Transition to renewable energy boosted by climate and energy provisions

While much of the environment, natural resources, climate and energy finance and policy law deals with environmental law and appropriations, the climate and energy portion contains 78 policy provisions, as well as funding for several grant programs to aid the transition to renewable energy sources and upgrade energy efficiency in homes and businesses.

They’re part of a law sponsored by Rep. Rick Hansen (DFL-South St. Paul) and Sen. Foung Hawj (DFL-St. Paul), but the law’s energy provisions came from climate and energy finance bills sponsored by Rep. Patty Acomb (DFL-Minnetonka) and Sen. Nick Frentz (DFL-North Mankato).

The law’s provisions related to climate and energy establish a biennial budget for the Department of Commerce and the Public Utilities Commission, and govern activities related to clean and renewable energy, with a focus upon reducing the state’s greenhouse gas emissions in the energy sector. It establishes and modifies provisions governing energy storage, use and conservation, utility regulation, and Public Utilities Commission proceedings.

All finance provisions take effect July 1, 2023.

HF2310*/SF2438/CH60

Climate and Energy Finance

The law’s climate and energy-related appropriations include $125.9 million for the Department of Commerce during the 2024-25 biennium. Almost all is dedicated to the division of energy resources, the funding earmarked for the following purposes:

• $38.7 million for weatherization and pre-weatherization work;

• $16.1 million for the Solar for Schools program;

• $15 million to increase the capacity and improve the reliability of a transmission line between North Dakota and Minnesota;

• $11.9 million for operating expenses;

• $6 million for electric school bus grants;

• $6 million for a heat pump rebate program;

• $5.3 million for electric grid resiliency grants;

• $5 million for an electric vehicle rebate program;

• $3 million for the Minnesota Energy Alley initiative;

• $3 million for a residential electric panel upgrade grant program;

• $3 million to install on-site energy storage systems;

• $2.1 million to implement energy benchmarking;

• $1.9 million for community solar gardens;

• $1 million for the Strengthen Minnesota Homes program;

• $1 million for auto dealers seeking certification to sell electric vehicles;

• $1 million for Clean Energy Resource Teams partnerships;

• $1 million for air ventilation pilot program grants;

• $500,000 to study possible use of Minnesota iron resources in long-term battery storage;

• $500,000 to the city of Anoka for a study related to the repair and reconstruction of the Rum River Dam;

• $378,000 to participate in Public Utilities Commission proceedings regarding natural gas innovation plans;

• $300,000 to remediate vermiculite insulation from households that are eligible for weatherization assistance;

• $300,000 to provide technical assistance to the Tribal Advocacy Council on Energy;

• $300,000 for a community solar garden program study;

• $164,000 to participate in Public Utilities Commission proceedings regarding transportation electrification plans filed by public utilities; and

• $154,000 participate in Public Utilities Commission proceedings regarding appeals of consumer complaints to the full Public Utilities Commission.

This article also includes a $2.2 million appropriation for the Petroleum Tank Release Compensation Board from the petroleum tank fund.

Other General Fund appropriations for state agencies during the 2024-25 biennium include:

• $21.9 million to the Public Utilities Commission;

• $20 million to the Climate Innovation Finance Authority;

• $7 million to the Department of Agriculture for grants to cooperatives to invest in green fertilizer production facilities;

• $2 million to the Pollution Control Agency to operate a program awarding grants to local units of government for climate adaptation or greenhouse gas mitigation activities;

• $2 million to the University of Minnesota for an Extension Service program on planning for and adapting to weather extremes;

• $945,000 to the Department of Administration for research related to establishing new energy guidelines for state buildings; and

• $310,000 to the Department of Transportation for assisting manufacturers in obtaining environmental product declarations for materials used to build roads. (Art. 10, Secs. 2-9)

Renewable Development Account Appropriations

The Renewable Development Account is a special state-administered fund designed to support renewable energy projects. Xcel Energy pays into the account for being able to store nuclear waste at its Prairie Island and Monticello nuclear power plants, the size of payments based upon how many dry casks are currently in use. Money from the fund is typically spent only on projects located within Xcel Energy’s electric service territory.

For the 2024-25 biennium, $72.7 million from the fund will go to the Department of Commerce for these 12 renewable energy projects:

• $14.3 million for the Solar for Schools program;

• $10.7 million for an electric vehicle rebate program;

• $10.2 million for distributed energy resource system upgrades;

• $7.5 million for grants to the University of St. Thomas Center for Microgrid Research;

• $7 million for electric school bus grants;

• $7 million for a heat pump rebate program;

• $5 million for solar on public buildings grants;

• $4 million for energy storage system incentive grants;

• $3.5 million for residential electric panel upgrade grants;

• $2 million to the city of Granite Falls for repair and overage costs related to its hydroelectric generating facility;

• $1 million for automobile dealers seeking certification from an electric vehicle manufacturer;

• $250,000 for a study of the energy storage system capacity required to achieve the state renewable energy standard and carbon-free goals; and

• $200,000 for the “Made in Minnesota” solar energy production incentive program.

