Costing Renewable Energy Mandates

Blog, Energy, Les Routledge

The Mid West Energy News has published an article that examines the cost incurred by utilities to comply with Minnesota’s renewable energy mandate, which is a requirement to ramp up renewable content to 25% by 2025. Overall, the article reports that increased costs have been modest.

A competing study suggests the cost is higher, with rates in 2025 estimated to be between 0.88 and 3.59 cents higher than the cost without a renewable portfolio standard.  I wonder how those estimates compare to the increased costs we will experience in Manitoba from adding new hydro dams and transmission lines?

Predicting the future impact on rates from adding renewable energy to the electricity production mix is challenging task.  Fifteen years from now, what will the cost be of natural gas?  Will emission standards on coal thermal plants present additional costs that are not present today?  Given the rate of cost inflation experience by hydro dams in Manitoba, will imports for hydro energy be more expensive in 15 years?  Will bio-mass energy be more or less expensive in 15 years?

If I was a consumer in Minnesota, I would like an opportunity to lock in rates over a period of 10 to 20 years and let companies compete to supply that demand.  It may be possible that after factoring in the cost of price hedges on natural gas and potential emission upgrades on coal plants, renewable energy might look fairly attractive.