Jump Starting Minnesota's Green Economy

Table of Contents
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Development of the Green Economy. . . . . . . . . . . . . . . . . . . . . . . . . 5
Policy Options Outline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Selection Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Syngas and Green Gasoline From the Farm. . . . . . . . . . . . . . . . . . . . . . . 13
Heating Minnesota From the Ground Up With Heat Pumps. . . . . . . . . . . . . . 19
Suburb to Suburb Bus Transport. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Residential Rooftop Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Improving the Grid, the New Network for Minnesota’s Green Economy . . . . . . 36
Wind Power for Minnesota; Utilizing Stranded Wind . . . . . . . . . . . . . . . . . 41
From Economical Plug-in Hybrids to an Electric Car Industry . . . . . . . . . . . . 44
Nuclear Power for Minnesota. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Conclusion: A Call to Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Minnesota 2020 - www.mn2020.org 1

Executive Summary
Introduction
Minnesota is a national leader in green technology. Leadership by the state legislature
has put Minnesota on the path to produce 25 percent of its electricity by wind and
other renewable sources. Minnesota is also a leader in producing and using ethanol for
transportation. Minnesota has the largest network of E85 ethanol-blend fuel pumps in the
United States. Our leadership in the green technology sector has greatly benefited us; wind
and ethanol revenues put millions of dollars directly into Minnesotans’ pockets. By getting
into green technologies early, Minnesota has gotten a head start into the new economy. But
the rest of the world is catching up.
Climate and economic concerns are pushing national and local governments worldwide to
attract and develop green businesses. The Chinese leadership in particular is turning their
focus toward the green technologies. The world’s fastest growing economy is starting to
produce and consume green technologies such as solar panels, electric cars and fast trains.
The Scandinavian countries have already demonstrated that it is possible to simultaneously
reduce CO2 emissions and grow the economy. In the last three decades with good
leadership, Norway and Denmark have consistently reduced their energy consumption
and delivered strong economic growth. These countries are well positioned for economic
revolution.
Minnesota needs to stay in the race. Minnesota is a highly

With strong
educated state with a very strong university system. We have all
leadership, we are
the right resources to form a green technology industrial cluster.
well positioned to
Minnesota’s track record of forming clusters for cutting edge
take advantage
technologies like supercomputers in the past to medical devices
of the changing
today. With strong leadership, we are well positioned to take
economic climate.
advantage of the changing economic climate.
The objective of this report is to inject business and technical discipline into Minnesota’s
green economy policy framework. Minnesota already has had success in improving our
state’s economy and environment by developing well thought out policy such as the wind
mandate. This was due to a consensus between government and industry based on sound
science and good business practices. This report develops a methodology to identify
ways to develop the green economy and back it up with specific and detailed ideas where
Minnesota can and should act.
2 Jump Starting Minnesota’s Green Economy

Key Findings
The business communities, including venture capitalists, have already turned their focus
toward green technology as the next growth sector. Strong leadership in the state can
provide a coherent business friendly approach to developing Minnesota’s green economy.
This report reviews seven specific opportunities for green technology growth in Minnesota.
Based on Minnesota’s current economy, knowledge base and geography, the following
projects are the best positioned to jump start Minnesota’s green economy and stimulate job
growth in the coming years.
Green Fertilizer from the Wind: Minnesota has enormous wind power capacity, far
more than the grid can absorb in the foreseeable future. This surplus wind power can be
used to produce ammonia for fertilizer. Minnesota’s own fertilizer needs can inject $300
million per annum in to our economy and use up to 2000 MW of wind power.
Solar Powered Roofs: Minnesota has more potential for solar power than New York
and Boston due to a large number of sunny days year round. If only 25 percent of homes
had solar panels installed, they would represent 10 percent of Minnesota’s electricity
generation capacity. The benefits from the installation process, if spread over 10 years,
could easily produce over $500 million per year.
Electric Cars in Minnesota: Minnesota is surprisingly well positioned to become a

leader in mass market electric cars. Minnesota possesses two key skill sets: existing car
manufacturing (Ford Plant) and a broad supply of electrical and electronic engineers
from the MedTech and automation industry clusters. The mass market car industry is
undergoing a disruptive change on which Minnesota could capitalize. The prize is very
big. Even one percent of the US car market is $3 to $4 billion per annum in sales.
Heat Pumps: Heat pumps are the most efficient way

Installing heat pumps
of heating homes, and they can do it without burning
in 25 percent of
anything. While there is a common misconception
Minnesota’s homes
that heat pumps don’t work in very cold weather, a
over a 10-year period
Minnesota company has been making cold weather heat
would generate $700
pumps for over two decades. Installing heat pumps in
million per year.
25 percent of Minnesota’s homes over a 10-year period
would generate $700 million per year.
Smart Grid: According to the American Wind Power Association, Minnesota has about
75,000 MW of wind, but we are currently using only 2.5 percent of the total capacity.
Even after all the wind mandates have been fulfilled, Minnesota will be using less than
10 percent of the state’s wind capacity. The remaining 90 percent is waiting for a smarter
grid with better control and energy storage.