And the following state agencies will receive funding from the Renewable Development Account:

• $4.2 million to the Minnesota Amateur Sports Commission to install solar arrays on an ice rink and maintenance facility at the National Sports Center;

• $3 million to the Pollution Control Agency for the local climate action grant program; and

• $872,000 to the Department of Administration for a grant to the University of Minnesota’s Institute on the Environment to conduct research on how projections of future weather trends may exacerbate conditions, and for costs related to the state building energy conservation improvement revolving loan program (Art. 11, Secs. 2-5).

Energy Policy

This article contains 78 provisions related to climate and energy. All took effect May 26, 2023, except where noted.

The Department of Administration must establish and oversee a program of environmental analysis of construction materials. The program will establish a standard for maximum global warming potential for materials, a procurement process, a pilot program, an environmental standards procurement task force, and a grant program. (Art. 12, Sec. 1)

State fleet vehicle purchasing priorities are established, with electric vehicles preferred, followed by hybrid electric vehicles, then vehicles capable of being powered by cleaner fuels, then those powered by gasoline or diesel fuel. (Art. 12, Secs. 3-4)

The agreement with Xcel Energy for funding the Renewable Development Account is altered to reduce the amount the utility annually pays to the account by $3.75 million. It also adds to the agreement language requiring reporting of the utility’s commitment to diversity in its workforce and vendors, and says that construction projects receiving account funds must meet prevailing wage requirements. (Art. 12, Sec. 5)

Xcel Energy’s solar energy production incentive program for systems of 40 kilowatts or fewer (Solar Rewards) is extended through 2025. Half of its allocations now must be reserved for solar energy projects whose installation meets the eligibility standards for a low-income program. (Art. 12, Sec. 6)

Programs are established in the Commerce Department to provide grants for a variety of purposes, each funded by the Renewable Development Account. The law describes requirements and eligibility for the grants, sets an appropriation for each, and clarifies that technical assistance is provided and reports to the Legislature are required. The new grant programs include:

• a school air ventilation pilot grant program;

• grants for pre-weatherization services and training of workers for careers in the weatherization industry;

• an electric school bus deployment program to accelerate their implementation;

• a solar grant program for public buildings;

• a distributed energy resources system upgrade program to assist Xcel Energy make infrastructure investments necessary to enable electricity customers to interconnect distributed energy resources;

• a grant program for automobile dealers to offset the costs of obtaining manufacturers’ necessary training and equipment for certification to sell electric vehicles;

• a residential electric panel upgrade grant program to provide financial assistance to owners of single-family residences and multifamily buildings;

• a local climate action grant program in the Pollution Control Agency to support local jurisdictions in adapting to extreme weather events or reducing the local jurisdiction’s contributions to the causes of climate change; and

• an electric grid resilience grant program to either develop or improve carbon-free distributed energy resources in the state or improve a utility’s ability to add load growth resulting from strategic electrification and electrification of transportation (Art. 12, Secs. 8, 28-33, 35, 37-38, 41, 45, 68, 72).

The law also features rebate programs for certain purchases. Like the grant programs, their funding comes from the Renewable Development Account and they place in statute requirements and eligibility, an appropriation for each, and clarify that technical assistance is provided and that reports to the Legislature are required.

The programs include an electric vehicle rebate program that provides $2,500 rebates for new vehicles and $600 for used vehicles (expiring June 30, 2027); and a residential heat pump rebate program for eligible applicants who purchase and install a heat pump in their Minnesota residence. (Art. 12, Secs. 40, 46)

Effective Jan. 1, 2024, a new motor vehicle dealer must have at least one employee certified as having completed a dealership association training course on electric vehicles. (Sec. 9)

The dates on which utilities are required to start filing with the state how many heating service customers have had their service disconnected is moved from Nov. 1 to Oct. 15. (Sec. 10)

Utilities operating in the state are required to file with the Public Utilities Commission a transportation electrification plan and attendant cost recovery proposals that will be reviewed by the commission as to whether they’re reasonable and in the public interest. (Sec. 12)

A utility must provide a customer’s electricity usage data to the customer within 10 days of a request that’s accompanied by evidence the data is relevant to the interconnection of a qualifying facility on behalf of the customer. (Sec. 13)

