|Select Economic and Energy Data†||Value||State Rank|
|Real Gross Domestic Product, per capita||$41,573||9th highest|
|Gasoline Price, per gallon||$2.75||20th lowest|
|Electricity Price, per kWh||8.13¢||19th lowest|
Minnesota has below average electricity prices. Coal produces almost 60 percent of Minnesota’s electricity, and two nuclear plants contribute nearly a quarter of the state’s electricity generation. Minnesota is among the top states in wind power generation, which provides over 9 percent of the state’s electricity.
Though coal provides almost 60 percent of Minnesota’s electricity, the state does not have its own fossil fuel resources. Instead, coal is delivered from Montana and Wyoming. The state is home to two oil refineries, which process crude that comes primarily from Canada. Minnesota is a leading producer of ethanol, which has been supported by the state government through a variety of production incentives and mandates. The state has more E85 refueling stations than any other state having encouraged its production and use—a blend of 85 percent ethanol and 15 percent motor gasoline.
Regulatory Impediments to Affordable Energy
Although affordable energy is a vital component of a healthy economy, regulations frequently increase energy costs. Regulations imposed in the name of reducing carbon dioxide and greenhouse gas emissions are especially costly. Carbon dioxide is a natural byproduct of the combustion of all carbon-containing fuels, such as natural gas, petroleum, coal, wood, and other organic materials. Today, there is no cost-effective way to capture the carbon dioxide output of the combustion of these fuels, so any regulations that limit carbon dioxide emissions will either limit the use of natural gas, petroleum, and coal, or dramatically increase their prices.
Below are some facts about Minnesota’s regulatory environment that are likely to affect the cost of energy or the cost of using energy.
- Minnesota does not cap greenhouse gas emissions.
- Minnesota is a member of the Midwestern Regional Greenhouse Gas Reduction Accord, a regional agreement among six American governors and one Canadian premier to target greenhouse gas reductions. The central component of this agreement is the eventual enactment of a cap-and-trade scheme, perhaps supported by low-carbon fuel standards and other supplemental policies.
- Minnesota requires utilities to sell a certain percentage of electricity from renewable sources. The state’s renewable portfolio standard requires utilities to provide 25 percent of retail electricity sales from renewable sources by December 31, 2025. [i] Xcel Energy must provide 30 percent of retail electricity sales from renewables by December 31, 2020, with “at least” 25 percent generated by wind-energy or solar energy systems, with solar limited to no more than 1 percent of the requirement.
- Minnesota requires gasoline to be mixed with renewable fuels. Senate File 4, passed in 2005, mandates that all gasoline contain 20 percent ethanol by 2013.[ii] This requirement relies on approval for mixing 20 percent ethanol into gasoline from the federal Environmental Protection Agency. Without that approval, Minnesota’s law requires that all gasoline contain 10 percent ethanol by 2013. Senate File 3683, passed in 2008, mandates that all diesel contain 20 percent biodiesel between the months of April and October by 2015. From November to March, all diesel must contain 5 percent biodiesel.[iii]
- Minnesota does not impose automobile fuel economy standards similar to California’s, which include attempts to regulate greenhouse gas emissions from new vehicles.
- Minnesota requires new residential and commercial buildings to meet energy efficiency standards. Residential and commercial buildings in localities with a population greater than 2,500 must enforce the Minnesota State Building Code, which is based on the 2006 International Residential Code and ASHRAE 90.1-2004.[iv] The IRC (developed by the International Code Council) and ASHRAE (developed by the American Society of Heating and Refrigeration and Air Conditioning Engineers) are model codes that mandate certain energy efficiency standards. Governor Tim Pawlenty signed Executive Order 05-16 in 2006, committing state agencies to reduce energy use in state buildings by 10 percent in the year.[v] However, actual energy use was reduced only 4.8 percent compared to 2005.[vi] New construction and major renovations funded fully or in part with state bonds must exceed the 2004 state energy code by 30 percent.[vii]
- Minnesota does not impose state-based appliance efficiency standards.
- Minnesota does not allow utilities to “decouple” revenue from the sale of electricity and natural gas. Some states decouple revenue from actual sales, allowing utilities to increase their revenue by selling less electricity and natural gas.
† Data Sources: Real GDP per capita 2008: Bureau of Economic Analysis, News Release: GDP by State (June 2, 2009), http://www.bea.gov/newsreleases/regional/gdp_ state/gsp_newsrelease.htm; Unemployment: Bureau of Labor Statistics, Regional and State Employment and Unemployment–February 2010 (Mar. 10, 2010); Gasoline Prices: American Automobile Association, AAA Daily Fuel Gauge Report (Mar. 30, 2010); Electricity Prices: Energy Information Administration, Electric Power Monthly, Table 5.6.B., Average Retail Price of Electricity, (March 15, 2010), http://www.eia.doe.gov/cneaf/electricity/epm/table5_6_b.html; Electricity Generation Data: Energy Information Administration, Electricity Generation 2009, http://www.eia.doe.gov/cneaf/electricity/epa/generation_state_mon.xls.
[i] Minn. Stat. § 216B.1691(2009), https://www.revisor.leg.state.mn.us/statutes/?id=216B.1691.
[ii]A bill for an act relating to the operation of state government, S.F. No. 3683 (Minn. 2008), https://www.revisor.leg.state.mn.us/bin/bldbill.php?bill=S3683.4.html&session=ls85.
[iv] Building Codes Assistance Project, Code Status: Minnesota, http://bcap-energy.org/node/76.
[v] Minn. Exec. Order No. 05-16 (2005), http://www.governor.state.mn.us/priorities/governorsorders/executiveorders/2005/PROD005605.html.
[vi] Database of State Incentives for Renewables and Efficiency, Minnesota Energy Reduction Plan for State Buildings, http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=MN12R&re=0&ee=1.
[vii] Database of State Incentives for Renewables and Efficiency, Minnesota Sustainable Building Guidelines for New State Construction and Renovations, http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=MN04R&re=0&ee=1.