Green Gasoline from the Farm: One of Minnesota’s greatest natural resources is
agricultural waste from corn farming. Most of the corn stover is tilled back into the
ground, but it is the single largest, easily available source of biomass. Corn stover can be
converted to syngas, which in turn can be converted to gasoline. Minnesota’s corn stover
can produce 400 to 600 million gallons of gasoline a year. In the foreseeable future this
could add $2 to $3 billion annually to our economy.
Suburb-to-Suburb Bus Transport: Most commuters travel solo. The Twin Cities
alone have an estimated 500,000 commuters who commute alone and from suburb to
suburb. A specialized bus system would offer these commuters easy transport plus
recovery of their commute time. If 25 percent of the commuters used such a system,
Minnesota would save 25 million gallons of gasoline. If the commuter bus time was put
to productive use, Minnesotans would recover $30 million in wasted labor-hours worth
around $1 billion annually.

The Development of the Green Economy
In 2004, Vinod Khosla, a leading Silicon Valley venture capitalist, started his own new venture
capital firm called Khosla Ventures. Vinod Khosla was a founder of Sun Microsystems, one of the
giants of the IT revolution and he was also a general partner in Kleiner Perkins, perhaps the leading
IT venture capital firm in Silicon Valley and the world. But when Khosla started his own VC firm he
decided to back green technology companies. Other VCs have
also followed. It was not only the finance stalwarts from the Minnesota needs to actively
IT revolution. Elon Musk used his fortune from the sale of the compete for jobs and new
leading internet payment company Paypal to found, fund and industries. Public policy
run an electric car company, Tesla Motors. At the same time should be developed to
Al Gore released ‘An Inconvenient Truth’ and got his Oscar facilitate development of
and Nobel Prize for focusing worldwide public opinion on green technologies and
global warming. then green business.
Market forces driven by latent needs and public opinion have been driving toward the green
economy. Minnesota with it natural resources and educated workforce can and should lead.
Definitions
There are many environmental needs, from reducing pollution to protecting habitats and
endangered species. However this report will focus on the opportunities provided by the global
warming challenge; reduce CO2 emissions and benefit the economy. For the purposes of this report:
Green Technology: Technology and products that reduce overall CO2 emissions. This includes
the entire range from efficiency measures to energy technology that uses renewable energy.
Green Business: Business and industries that utilize green technologies to make a profit in a
competitive market place, including both new and old companies.
Green Economy: Normal market forces propelling green businesses to prosper and grow
without long-term subsidies.
Policy Objectives
States and governments all over the world are working to ensure that their jurisdictions benefit
from the green economy. Minnesota needs to actively compete for jobs and new industries.
Public policy should be developed to facilitate development of green technologies and then green
business. Finally public policies should be focused on developing businesses that can operate
without constant government attention and especially long-term subsidies.

Policy Approach
In developing an underlying policy philosophy and approach it is instructional to consider the
development of the waste and garbage hauling industry, particularly the question of how free
market giants like Waste Management could come into being.
Many poor countries, especially ones with weak governments, tend to have garbage strewn all over,
even when private spaces are immaculately clean. Much of the garbage is household garbage that
gets dumped outside. Nobody wants the garbage there, nobody benefits from the garbage, but it
persists. Even in these poor countries the free market adequately serves the cleaning needs inside
middle class homes but cannot deliver clean public spaces. Economists call it the commons problem
when no one wants to take care of the common spaces. But in the US the free market takes care of
the garbage and waste, and it virtually never finds its way on to the streets. In many municipalities
the household garbage pickup is done completely by the free market. The state and local
governments don’t run, manage or contract out the pickup. Why does the free market overcome the
commons problem in the US but not in many poor countries?
The hint for the answer is found in certain neighborhoods in the poor countries that have much
cleaner streets. These neighborhoods have strong central organizations with the power to enforce
rules. But outside these neighborhoods in a poor country, a company like Waste Management could
never make money in a free market. So how did the US economy reach the point where Waste
Management could and does thrive in a free market? There were several steps to get where we are
now.
1) Enforcement of Rights: People have a right to a garbage-free environment. The state decided
that this is a very strongly defined right. E.g. in a residential zone an owner is not allowed to
dump garbage on their own private property let alone elsewhere. Pile garbage on your front
yard and the police will show up. Enforcing the public’s right to a garbage-free environment is the
foundation of the waste hauling and disposal industry.
2) Prototyping the Industry: State and local government jump started the industry. Industry can
be jump started by mandates, subsidies or direct activity. Population densification and rapid
industrialization led municipalities to start garbage collection services. Initially run by the
government, some municipalities still run waste services, others contract it out, while others
allow the free market companies to do everything.
3) Market Definition by Regulation: This is the most critical and sensitive piece. Too little
regulation, and the market never develops. Too much and the market dies. If garbage haulers
were allowed to charge for just moving the garbage and dumping it wherever they wanted,
they will appear to make more money. But garbage would not get disposed, cities would
not become garbage free, and the industry would eventually collapse because no one would
pay for it. But if the state required everybody to dispose of the garbage 1000 feet deep in the
Mohave Desert the technical and financial requirements would kill the industry. In short,
the regulations must be financially and technically feasible and need to evolve over time as
technology and market evolves.