Community solar gardens established in 2024 and thereafter are subject to new regulations. While the capacity of individual solar gardens is increased from one to five megawatts, the statewide capacity of all new solar gardens that may be added annually is capped at 100 megawatts, decreasing to 80 megawatts in 2027 and to 60 megawatts after 2030. At least 30 percent of the capacity of solar gardens must be subscribed by low- and moderate-income households; and least 55 percent by those households, public interest customers and affordable housing providers. The law also establishes the rates at which individual subscribers must be compensated, offers protections for both subscribers and non-subscribers, requires a report to the Legislature, and provides guidelines for transitioning from a legacy program. (Sec. 14)

Effective Jan. 1, 2024, payments to the Prairie Island Indian Community for nuclear waste dry cask storage at Xcel Energy’s Prairie Island nuclear power plant are altered thus: The Prairie Island community will receive $7.5 million annually each year the generating facility is in operation, as well as $50,000 for each cask containing spent nuclear fuel. (Sec. 15)

The law establishes a distributed solar energy standard public utilities must meet by the end of 2030 regarding the proportion of retail electricity sales supplied by solar energy projects with a capacity of 10 megawatts or less constructed or purchased after August 2023: 3 percent for Xcel Energy and Minnesota Power, one percent for Otter Tail Power. (Sec. 16)

A complaint resolution procedure is established at the Public Utilities Commission that allows a residential customer to appeal a decision made by the commission’s consumer affairs office regarding a complaint regarding utility service to the full commission for resolution. (Sec. 18)

The definition of “low-income household” is clarified as one earning 80% of an area’s median household income, and some exemptions are removed for cogeneration or small power production facilities. (Secs. 19, 22)

A public utility that owns a nuclear generating plant must include in its integrated distribution plan a forecast of upgrades, an evaluation of measures that can reduce the need for them, and a discussion of alternative methods. (Sec. 21)

Public Utilities Commission approval is required for a transaction involving any plant being bought, sold, leased, or rented by a public utility for a total consideration of more than $1 million. And the assessment for Commerce Department regional and national duties is increased to $1 million, and its expiration date removed. (Secs. 23-24)

A new pilot program is established until 2031 that governs eligibility for and amounts of compensation that may be awarded to participants in Public Utilities Commission proceedings (Sec. 25).

The Commerce Department must establish a building energy benchmarking program requiring owners of buildings containing 50,000 square feet or more and located in the metro area or in cities over 50,000 population to use a U.S. Department of Energy computer app to annually report a building’s energy consumption levels and patterns to the department. The provision classifies covered properties, lays out requirements, exemptions, schedules and utility data requirements. A program account is established with an appropriation (effective June 15, 2026), and enforcement and expense recovery rules are established (Sec. 34)

Statute around the state’s Solar for Schools program is altered to add some new definitions, Renewable Development Account funding, an increase in eligible wattage, reporting requirements, and a section on renewable energy credits. The program currently operated by Xcel Energy in its electric service area is transferred to the Minnesota Department of Commerce. (Sec. 36)

Public utilities will be required to develop and operate an incentive program to provide grants to customers to reduce the cost of purchasing and installing an on-site energy storage system. Utilities will also be required to file an annual diversity report, explaining plans to increase diversity in their workforce and vendors. (Secs. 39, 47)

“Energy storage system” is defined and added to the definition of large electric power facilities. (Secs. 48-59)

The state’s greenhouse gas emissions-reduction goal is revised to achieve these levels of reduction, compared to the level of emissions in 2005: 30% by 2025, 50% by 2030, and to net zero by 2050. (Sec. 61)

The date that an annual report on telecommunications access must be filed with the state has been changed from Jan. 31 to March 31. (Sec. 62)

The law specifies the restrictions a homeowners association may require a condominium owner to observe regarding the installation of a roof-mounted energy system. (Secs. 63-65)

The Public Utilities Commission is authorized to develop and adopt rules for siting energy storage systems. (Sec. 67)

The law lays out requirements for the public utility that owns a plant within the St. Croix National Scenic Riverway and is scheduled for retirement in 2028 to develop a plan and detailed schedule for its decommission and demolition and attendant pollution remediation. (Sec. 70)

The Commerce Department must provide technical support and subject matter expertise to assist and help facilitate any efforts taken by the 11 federally recognized Indian tribes in Minnesota to establish a tribal advocacy council on energy. (Sec. 71)

Studies are commissioned to assess the effectiveness of the community solar garden program and to determine the optimal capacity of energy storage systems required to be installed by electric utilities located in Minnesota by 2030, 2035 and 2040. (Secs. 73-74)

The Public Utilities Commission shall open a proceeding no later than Sept. 1, 2023, to establish interconnection procedures that allow customer-sited distributed generation projects of up to 40 kilowatts to have priority over larger projects. (Sec. 75)

And the Department of Agriculture may award grants to a cooperative to invest in green fertilizer production facilities to reduce greenhouse gas emissions and increase the use of renewable energy in the agriculture sector. (Sec. 76)

HF2310* / SF2438 / CH60