Updated: Minnesota's Green Energy Follies, Part 4

This is Part 4 of a series.  Parts 1, 2, and 3 are available elsewhere on this site.  [Update:  I have revised the cost figures below using more recent price data.]

In 2013, Minnesota’s environmental advocates will be asking the State Legislature to impose a 10 percent solar mandate on the state’s electric utilities.  This mandate would be in addition to the current 25 percent renewable energy mandate, which for the most part has been met with wind power.  The idea is to meet 10 percent of Minnesota’s electrical energy requirements with solar power by the year 2030.

Advocates of the solar mandate tout the jobs created by and the environmental benefits stemming from their proposed legislation.  Nowhere have I seen an estimate of what this mandate could cost Minnesota energy consumers.  So I have calculated this back-of-the-envelope estimate.  Sorry for all the math.

In 2008 (most recent state data available) Minnesota’s electric consumers used 69,137 gigawatt-hours of electricity.[1]  A gigawatt is equal to 1,000 megawatts.  So, in 2008, Minnesota consumed 69,137,000 megawatt-hours of electric power.  To reflect a ten percent solar mandate, we would divide Minnesota’s annual consumption by 10, giving us a total of 6,913,700 megawatt hours of solar purchases.

According to this Bloomberg story, the news agency reports that, for the most efficient photovoltaic generators, the current cost for solar power is $172 per megawatt-hour.

If not purchasing solar power, Minnesota’s utilities would buy energy from “the grid.”  Grid prices vary hour-by-hour (if not instant-by-instant) and reflect the wholesale market for electricity.  To do our calculation, let’s use a price of $32.10 per megawatt-hour, which rounds up the $32.06 per megawatt-hour price for the closest point to Minnesota for 2012 as presented by the U.S. Energy Information Administration (EIA), a division of the federal U.S. Department of Energy.

That would give us a price differential of $133 per megawatt-hour between solar power and wholesale power prices.

Applying the $139.90/megawatt-hour solar price premium produces an added cost of $967,226,630 per year for Minnesota consumers.

Electricity in Minnesota is a nearly $6 billion-a-year industry, with total revenue estimated at $5,928,515,000 in 2011.[2]

An extra $970 million in costs on a revenue base of nearly $6 billion produces an estimated increase of 16.3 percent.

Now for the caveats.  It is likely that any mandate imposed would be phased in, over time.  To reflect the full cost of implementation in today’s dollars, advocates for the mandate would point out, is unfair.

Further, the whole point of the Bloomberg article cited above was to tout an estimate of falling solar power prices.  The Internet is full of advocates claiming that solar power will quickly fall in price below the wholesale cost of power, assuming it has not done so already.

I’m sure that solar advocates would argue for a lower price for solar power and/or a higher price for wholesale power to compare.  Let them do so. 

On the other side of the ledger, the $172 per megawatt-hour cost for solar does not include utility profits, site-specific interconnection costs or system integration costs.  As an intermittent resource, utilities would need to purchase backup power during those hours the sun is not shining.

My point here is to start a discussion of what this mandate will cost, and upon whom those costs will fall.  Let the games begin!

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[1] The Minnesota Utility Data Book, Minnesota Department of Commerce, Table 1.  Available here:  http://mn.gov/commerce/energy/images/2008MinnesotaUtilityDataBook.pdf

[2] See http://www.eia.gov/electricity/data/state/revenue_annual.xls