4) Business Needs: The most obvious but often forgotten need. An industry created by
enforcement of rights still needs everything else that other industries need e.g. infrastructure,
unfettered access to the market, and freedom to innovate etc.
Similar to the waste hauling industry, the nascent green industry is based on the need to reduce
and eventually eradicate CO2 emissions. State and local governments have started to prototype the
industry, e.g. mandating utilities to use wind power, subsidizing solar power, or directly investing
in efficient school buildings. However, the critical step is to ensure that specific regulations and
actions are technically and financially feasible. For example, mandating wind power to 25 percent
may be reasonable but mandating it to 50 percent may not be technically reasonable without energy
storage technology. Then the decision to boost wind power to 50 percent will cascade into a decision
to mandate energy storage, and that will be based on the costs and technical readiness of the energy
storage. The regulatory framework must be based on sound financial and technical basis.
Economic Benefits
The economic benefits of the right blend of regulations can be tremendous, especially when indirect
economic benefits are taken into account. The waste hauling industry not only created jobs for
garbage men, but also in truck companies. However, the
greatest economic benefits were those that came with clean The economic benefits of the
cities and the improved quality of life. These benefits sound right blend of regulations
more ephemeral, but they result in better health, higher can be tremendous,
property values and increased productivity. The absolute especially when indirect
economical value-added from them would probably dwarf economic benefits are taken
the direct economic benefits of the waste hauling industry. into account.
Similar economic benefits can be expected from the green economy. The target industries are much
bigger so even the direct economic benefits will be much bigger. But indirect benefits will be truly
enormous as economic growth will be based less and less on fossil fuels.

Policy Options Outline
Countries and local government have successfully used public policy tools to develop the green
industry. Minnesota’s own success story is our wind power industry that was initiated by policies
culminating in the renewable energy standards bill. Other states have built up a solar power
industry and still others are on track to create an electric car industry.
Good policies work. However, poorly thought out policies can have undesirable consequences. The
electricity deregulation effort in California in 2000 is often blamed for the unprecedented brownouts
and blackouts that California suffered in 2000 and 2001. Many observers have blamed deregulation
itself for California’s troubles. But countries like the UK have successfully deregulated their electric
markets. A careful analysis of California’s electric supply problems shows that the policies behind
the deregulation were poorly designed. The brownouts were unintended consequences of a poorly
planned set of policies.
Reducing the risk of unintended consequences requires clearly defined objectives followed by well
thought out policies. Policy details need to be consistent with the objective. Success of the green
economic development requires a set of objectives and a coherent set of policy tools.
Green Economy Policy Objectives

Creating a green economy requires the simultaneous fulfillment of two objectives— reduction
of CO2 emissions and development of self-sustaining businesses. Any policy framework should
address these two important issues.
Reduced CO2 Emissions: One of the ongoing challenges with green industries is the problem of
green washing, where claims of emission reduction are exaggerated.
• Businesses must verify or demonstrate a reduction of emissions. The verification requirement

can be as broad as possible, but it is necessary to prevent companies from gaming the system.
• Businesses must verify or demonstrate that technology does not increase emissions
elsewhere. Driving the emissions up the supply chain is self-defeating.
Self-sustaining Businesses: Another point of failure is economic policies that do not produce self
sustaining businesses. Businesses have to become independent of state action and should not be
continually dependent on state action.
• Policy makers should plan for businesses becoming independent of state action, e.g. policies
providing incentives should have sunset clauses. Eventually policies need to create self
sustaining businesses that can generate profits in the market place.
• Policy makers should ensure that technology and industry are ready for the market and meet
technology selection criteria. An outline of technology selection criteria is provided elsewhere
in this report.

