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Minnesota vs. N. Dakota: Who’s more energy diverse?

July 12, 2012 By Will Nissen, Fellow

At the end of June, North Dakota’s Governor and its two U.S. Senators were keynote participants at the Renewable Energy Action Summit in Bismarck. These policymakers touted North Dakota’s diverse and robust energy sector as a model for a potential national energy plan.

This seems a little ironic considering the gas and oil boom is generally the first thing that comes to mind when people think of North Dakota energy. In reality, North Dakota's policymakers have a point. The state has made great strides to diversify in the last decade. Remember, the state exports most of that gas and oil. Still, holding up Minnesota's northwest neighbors as a national model for energy diversification is a huge stretch.

When you boil it down, Minnesota has taken more decisive steps to develop a comprehensive energy policy that could serve as a national model. Here’s how the two states stack up in relevant categories.

Electricity Generation Diversity:
In 2001, North Dakota got a whopping 95.5% of the electricity it generated from coal. Minnesota got 69.1% of its total electricity generation from coal in that year but relied on nuclear power for much of the rest. In the next decade North Dakota saw a rapid expansion of wind power in the state but saw little diversification elsewhere. In Minnesota, we saw less reliance on coal and nuclear through the expansion of wind, natural gas and biomass sources.

[ graph: Net Electricity Gen 2001 ]

[ graph: net electricity gen 2011 ]
Data Source: U.S. Energy Information Administration

Renewable Energy and Biofuel Policies:
While both North Dakota and Minnesota offer corporate, income, property and sales tax incentives for renewable energy projects, Minnesota offers a greater variety of incentives to encourage renewable energy growth, such as Community-Based Energy Development (C-BED) and various state loans and grants to foster renewable projects. Most notably, Minnesota has a mandated Renewable Portfolio Standard that requires utilities to get 25% of the electricity they sell to consumers from renewable sources by 2025 (30% by 2020 for Xcel Energy). North Dakota has only a stated goal of 10% by 2015 with no mandate attached. The state has already achieved this objective by generating over 14% of its electricity from wind in 2011.

Regarding biofuels, both states utilize a variety of measures to promote and support the ethanol and biofuel industries, but they differ in approach. North Dakota offers tax credits, grants and incentives for the production of ethanol and biofuels, and provides ethanol producers with counter-cyclical financial supplements to buffer the industry against hard times. Minnesota offers tax credits and grants, but also has mandates that require ethanol and biodiesel blends in all gasoline and diesel sold in the state. In addition, Minnesota requires state agencies to use ethanol and biodiesel vehicles when possible.

Energy Efficiency Efforts:
Utilities in both North Dakota and Minnesota offer rebates and incentives for energy efficient appliances, water heaters and light bulbs, quality insulation, thermal storage units and other means. State policy in Minnesota, however, has taken action to decouple utility profits from quantity of electricity produced, removing the disincentive for utilities to promote conservation to consumers. In addition, Minnesota requires utilities to develop Conservation Improvement Plans every three years and invest a portion of their gross operating revenues into those plans. North Dakota’s state policy does not make these efforts to encourage conservation and energy efficiency.

In addition, Minnesota has mandatory residential and commercial building energy codes that implement greater energy efficiency through a variety of building requirements. North Dakota has no statewide mandatory building energy codes, but rather leaves this to local jurisdictions.

Energy Resources:
Minnesota has no oil, natural gas or coal deposits to speak of. North Dakota has four lignite coal mines but does not extract coal on a scale similar to giants like Wyoming, West Virginia or Kentucky. 

North Dakota has extracted modest levels of natural gas and oil, but recent technology improvements have resulted in an oil and gas boom in the state. The amount of natural gas it extracts every year has more than doubled since 2005, and the level of crude oil it extracts every year has increased five-fold in the same time. 

Although this boom is a monetary windfall for the state, the process of extracting and transporting these resources comes with consequences for local communities, environments and air quality for neighboring states. It's difficult to say how Minnesota would react to similar energy resource wealth, but I would like to think we would manage safety, public health and environmental concerns with the utmost care.

