interstate Renewable Energy Council’s latest Solar Jobs Census, the state had nearly 5,000 solar workers in 2021 and employment grew by 14.4% compared to the year before.

The solar industry stands ready to make those jobs and economic benefits available to more Minnesotans. A statement we received from Logan O’Grady, Executive Director of the Minnesota Solar Energy Industries Association (MnSEIA), reads:

“MnSEIA is thankful for the dedicated work of lawmakers and partners to pass the 100% clean energy bill. This is a step in the right direction for a clean energy future. MnSEIA is working hard to ensure there are industry-wide benefits from the bill so businesses from small residential to large utility-scale solar can take part. These benefits should also be equitable for low-income and underserved communities so more Minnesotans can access clean energy. Minnesota is a great market for solar + storage and MnSEIA is looking forward to the clean energy jobs and investments this bill will create.”

- Logan O'Grady

Concerns over energy democracy

Not everyone is so happy with Senate File 4. We spoke to John Farrell, Director of Energy Democracy at the Minnesota-based Institute for Local Self Reliance. He pointed out that the bill does little to control costs for consumers, and includes no binding rules to encourage local ownership or local workers, adding “if you care about distributed energy resources, the law is basically silent on them. If you're fine with utilities maintaining their current market power and being obligated to pursue carbon free electricity, this is your bill”.

The bill does lack specific support for people who want to invest their money in personal use of renewable energy, such as adding solar panels to their homes and businesses. There is no solar carve out in the Minnesota bill that would require utilities to get a portion of the energy they serve from solar installations, nor is there any new funding for programs like a state solar tax credit, rebate program, community solar, or SREC market.

Incentive programs and a carve out for distributed generation or solar energy would have been nice to have in the bill. However, Minnesotans who want to invest in renewable energy will still benefit from that investment. The state offers net metering, homeowners can take advantage of the federal solar tax credit, and Xcel energy offers its customers a small incentive program called Solar*Rewards, with larger cash incentives for income-qualified customers.

Bottom line: Is this a good law?

To determine whether Senate File 4 is a good law, the questions we have to ask ourselves are these: whom does it help, will it be successful in reducing carbon emissions, and will it have long-term negative consequences?

Largely, the bill seems like it will help Minnesota electric utilities maintain their control on the generation and distribution of electricity, while also leading to some new jobs in construction, operations, and maintenance of renewable energy facilities. If you like the way things are now but wish there was more solar (and solar jobs) around, this bill will do that.

Given that Xcel and Minnesota Power had already set achievable goals for themselves to reach 100% carbon-free electricity by 2050, the bill will likely be successful in speeding the transition to carbon-free energy sources. That means all Minnesotans will benefit from cleaner air and an electric grid free from reliance on fossil fuels.

The possible negative long-term consequences of the bill include rapidly-increasing prices for consumers and a grid that continues to operate for the benefit of monopoly utility companies. That might get Minnesota to 100% carbon-free electricity by 2040, but it will still mean the utility companies can make a guaranteed profit on serving electricity. Those utilities will still be allowed to pass the costs of new generation facilities and grid improvements onto customers.

While we’d prefer a more forward-thinking law that introduces new economic models of grid operation, there’s no denying that Senate File 4 will result in a quicker transition to clean energy than was planned before it became law.