Types of Policy Tools
Within the policy objectives there are different policy tools that can be used. Depending on the
technology or business one or more of these tools could be adapted to drive policy. Policy tools are
summarized below.
Direct Action: Mandates and Tax-code Incentives

Government Mandates: Mandate are the simplest way to move the market place. They are also
easily targeted toward specific industries. But they are also easy to misuse. Before implementing
mandates it is important to identify costs and possible unintended consequences.
Tax Credits: Tax credits are a simple way to incentivize a particular industry. Tax credits for
consumers work better than those for businesses. Startup businesses are not profitable and tax
incentives are not relevant in the short run. End-user tax credits provide new businesses with
an effectively lower price for the end-user. However tax credits can be costly to the state and
businesses can become too dependent on them.
Grant: Grants are difficult for state government to provide because the state budgets are more
constrained than the federal budget. However, the state and local governments can set up processes
to help businesses and communities get federal monies.
Financing and Loan Guarantees: While it is difficult for states to provide traditional financing for
new businesses, there are ways to create new frameworks in law to leverage market financing. One
such way is to authorize local governments to issue PACE bonds. PACE bonds are debt-instruments
that are linked to property, and the payments are collected through property taxes. PACE bonds are
a way to leverage market financing by mitigating risk for the lender. There could be other ways.
State Participation: Market Development

The state can also directly participate in the market place, either with purchases or with marketing
assistance.
Direct Participation: Market participation is great for new businesses because it gives them revenue
and validates the product for the market.
• Create a public infrastructure for the new technology. E.g. a simple recharging infrastructure
could stimulate electric car production in Minnesota.
• Seed the market with purchases for government use. E.g. local governments that purchased
hybrid cars for their fleet of cars as hybrids were just becoming more popular.

Validation and Market Development: New technology is always challenged to find customer and
capital. Marketing the idea is perhaps the cheapest way for the state or government to help a new
industry.
• Validation: State or local government validates a new technology or business model. Creating
code, specifications and requirements for new technologies such as heat pumps will validate
them with consumers who have not heard of them before.
• Leadership: The bully pulpit of the governor and other elected officials can have a huge
impact. Public leaders can effectively replace millions of dollars worth of advertising for a
new industry as well as coordinate deals that can land jobs for the state or community.
State Support: Education & Service

The state and local governments can also use state educational institutions and government
departments to promote a policy.
Education and Training: Availability of a trained workforce is key to developing any industry.
• Community colleges developing rapid training for new technologies
• DEED training, programs and centers directing job seekers
• Collaboration with NGOs that train and assist the unemployed
“Good Customer Service” to Businesses: Regulatory uncertainty and friction often turns off
businesses more than cost alone.
• Clear and fair regulations
• Assisting businesses to navigate laws, especially federal law
• Ensuring interdepartmental cooperation
• Single points of contact for regulatory purposes, especially at the local level
Technology Development: State institutions like the University of Minnesota are already leaders in
basic research but have the ability to do more.
• Higher Education institutes producing public domain technology that can seed startup
businesses. Public domain information in the information technology sector has been a
tremendous help for new businesses.

Selection Criteria
During heady days of the internet bubble a lot of private capital was invested in very questionable
business models. Hundreds of millions of dollars were lost in attempts to sell heavy bags of pet
food over the web or home-delivery for weekly groceries. For a variety of reasons that included a
‘gold rush’ mentality, many of these business plans were poorly thought out. When a new business
initiative omits the key step of validating the technology and marketplace, the business will fail. No
amount of investment money or management talent can overcome this fundamental flaw.
The green technologies revolution is also susceptible to an economic bubble and the gold rush
mentality. Even though the state will not directly invest large amounts of capital, it still has a
huge impact on the green economy development. When the state promotes a particular green
technology or business, it creates a critical mind share within that industry, and private capital
follows. Promotion of the ‘hydrogen’ economy by President Bush and other state actors drove a lot
of private capital into fuel cells and ancillary technologies. In the green economy area, the state and
government need to be very careful about directing private capital.
While investors and boards will manage individual business plans, the state has to be careful
about selecting the technologies and industries to back. Good selection criteria are a combination
of societal benefits and business and technical readiness. A disciplined approach to selecting
industries and technologies to back is critical to jumpstarting Minnesota’s Green Economy. A
summary of selection criteria follows.
Societal Benefits
• Environmental Benefits
◦◦ Clear and proven long-term CO2 emission reduction. Merely shifting CO2 will cause the
industry to collapse in a few years. This will be especially true as either cap and trade or
direct carbon taxes get implemented.
◦◦ No other negative environmental impact, even legal ones. Disrupting the environment
will reduce political support in the short run and drive up long- term costs.
• Importance for Minnesota
◦◦ Clear economic benefits to Minnesota. The state institutions should not be spending time
on benefits that do not help Minnesotans.
◦◦ State and local control of policies possible. Technologies and business where federal law
or policies are paramount should be left to the federal government.