Diverse and Robust?

North Dakota should be lauded for diversifying its electricity generation by expanding wind energy. But North Dakota could do more to encourage other forms of energy and reduce its total energy consumption by taking more aggressive state energy policy approaches similar to Minnesota, such as Renewable Portfolio Standards, energy efficiency efforts, mandatory building energy codes and required fuel blends to promote biofuels.

North Dakota’s oil and gas sector is certainly robust at the moment. But is this the result of good state policy or having the right natural resources at the right time? The oil and gas boom have definitely brought tax dollars to the state, but it also has impacts on local communities, environments and neighboring states. When it comes to a national energy plan, Minnesota’s would be a better, comprehensive and more progressive model.

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4 Comments:

  • Robert Moffitt says:

    July 12, 2012 at 8:47 am

    Interesting comparison.

    Re: biofuels, Minnesota has more E85 stations than any other state (360+). Last year the quarter million flex fuel vehicles registered in Minnesota used nearly 20 million gallons of the cleaner-burning fuel. North Dakota, with a much smaller population, used 1 million gallons (a new record).

    In the past 10 years ND has been very active in building up its flex fuel and blender pump infrastructure.

  • Dean says:

    July 15, 2012 at 10:11 am

    “When it comes to a national energy plan, Minnesota‚Äôs would be a better, comprehensive and more progressive model.”
    That is a completely foolish statement.  Minnesota has electricity prices above the national average.  In fact one can drive from MN to the Pacific ocean or the Gulf of Mexico without ever driving through a state with higher priced electricity.  And that’s only half of the problem:  MN has no base load sources that are newer than 30 years old.  In the next twenty years, the whole base will be retired without a realistic plan for their replacement.  Natural gas generation is being used increasingly to bridge the gap.  Of course gas prices, unlike coal, are subject to wild price swings and can’t be considered a reliable base load fuel.  The state is on an energy path similar to California where much of the electricity they use is generated outside the state.  Few states would willing cede control of their energy future like Minnesota.

  • Will Nissen says:

    July 17, 2012 at 2:48 pm

    In 2011, Minnesota had average retail electricity rates of 10.97 cents/kWh for the residential sector, and 8.68 cents/kWh for residential, commercial and industrial sectors combined, according to numbers released by the Energy Information Administration. Both of these were below the national average of 11.80 cents/kWh and 9.99 cents/kWh, respectively. Both figures were also below several states between here and the Pacific and the Gulf of Mexico.

    20 years to diversify our energy portfolio, allow technology to develop so renewables can be more reliably utilized, continue implementing energy efficiency and conservation measures to control/reduce our energy demands, upgrade existing baseload power plants or build new ones (if we repeal the Next Generation Energy Act). With the decisive actions Minnesota has taken in recent years regarding energy policy, that time frame doesn’t worry me.

    Two coal plants (both outside the state) were exempted from the de facto ban on new fossil fuel plants in the Next Generation Energy Act in 2007. One was scrapped in the planning stages, one was built but has yet to be used. So far, we don’t need more baseload energy supplies in Minnesota, much less from sources outside our borders.

  • Will Nissen says:

    July 17, 2012 at 4:03 pm

    “Few states would willing cede control of their energy future like Minnesota.”

    Actually, by expanding our wind energy capacity I would argue that Minnesota has gained greater control of our energy future in recent years. Regardless of where the electricity is produced, Minnesota has no coal or natural gas deposits to extract and burn. So anytime we use electricity generated by coal or natural gas-fired power plants we are sending our dollars out of state and putting the state’s energy future at risk.

    At least by building up wind capacity we are spurring development in rural areas, creating revenues for farmers and rural communities, creating jobs and helping a manufacturing industry hit hard by the recession (although we need more wind manufacturing in Minnesota in my opinion), and keeping our energy dollars in our state.