Why is energy a critical issue?

Energy is the lifeblood of the economy. Of the various segments of the U.S. energy market (gasoline, diesel, heating oil, natural gas, electrical), the generation of affordable electrical energy especially is important to Minnesota businesses, and must be our first priority. Reliable and affordable electricity is important to all Minnesota businesses regardless of industry, size, or location. Uncertainty regarding future supply and a declining competitive advantage in electricity prices may cause businesses to re-evaluate their activities inMinnesota. Minnesota must diversify its energy portfolio, take advantage of emerging technologies and natural resources, and encourage energy conservation in order for its businesses to remain competitive.

Over 51 percent of US energy use is commercial, compared with 21 percent residential (the rest being transportation related). Energy is a significant operating cost of all businesses. The continual increase in energy costs contribute to upward pressure on prices of finished goods. Minnesota’s electric rates have been a competitive advantage for the state’s economy, but large industrial rates slipped from 16th best in the nation in 2002 to 22nd best in 2005, according to the U.S. Energy Administration. The same data shows Minnesotans spent $4.4 billion in 2005 for over 66 million megawatt hours of electrical energy, with commercial/industrial customers accounting for $2.6 billion of that total.

What are Minnesota’s energy challenges?

Growing Demand
Energy consumption is expected to increase at a rate of 1.5 percent annually, according to the Minnesota Department of Commerce. This means that by 2020, there will be a peak load demand of almost 8,000 megawatts. Currently, there is not enough excess generating capacity available to meet this demand. Significant investments in new generation and transmission facilities are needed to continue to serve the needs of the state and region.

Aging Infrastructure
Minnesota hasn’t increased its base-load generation capacity in 20 years (since 1987). The facilities that have been completed since then serve as either peaking or intermediate facilities – high-cost options designed only to be run during times of high demand when all base-load resources have been dispatched.

Transmission
Minnesota consumers depend on a reliable electric transmission infrastructure that provides access to lowpriced generation. However, investment in the transmission system equals only one-half the investment of 25 years ago, even though peak demand for electricity continues to grow. Increases in wholesale electricity marketplace activity have significantly decreased the amount of transmission capacity that is available.

What energy solutions does TwinWest advocate?

Increased Conservation
• The cost of conservation programs should be evaluated against the cost of production and transmission of the energy use they would save. Energy consumed during peak periods to supplement base-load capacity is the most expensive to produce, and is thus the most cost-effective to conserve.

• Business contributions to the conservation improvement program need to be more transparent, and the program should be evaluated by comparing the cost to businesses to real energy conservation results. Businesses that implement industry leading conservation practices should be rewarded.

• Transmission infrastructure is measured on its capacity and reliability during periods of peak demand. Conservation practices that focus on reducing consumption during these periods will alleviate system congestion and reduce the need for increased transmission capabilities.

Business Approach to Renewable Energy
• Further development of renewable energy options in Minnesota should be created through incentives, not mandates.

• Economic development funds should be used to encourage the growth of renewable energy through investment and tax credits.

• TwinWest opposes any government-imposed costs that raise the cost of generating electricity in Minnesota. In order to minimize our reliance on outside sources, generating facilities located in our state should hold a competitive advantage.

Increase Base Load Supply
• TwinWest supports policies that protect the current levels of base-load generation by encouraging cost-effective and environmentally sound improvements to existing plants. These improvements will enable plants to remain open and produce power for longer periods of time, and will improve the efficiency of current base-load resources.

• All types of generation (including hydroelectric and nuclear) should be considered for additional base-load generating capacity.