Technical Factors
• Technology Readiness
◦◦ Core technology is manufacturing ready. Technologies in a pure research state are too
risky to be identified as a basis for economic development.
◦◦ Ancillary technologies already in market. Any other technology that is critical to bring
the product to market should also be in market. Bringing multiple new technologies to
market simultaneously in one new product is often too risky.
• Manufacturing Readiness & Scalability
◦◦ Supply chain ready and can scale up easily. If the manufacturing or delivery supply
chain cannot scale up, the product will remain a niche product not worth the effort.
◦◦ Key skills widely available or can be developed rapidly. Critical for both growing the
industry and reaping the economic benefits.
◦◦ Raw materials widely available otherwise it would become a bottleneck for growth. This
is point relevant even if raw material is otherwise considered ‘waste’.
◦◦ Scaling up should not impact other critical industries or the environment. Competing
interests increase the risk, add cost and increase the potential of loss of public support.
Economic and Business Factors

• Market Readiness & Competitive Viability
◦◦ Should not require an expensive new infrastructure for use. Industries and technologies
with infrastructure needs should be considered on a separate track and should not be
considered for rapid deployment.
◦◦ There should be no competitive green industry with substantially better value. However,
if two green industries are roughly comparable then the market should decide.
◦◦ Industry should be roughly price competitive with non-green competition. Early
adopters are often willing to pay a premium for green products. However, the cost
differential cannot be too high and it should eventually disappear. The cost differential
can also disappear as environmental impact costs are built into the non-green product.
• Economic & Stakeholder Impact
◦◦ There should be no expectation of substantial changes in consumer behavior. Any

product or service that requires substantial change in consumer behavior could take up
to a generation to adopt.
◦◦ Business should thrive and grow in Minnesota. Key parts of the business value chain
should remain in Minnesota for the foreseeable future.

Syngas and Green Gasoline from the Farm
Minnesota produces about one billion gallons of ethanol annually adding approximately $2 to
$3 billion dollars to our economy. State and federal mandates requiring ethanol to be blended
into gasoline for cars have benefited Minnesota. However, in addition to improving the greater
Minnesota economy, there are also global warming benefits and a reduction in our dependence
on imported oil. But ethanol blending in gasoline started for a different reason.
The use of ethanol blending started with the need to make gasoline cleaner burning. Adding
ethanol to gasoline is often called oxygenation and results in lower noxious emissions from the
tailpipe. However, as the twin specters of global warming and America’s dependence on foreign oil
came into public consciousness, it also became clear that ethanol blending addresses both concerns.
Ethanol is a biomass-derived renewable fuel and thus can help reduce green house gases. It replaces
some gasoline used in cars and is domestically produced so it also reduces America’s dependence
on foreign oil. Ethanol has become very popular with Congress who has increased the federal
mandate to blend ethanol. The Congress has encouraged the use of ethanol both by a mandate and
by a direct subsidy to ethanol producers.
Nevertheless, ethanol has fallen out of favor in environmental circles because of the challenges that
arise from using a specific ethanol production technique: corn-based ethanol. Corn-based ethanol
is the first large scale use of biomass for energy. While using it does not release any net CO2, the
production process is energy intensive and releases CO2. Many technical studies have shown that
using corn-based ethanol does not reduce overall carbon dioxide emissions. Secondly, there are
growing concerns that using corn for fuel adversely affects the food supply. Finally corn-based
ethanol may be too expensive to be viable on a larger scale.
In 2008 even with record high oil prices and a substantial Minnesota has gone
subsidy, the price of corn had risen so much that corn-based farther than the
ethanol companies were not making money. federal government in
encouraging corn-based
Given all the problems with corn based ethanol in 2008 the ethanol, and our state
EPA even considered rescinding the federal ethanol mandate. became the leader in
Minnesota has gone farther than the federal government in ethanol use.
encouraging corn-based ethanol, and our state became the
leader in ethanol use. Minnesota now has the largest E85, 85 percent ethanol blend, distribution
network for flex fuel cars. In the long run we do stand to benefit from the ethanol distribution
infrastructure as new ethanol technologies e.g. more efficient corn ethanol or cellulosic ethanol
come into play. It is unlikely that the need for ethanol from the farm will go away because of the
need for clean burning gasoline. But using corn, a food crop, to make transportation fuel is not the
only way to get energy from Minnesota farms.

