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ALLETE: Solar initiative will raise costs for customers
PHOTO: ALLETE President, CEO and Board Chair Al Hodnik addresses shareholders during the corporation's annual meeting Tuesday.
A solar power initiative in the Minnesota Legislature will force electricity customers to pay more if they reside in the Minnesota Power Co. service area, executives of the utility said Tuesday at the ALLETE annual shareholders meeting.
“Minnesota Power fought very hard during this session to avoid getting the solar mandate,” said Margaret Hodnik, vice president – regulatory and legislative affairs. “We have the option to choose solar energy now if we want to. We haven’t chosen it because it’s not as economical as the wind energy or hydro energy. We tried that argument at the legislature, but we were not able to prevail.”
The bill advanced from a House-Senate conference committee over night as part of the Omnibus Energy Bill. It requires the affected utilities to generate 1.5 percent of their energy via solar by the year 2020.
Minnesota Power doesn’t oppose solar power per se, she said, but because this region receives far less sunlight than elsewhere in the state and nation, it’s less efficient and more costly than energy generated by windmills or hydro-electric units.
Several of the state’s largest utilities banded together to fight for a more-rational energy policy in Minnesota, ALLETE Inc. President, CEO and Board Chair Al Hodnik told stockholders during a question/answer period. To compensate for the area’s low amount of solar-generating sunlight, compared with other places, utilities would be forced to develop much larger solar footprints. The capacity factor for solar panels in Minnesota is 18 percent or less compared with 40 percent for windmills.
“We think we know best when it comes to energy policy. Unfortunately, policy makers sometimes think they know more,” he said.
Also of concern is the variability of power generated by intermittent renewables, Hodnik explained. Included in that sector are solar, wind and hydro-electric generators.
“It’s not conducive to large industrial mills like NewPage paper in West Duluth or MinnTac on the Iron Range. It just doesn’t work that way. It’s a part of the solution, but it really doesn’t satisfy those large industrial users,” he said.
Al Hodnik explained another problem beyond price and reliability – one that he deemed the “Reverse Robin Hood” effect. The state provides subsidies to persons who can afford to install solar arrays on their homes. But those people tend to be higher-income individuals, while the subsidies are largely funded by low- to moderate-income ratepayers.
“We tried to make those arguments…but there’s only so much you can do when you argue energy policy in Minnesota,” he said.
Although the bill seems to have an environmental theme, electric co-operatives and municipal electricity providers are exempt from the solar provision. It applies only to investor-owned utilities. Additionally, costs of the solar provision can’t be passed on to mining and paper-making companies; all other firms must pay the higher charge, according to a May 7 amendment.
The revised bill is supported by Reps. Tom Anzelc, David Dill, Tom Huntley, Carly Melin, Mary Murphy, Erik Simonson and Sens. Tom Bakk, Tony Lourey, Roger Reinert, Tom Saxhaug and David Tomassoni, all DFLers.
Minnesota Power currently generates 20 percent of its electricity from renewable sources, with one third being the company’s long-term goal through a program called Energy Forward. Of the other two-thirds, 33 percent will come from coal and 33 percent from natural gas.
“First and foremost, we have a responsibility to make careful energy choices that protect affordability for our customers,” Al Hodnik said.
Short-term projects include a major retrofit of Boswell unit 4, which serves large industrial customers. About $350 million will be invested to reduce mercury emissions by 90 percent. In addition, two coal-fired generating units in Taconite Harbor are being converted from coal to natural gas, and a third coal-burning unit is being retired.
“We’re very proud of what we’re accomplishing. Earlier this year, we were recognized by the Minnesota Pollution Control Agency for reducing mercury well ahead of state goals. We’re proud of our long legacy of environmental stewardship.”
During the 12 months since ALLETE's 2012 annual meeting:
• The company's market capitalization has reached $2.01 billion
• Its share price has increased from $40.05 to $52.25
• The dividend has increase from $1.76 per share to $1.90 per share
• Earnings per share has increased from $2.19 to $2.58
The annual Don Shippar Community Leadership Award was presented to Crystal Burggraf.
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