Why businesses are aligning their energy goals with the Minnesota clean energy by 2040 law

Signed into law by Governor Tim Walz in February of 2023, Minnesota set a requirement that its grid must be 100% using clean energy by 2040. The new rules set the standard and a timeline for Minnesota to be powered entirely by carbon-free electricity. The bill mandates Minnesota utilities to gradually increase carbon-free energy sold to Minnesota consumers and is designed to move Minnesota to lower greenhouse gas (GHG) emissions, foster energy independence, and create new clean energy jobs.

Setting a target for significant impact in not-so-distant future, state utilities must produce 100 percent carbon-free energy by 2040 and follow benchmarks set for every five years:

• 80% by 2030
• 90% by 2035
• 100% by 2040

While currently being discussed by the Public Utilities Commission, “carbon-free” sources under the current law include wind, solar, hydroelectric, hydrogen and biomass.

In addition, the law requires that 55 percent of the energy sold to Minnesota customers by electrical utilities come from renewable energy sources by 2035. The eligible renewable energy sources include wind and solar.

Law’s impact on economic development

Although the law is relatively new, it is already contributing to decarbonization in the state while boosting economic growth. The 2040 law has accelerated Xcel and Minnesota Power’s carbon-free electricity goals, moving their targets up from 2050 and advancing decarbonization efforts in Minnesota. The Minnesota Energy Factsheet shows that the state has 33% of its energy sources coming from renewable energy, a 2% improvement over previous year, and 54% of Minnesota’s power is already without greenhouse gases. Minnesota’s power sector emissions reductions were at 54%, which is a 4% improvement over the previous year.

CEEM’s recent Clean Jobs Midwest Report indicated that in 2023, Minnesota’s clean jobs sector has surpassed pre-pandemic high, to set a new record of 62,102 jobs. Acceleration of the clean jobs tied to non-fossil fuel energy sources is impressive, as they grew nearly five times faster than the state’s overall economy. In the future, the bill is anticipated to lead to new jobs in generation and distribution of carbon-free energy, as well as jobs in construction, operations and maintenance of renewable energy facilities.

Beyond economic development and the increase in family sustaining careers, the clean energy transition improves climate mitigation efforts because of its impacts on Greenhouse Gas (GHG) emissions. GHG emissions are gasses released into the atmosphere that trap heat and contribute to global warming. For instance, when we burn fossil fuels, including coal, oil and gas, for electricity, we add more carbon dioxide into the atmosphere. This buildup acts like a heat-trapping blanket, leading to additional warming. In Minnesota, the top GHG producing sectors are transportation, electricity generation, agriculture & forestry, and industrial processes.

Global temperatures have increased as the concentration of GHG in the atmosphere has risen. Individual choices people make, such as diet, flying, or driving an electric vehicle, influence carbon emissions. In 2023, CO2 in the earth’s atmosphere surpassed 400 parts per million, driven largely by burning of fossil fuels and deforestation, which is 50% higher than preindustrial levels.

GHG reporting at the corporate level

Eighty-three percent of companies acknowledge that climate change poses a financial risk to their business. And while not all companies are actively beginning to address their GHG emissions, in the last few years, businesses began to make net-zero and carbon emissions reduction pledges.

• 3M is now measuring and reducing its GHG emissions, including a goal to achieve carbon neutrality by 2050.
• Cummins is reducing absolute GHG emissions from facilities and operations by 50% by 2030, as well as reducing Scope 3 absolute lifetime GHG emissions from newly sold products by 25%.

Benefits of measuring and reporting GHG emissions for organizations

Following net zero and carbon emissions reduction pledges, measuring GHG inventory baseline and implementing decarbonization interventions provides a number of corporate advantages. Organizations are beginning to see the benefits from the clean energy transition and greater returns for their shareholders:

• Operational efficiencies, reduced overhead, and cost savings
• Getting ahead of regulation
• Government rebate and reimbursement programs
• Improved brand reputation and loyalty
• Competitive advantage in the market
• Investor confidence

How 2040 law helps organizations reduce GHG emissions

Electricity generation is the third-largest source of carbon emissions in Minnesota. Transition to carbon-free electricity, guided by the new law, will drive reduction in GHG emissions for organizations in the state. Scope 2, purchased energy and electricity, are indirect emissions that make up a sizable portion of most organizations’ GHG inventory. Impactful changes in the Minnesota utilities generation portfolio are a meaningful driver to reducing these Scope 2 carbon emissions for Minnesota corporations.

For Minnesota organizations like the Winona State University that made sustainability commitments to achieve carbon neutrality, decarbonization of the local grid will make that goal even more attainable. While transformative technologies like LED lighting and rooftop solar help the university reduce the amount of total electricity they receive from the grid, local utilities are still required to remove carbon from their generation sources, decarbonizing remaining electricity that local organizations use.

Looking ahead

As organizations contribute to Minnesota’s economic development, while balancing climate impacts and looking for ways to use clean energy to decarbonize, internal business benefits can be significant. Gains from cost savings from operational efficiencies, investor confidence and brand reputation are worth the effort to set clean energy commitments and look for ways to decarbonize alongside Minnesota’s clean energy by 2040 law.

Organizations should consider setting net-zero commitments and look to benefit from decarbonization of their business operations, which Clean Energy 2040 Law will contribute to and accelerate. How should organizations that are still in the beginning of their journey get started? I suggest following these first steps:

• Make a net zero pledge
• Define your GHG inventory baseline
• Identify carbon hotspots, benchmark and determine areas of decarbonization focus
• Implement GHG reduction strategies and manage decarbonization benefits