During the early 1920s, German scientists developed a way to make gasoline and diesel fuel using
the gas called syngas. Syngas was then generated from coal. During WWII the Germans made
large quantities of gasoline and diesel from coal derived syngas. But syngas can also be created
from biomass. Replacing coal with biomass, a renewable resource, to produce syngas would then
produce renewable gasoline or diesel.
Technology and Industry
Syngas is a mixture of hydrogen and carbon monoxide. At the start of the 19th century, many cities
were being lighted by syngas, the famous gaslight of the Victorian era. It was generated by blasting
steam over hot coal or coke. Both carbon monoxide and hydrogen are flammable, and syngas was a
very easy way to distribute heat and lighting fuel before electricity. It was also used for cooking and
heating in the home. However, carbon monoxide is very poisonous, and by the early 20th century,
natural gas was replacing syngas everywhere.
World War I was the first major war that required the use of gasoline. After the war it became
clear that access to transportation fuels was of critical national strategic interest. Germany was
rich in coal but had limited access to oil and became very concerned about its strategic weakness.
During the early 1920s two German scientists Franz Fischer and Hans Tropsch developed a way
of converting syngas to gasoline. Syngas is heated with a catalyst and is converted to gasoline
or heavier fuels like diesel. The technology is called the Fischer-Tropsch process and was easily
scaled up to industrial levels. During World War II the Nazi government, using Fischer-Tropsch
process, was producing upwards of 125,000 barrels of oil per day for their war effort. The process of
producing gasoline from coal-derived syngas is called coal gasification.
After the war was over, coal gasification lost favor as cheap Middle Eastern oil flooded the world
market. There have been recurring attempts to revive coal gasification for other reasons. National
security concerns is one reason; using coal gasification and using American coal to fuel our cars
reduces dependence on foreign oil. Early environmentalists also advocated goal gasification as a
simple way of creating a clean burning coal process because the gasification process removes many
types of pollutants. But coal gasification does not reduce CO2 emissions, and the environmental
movement lost interest in it. But syngas to gasoline is a proven industrial scale technology and has
been improved over the years. Creating gasoline from biomass-based syngas would be ready for
primetime as soon as biomass syngas becomes commercially viable.
The fundamental science behind creating syngas from biomass is quite straightforward. Biomass
is heated in an atmosphere of steam and limited air, and voila, the syngas comes out. The process
also produces a solid residue that contains all the potential old fashioned pollutants such as
sulfur. The solid residue can be used for other industrial purposes. The syngas itself is a very clean
burning fuel and any gasoline from it will also burn cleanly. A well-designed biomass reactor will
be able to accommodate a range of biomass, from corn stover to woodchips to turkey litter. The
major technical challenge is making the process commercially feasible and being able to control
the quality of the syngas. The syngas output needs to have a controlled composition of carbon
monoxide and hydrogen. Additionally, the reactor needs to handle a variety of biomass with
varying levels of moisture, particle size and composition.

A critical intermediary step in developing the industry is to use syngas for combined heating and
power applications. Burning biomass directly produces the old fashioned pollutants, like soot,
sulfur dioxide and nitrous oxides. But syngas burns much more cleanly than biomass. Converting
biomass to syngas is an excellent way to cleanly produce industrial heating or setup combined heat
and power plants. Combined heat and power plants could be
another way to get green heating for greater Minnesota buildings Converting biomass to
and get renewable electricity into the grid. syngas is an excellent
way to cleanly produce
Work on biomass to syngas reactors is already underway. The industrial heating or
University of Minnesota at Morris has built a biomass reactor to setup combined heat
create syngas for heating the campus. Syngas combustion is used and power plants.
to create steam in a boiler. In the future, syngas combustion will
also be used for cooling. However, Dr. Joel Tallaksen, the project manager of the biomass reactor
project, said the reactor project is more than just providing heating and cooling with a lower carbon
footprint. A key objective was for the university and its partners to learn about building better
biomass to syngas reactors. This reactor project is an industrial scale pilot for a biomass to syngas
study.
There are also other fuels from biomass syngas. Dr. Douglas Cameron, Chief Scientist at Piper Jaffrey,
says it is very easy to convert syngas into chemical called dimethyl ether that can be used in diesel
engines. Dimethyl ether is a gas but has the remarkable ability to work in today’s diesel engines with
minimal modifications, and it burns cleanly. Even older diesel engines when using dimethyl ether do
not produce any particulate pollution or sooty smoke. Dimethyl ether is the most clean burning fuel
for existing diesel technology.
Biomass to syngas technology is advancing fairly rapidly. There is already a radically different type of
reactor called plasma reactor that super heats biomass to a very high temperature to produce syngas.
A company in California is planning to use the plasma reactor to produce syngas followed by a
Fischer-Tropsch system to create renewable jet fuel. They are planning to set up a plant in Sacramento.
Finances and Business Development

