Minnesota

Minnesota enacted legislation (S.F. 4) in 2007 that created a renewable portfolio standard (RPS) for Xcel Energy, created a separate RPS for other electric utilities,* and modified the state's existing non-mandated renewable-energy objective.

Eligible Technologies

Electricity generated by solar, wind, hydroelectric facilities less than 100 megawatts (MW), hydrogen and biomass -- which includes landfill gas, anaerobic digestion, and municipal solid waste -- is eligible for the standards and the objective. The definition of eligible biomass was refined slightly in 2008 by S.F. 2996 to include the organic components of wastewater effluent and sludge from public treatment plants, with the exception of waste sludge incineration. After January 1, 2010, hydrogen must be generated by other eligible renewables in order to be eligible.

Xcel Energy Standard

The standard for Xcel Energy requires that eligible renewable electricity account for 30% of total retail electricity sales (including sales to retail customers of a distribution utility to which Xcel Energy provides wholesale service) in Minnesota by 2020. Of the 30% renewables required of Xcel Energy in 2020, at least 25% must be generated by wind-energy or solar energy systems, with solar limited to no more than 1% of the requirement. In effect, this means that the wind standard is at least 24%, solar may contribute up to 1%, and the "remaining" 5% may be generated using other eligible technologies.

Wind energy and biomass energy contracted for or purchased by Xcel Energy pursuant to Minn. Stat. § 216B.2423 et seq. is eligible under the RPS. The RPS schedule for Xcel Energy is as follows:

• 15% by 12/31/2010
• 18% by 12/31/2012
• 25% by 12/31/2016
• 30% by 12/31/2020

Standard for Non-Xcel Energy Utilities

The standard for other Minnesota utilities requires that eligible renewable electricity account for 25% of retail electricity sales to retail customers (and to retail customers of a distribution utility to which the one or more of the utilities provides wholesale service) in Minnesota by 2025. The RPS schedule for other Minnesota utilities is as follows:

• 12% by 12/31/2012
• 17% by 12/31/2016
• 20% by 12/31/2020
• 25% by 12/31/2025

Renewable Energy Certificates (RECs)

The 2007 legislation required the Minnesota Public Utilities Commission (PUC) to establish a program for tradable RECs by January 1, 2008. The PUC approved the Midwest Renewable Energy Tracking System (M-RETS) for this purpose and required all utilities to register renewable generation assets by March 1, 2008. The program treats all eligible renewables equally and may not ascribe more or less credit to energy based on the state in which the energy was generated or the technology used to generate the energy. Only RECs recorded and tracked through the M-RETS can be used for compliance. Notably, Xcel Energy may not sell RECs to other Minnesota utilities for RPS-compliance purposes until 2021. In December 2007, the PUC made certain additional determinations for the operation of the REC trading system, listed below:

• RECs will have a trading lifetime of 4 years according to the year of generation (i.e., all credits generated during 2008, regardless of the month, expired at the end of 2012).
• The purchase of RECs through M-RETS may be used in utility green pricing programs, subject to the shelf life described above.
• Consistent with M-RETS operating procedures, RECs must remain "whole" and may not be disaggregated into separate environmental commodities (e.g., carbon emission credits)
• The PUC declined to issue a directive ascribing ownership of RECs where ownership is not addressed in power purchase agreements (PPAs), instead requiring utilities to pursue negotiations and settlements with the owners of generation units.

Compliance and Reporting

Utilities are required to file annual compliance reports with the PUC detailing their retail sales, REC retirements, and REC trading activities. If the PUC finds a utility is non-compliant, the commission may order the utility to construct facilities, purchase eligible renewable electricity, purchase RECs or engage in other activities to achieve compliance. If a utility fails to comply, the PUC may impose a financial penalty on the utility in an amount not to exceed the estimated cost of achieving compliance. The penalty may not exceed the lesser of the cost of constructing facilities or purchasing credits and proceeds must be deposited into a special account reserved for energy and conservation improvements. The PUC is authorized to modify or delay the implementation of the standards if the commission determines it is in the public interest to do so.

The Minnesota Division of Energy Resources posted a consolidated 2007 Compliance Report detailing the progress made by each utility in achieving the renewable energy objective (see below). Compliance reports from individual utilities for 2008-2011 are available from the PUC through the E-Docket System in Dockets E-999/PR-09-287 (2008), E-999/PR-10-267 (2009), ER-999/PR-11-189 (2010), and ER-999/PR-12-334 (2011). In 2013, the Division of Energy Resources published a compliance progress report for compliance through 2011, stating that utilities are on track to comply with 2012 goals.

In May 2011, the legislature passed S.F. 1197, which requires utilities to submit a report to the commission and legislative committees estimating the rate impact of the activities necessary for compliance. The first report was due in October 2011, and subsequent reports are included as part of the utilities' resource plans.

Renewable-Energy Objective - All Utilities (2005-2010)

S.F. 4 (2007) also modified Minnesota's non-mandated, "good faith" renewable-energy objective. The revised objective, which applied to all utilities, called for eligible renewables to account for 1% of all retail electricity sales in 2005 and 7% of all retail sales by 2010. The PUC measured utilities' efforts to meet the objective to determine whether utilities are making the required "good faith" effort. In December 2008, the PUC issued an order clarifying how it would evaluate this "good faith" effort during the years (2006 - 2009) for which no benchmarks were defined by the statute. The order required utilities to retire renewable energy credits (RECs) equivalent to 1% of their annual retail sales for the 2007-2009 compliance years (i.e., the calendar year). In effect, this both established a mandatory baseline compliance benchmark and allowed utilities to bank RECs -- subject to the REC trading lifetime described above -- in preparation for meeting the more stringent 7% objective in 2010. It could also be interpreted as setting a precedent for addressing similar issues in future years. Only RECs recorded and tracked through the Midwest Renewable Energy Tracking System (M-RETS) could be used for compliance with the "good faith" objective. Docket E-999/CI-04-1616 remains open to address issues not covered during the first phase of rulemaking, as well as future implementation issues that may arise due to changes in national, state, or M-RETS policies and protocols.

*Other electric utilities that must comply with Minnesota's RPS are: public utilities providing electric service; generation and transmission cooperative electric associations; municipal power agencies; and power districts operating in the state.