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The price of green energy cuts a wide swath

Electric customers in Minnesota are paying varying prices to be green, although some of the state’s largest utilities say state mandates for wind and other renewable energy have been a pretty good deal.

Under a new state law, power companies recently submitted reports to regulators estimating the cost of renewable energy, mostly wind power, which now supplies about 10 percent of the state’s electricity.

Xcel Energy Inc., the state’s largest supplier with 1.1 million customers, and Minnesota Power, with 146,000 customers, both reported that wind power has been cost-effective compared to other electricity sources.

But Great River Energy, the state’s No. 2 electricity provider to 650,000 customers in 28 electric cooperatives, said renewable energy cost it $20 million extra last year because it often lost money selling wind power to the grid. The loss works out to $24 per household, the company said.

At Minnkota Power, which serves 77,000 customers of cooperatives and municipal utilities in northwestern Minnesota, a quick push into wind power in 2007-2009 is now coming back to haunt the cooperative. It signed long-term wind energy contracts to get 30 percent of its power from wind – far ahead of the state mandate – but at prices that generally are higher than what wind power costs today.

As a result, Minnkota reported paying 16 percent more for wholesale power last year, an extra $28 million. Yet company officials said they believed they made the right decisions by locking into well-positioned wind farms that will benefit customers in the long run.

“It’s a roll of the dice,” said Dale Sollom, the cooperative’s planning manager. “We thought we made the best decisions when we did.”

Unlike fossil fuels, which vary in price over time, the price of wind power is largely determined by upfront construction cost, with the power typically sold to utilities under long-term contracts. Wind farm construction prices peaked in 2006-2007, but have since dropped significantly, experts said.

Minnesota law mandates that utilities get 25 percent of their power from renewable sources, which include biomass, hydro and solar, by 2025. Xcel’s goal is strictly for wind power, which has been the prime renewable choice of utilities.

Xcel Energy, based in Minneapolis, didn’t put a price tag on its renewable energy, but said it’s been within 1 percent above or below other resources. Xcel’s rates are set by the state Public Utility Commission.

“The most important thing is that you can’t go by cost alone when you are looking at energy resources,” said Betsy Engelking, Xcel’s director of resource planning and bidding.

One key factor, reliability, has been improving for wind power through better forecasting and integration into the grid, she said. And environmental costs often aren’t counted, but “as we see new regulations coming down the road from the federal Environmental Protection Agency we are going to start seeing some cost benefits,” she added.

All 14 power companies serving Minnesota filed renewable energy cost reports, though the cost-calculation methods varied. Some companies focused on the complex daily pricing and demand of the regional grid.

At Great River Energy, renewable energy project leader Mark Rathbun said that wind turbines often generate when the demand isn’t high, resulting in less revenue or even a loss. Sometimes the grid can’t take the wind power, which can be another money loser, he said.

“Many times wind resources have been ‘constrained,’ meaning the transmission system doesn’t have the capacity to move the power to where the energy is consumed,” Rathbun said.

The law requiring the green cost reporting was pushed by the Minnesota Chamber of Commerce, which said Friday that it intends to analyze the submissions. “The concern is mostly that we don’t know what the cost impact of the renewable energy standard is,” said Sarah Radosevich, a public policy research associate for the chamber.