The key business advantage of creating renewable gasoline is that the market and distribution
network are already in place. Unlike ethanol or other non standard fuels, no changes are required
in existing cars or infrastructure. As such, there is a very large, ready market. The key challenge it to
produce green gasoline at market viable prices.
In the next decade, cap and trade and rising demand from India and China will drive up the price
of oil. A green gasoline industry will probably come to existence in a favorable economic climate
of $6 or more per gallon for gasoline. As such, it represents a tremendous opportunity. While new
sources of oil are being discovered, most of the new discoveries are very expensive to extract.
Newer oil shale or deep water oil fields require oil prices to be above $100 per barrel to be truly
profitable. It is very unlikely that a green gasoline industry will be competing with cheap middle-
eastern oil.

A critical first step in developing a green gasoline industry is to speed up the development of
biomass-derived syngas. While the requirements for syngas quality are very stringent for gasoline
production, they are much less so for syngas for heating. Using biomass-based syngas to for heating
may be the first commercial breakthrough for biomass reactors. Corn- based ethanol for fuel
producers are looking to replace their natural gas heating in their plants with renewable energy.
A biomass syngas reactor to provide heating is a possible solution. Renewable energy for heating
is very important because corn ethanol production requires a lot of energy. The Chippawa Valley
ethanol plant in Minnesota is already planning to roll out a syngas plant in the near future. That
plant will use corn cob, and this will greatly reduce their overall carbon footprint for producing
corn ethanol, making it much ‘greener’.
Ethanol plants are not the only place to use syngas for heating. Any large scale heating need in
greater Minnesota can be fulfilled by syngas heating. Additionally , Syngas can also be used in
combined heat and power plants since syngas can be used to create electricity in highly efficient
turbines. The hot exhaust from the turbines can be then be used to heat buildings, water or
anything else. The electricity can be used or be pushed back into the grid, adding to the green
electricity content of the grid. As the biomass to syngas reactor technology improves, it can then
easily become the basis for a green gasoline industry.
Benefits
While any biomass can be used to create syngas, in Minnesota
one resource stands out, corn stover. A few years ago the Xcel
Renewable Fund, with the approval of the Public Utilities
Commission, funded a very comprehensive study about the
availability of biomass in Minnesota. The study was performed
by the Minneapolis-based nonprofit Center for Energy and
Environment. The report released last year covers the entire
gamut of biomass in Minnesota from turkey manure to softwood
timber. Based on the numbers from this study, corn stalk is the
one biomass resource that stands out above others. There are two
reasons, a lot of corn is already being grown in Minnesota, and
there is no critical alternate use for corn stalk.
Corn stalk is a strategic biomass resource for Minnesota. Other

excellent biomass resources that are currently being used for
electricity, like turkey litter or forestry residue, are simply too
small to make a statewide impact. Other resources like softwood timber are available but cannot
be harvested in large enough quantities without a careful study of the environmental impact.
Large-scale planting of specialized crops for energy like switch grass or fast growing trees may
displace food crops or disrupt the environment. Corn stalk is available now without any significant
downside. We just have to figure out how to use it.

