Federal uncertainty and implementation issues cloud outlook for Minnesota’s clean energy economy

Minnesota’s electric grid is cleaner than ever, and the state is well positioned to take advantage of emerging energy industries, Clean Energy Economy Minnesota said Thursday.

But federal policy chaos — driven by President Donald Trump’s tariffs and general preference for fossil fuels — as well as shifting consumer behavior and lagging implementation of environmentally friendly technologies hint at bigger challenges ahead for one of the fastest-growing sectors of the state’s economy, analysts and industry representatives said at a Monday press briefing.

“Certainly there’s a lot going on right now…that makes predicting the future and [even] predicting today a little bit unsteady,” said Becky Wacker, director of energy services sales in North America for Trane Technologies.

The U.S. power sector saw a “dramatic transformation” in recent years thanks to falling costs for wind and solar power, state clean energy policies and long-term clean power purchase commitments by tech giants like Amazon and Google, said Derrick Flakoll, Bloomberg NEF senior policy associate. In Minnesota, carbon emissions from power generation fell 52% between 2005 and 2024 as cheaper, lower-emitting sources edged coal off the grid, according to CEEM’s 2025 energy factsheet.

More recently, the Inflation Reduction Act of 2022 spurred investment in nascent clean-tech industries like low-emissions hydrogen and sustainable aviation fuel, which airlines and jet manufacturers see as key to their long-term sustainability goals. CEEM’s factsheet touted the Minnesota Sustainable Aviation Fuel Tax Credit, which pays $1.50 per gallon of sustainable aviation fuel produced and sold in Minnesota through June 2030, and a biofuels startup’s plan to build a $5 billion sustainable aviation fuel plant in Moorhead that could eventually produce nearly 200 million gallons of fuel each year.

These investments “now face significant market risk” due to the Trump administration’s hefty — and self-contradictory — import tariffs, and the very real possibility that Congress narrows or repeals key IRA tax credits later this year.

“The fate of this is hanging in the balance (due to) a lot of political and economic factors,” Flakoll said.

State-level policy looks steadier in the near term, Wacker said. That could be a silver lining for HVAC and refrigeration businesses like Trane, which has rebranded itself as a leader in building efficiency and decarbonization. 

“A number of states are staying pretty consistent in how they’re approaching things,” she said.

Minnesota is 10th in the nation for “overall energy efficiency,” according to the American Council for an Energy Efficient Economy. A 2021 law that boosted utility-led efficiency programs saved residents and businesses more than $307 million over two years, CEEM said.

But Minnesota’s ambitious efficiency and sustainability policies haven’t translated into action to the extent seen in nation-leading states and cities, Wacker said. She nodded to Washington state, which will begin holding larger buildings to strict sustainability standards next year; and New York City, where Local Law 97 encourages landlords to swap out creaky boilers for efficient heat pumps.

On electric vehicle uptake, Minnesota lags the national trendline. New registrations fell 44% from 2023 to 2024, slipping below 10,000, as EV sales grew 6.5% nationally, CEEM found. Minnesota had 65,679 plug-in EVs on its roads in November 2024, according to CEEM — less than 2% of total light-duty vehicle registrations. Plug-in vehicles accounted for 1 in 4 vehicle registrations last year in California, the top U.S. EV market, though the total share of EV registrations there remains far lower.

And while it’s not yet clear whether it’s a blip or part of a longer-term trend, Minnesota’s wind power industry stalled out last year.

“That’s a little different from past years, when we had a combination of wind and solar [added to the grid],” said Cathy Liebowitz, director of member engagement for CEEM. 

Flakoll said wind power has several factors working against it right now. Most of the windiest areas already have working turbines; solar farm construction costs are rapidly declining; and the massive scale of the typical wind project can complicate projects, he said.

State lawmakers passed a major energy permitting reform bill last year that could accelerate approvals for large-scale wind and solar installations, but the law won’t take effect until July.

Despite the wind slowdown, CEEM’s latest factsheet had some qualified good news for Minnesota utility customers. The average consumer paid 12.36 cents per kilowatt-hour in 2024, up 1.2% from 2023 and 30% from 2015, CEEM said. But that’s lower than the 2024 national average of 12.99 cents per kilowatt-hour — up 2.4% from 2023.

Minnesotans should blame the aging electric grid and volatile natural gas prices for steadily rising electricity rates, rather than wind and solar farms, Liebowitz and Flakoll said.

Transmission and distribution grid infrastructure account for 63% of the $45 billion Xcel Energy plans to invest through 2029, compared with 11% for renewable power, the utility said in November. 

“The grid is old in general, so updating it regardless of whether it’s clean or not is something states are working on,” Liebowitz said.

Meanwhile, the actual cost of generating power is closely correlated with natural gas prices because gas-fired power plants tend to be the “last” units called on to meet demand, Flakoll said.

“If you rely on natural gas at the margin, you are going to affect bills,” he said. “To say renewables are the driving force behind these electricity rate increases would be overly simplistic and probably not true.”