Corn stover is the residue of the plant that is left over when the grain is harvested. Typically, most
of the corn stalk is tilled back into the land to maintain soil quality. Studies done by Oak Ridge
National Laboratory have shown that about 40% to 60% of the corn stalk can be removed from the
land without long term soil degradation. The single most important benefit from using corn stalk is
that it will not affect the food supply. And since corn is already being grown it will also not displace
any other crop or disrupt natural habitats.
The harvestable stover could be used for making synthetic green fuels. Studies done by Dutch
researchers have shown the biomass can be converted to fuel while maintaining up to 51% of its
energy content. Using Minnesota’s supply of harvestable biomass for transport fuel could generate
400 to 600 million gallons of green gasoline per year replacing 15 to 20 percent of our gasoline. In
the foreseeable future, when the global economy starts up, $4 to $6 per gallon gasoline is likely. In
this scenario, Minnesota’s green gasoline could easily account for $2 to $3 billion in revenue. If other
biomass resources, such as corn cob or even energy-rich corn itself, are added to mix then these
numbers go up.
Finally, biomass feedstock is heavy and transporting will not be cost effective. Moving gasoline, the
final product, is much more cost effective. Therefore, when the biomass-based gasoline industry
develops, high tech production facilities with the high paying jobs will develop close to the biomass
resources.
Policy Recommendations
The demand for corn-based ethanol is still strong, and it is unlikely that it will diminish in the
near future. Some of the rhetoric against corn-based ethanol was not accurate. Many economists
concur that last year’s sharp rise in food prices were attributable to high gas prices rather than
corn demand for corn-based ethanol. At the same time, improvements in the production process
will make corn-based ethanol more ‘green’. Nevertheless, the economic events of 2008; the sharp
rise in gasoline prices, the sharp rise in corn prices and the ethanol industry losing money point
to the need for Minnesota farmers to diversify out of corn ethanol. Government policies should be
directed toward diversification rather than just focusing on whether corn-based ethanol is good or
bad.
From a policy perspective, incentives for biofuels should only be based on three criteria:
1) Is the fuel green?

Does the carbon in the fuel come from renewable sources?
2) Does it help the economy?

Is there any economic value and will the economic value be captured locally?
3) Is it commercially viable?

Can the fuel production become independent of federal subsidy?

The key to jump starting the green fuel industry is to ensure incentives and some directions for
the intermediate steps. Some challenges are straightforward like the need to modify farm
equipment for harvesting corn and corn stover without multiple steps. State educational agencies
in partnerships with large farm equipment manufacturers could easily develop prototypes. There
are no fundamental engineering problems to developing this equipment. Biomass to syngas
reactors represents a bigger R&D effort. The University of Minnesota Morris’ biomass reactor
project is an excellent start. It can be followed up with encouragements for combined heating
and power projects. That will include incentives to electric companies to accept power from the
combined heat and power plants.
Farm-based biomass provides both renewable carbon and an income stream for the agricultural
economy. And if waste biomass is used, there is very little impact on food prices and the food
industry. In the long run, syngas can also be made from special energy crops like fast growing
prairie grass. Biomass is bulky and difficult to transport. So it is likely that the biomass-to-fuel
plants will be situated in Greater Minnesota.
The biomass-to-fuels revolution is already underway. Biomass is one of Minnesota’s great

resources, and we cannot afford to be left behind.

Heating Minnesota From the Ground Up
With Heat Pumps
In high school science we learn that heat or thermal energy is everywhere. When heat energy is
concentrated the temperature goes up and we feel hot. Wouldn’t it be nice if we could heat our
houses in the winter just by pumping in heat from outside, concentrating it in the home? Sounds
like science fiction but it’s not. Most homes in the US have two devices that do just that—pump
heat. We call these devices air conditioners and refrigerators. The fridge pumps heat from inside
the cabinet to outside. The food inside the cabinet cools down, and the back of the fridge, where the
heat is being dumped, heats up. The air-conditioner works the same way, pumping heat from inside
the house to the outside.
The air conditioner and refrigerator technology are over a century old. But they are complex
machines and, with cheap fossil fuels furnaces, were the simplest and most economical way to heat
homes. Rising energy costs and global warming concerns are starting to change this attitude, but
there are still ways to go. In March of 2009, a new exhibit called the Smart Home opened up in the
Chicago Museum of Science and Industry. It is a model green and energy efficient house built on
the Museums grounds. It has all the latest energy efficiency gadgets and technology except for heat
pumps. Some of the attendants at the exhibit did even know that heat pump technology is viable in
the Chicago cold, let alone Minnesota.
The most common type of heat pumps available today is called air-source heat pumps. They
are modified air-conditioners and most air-conditioner manufacturers supply them. The air-
source heat pumps can heat homes in the south, but not in Minnesota. The weather in Minnesota
requires a special type of heat pump called ground-source heat pumps. They are also called geo
exchange systems and sometimes (inaccurately) called geothermal heating. Large manufacturers
are not offering ground source heat pumps, but a small company has been manufacturing them
in Appleton, Minnesota for the last two decades. And yes, a ground source heat pump can heat a
house in Tower, Minnesota in January.

Heat pumps work off two physical properties of liquids; evaporating liquids absorb heat and
condensing liquids deposit heat. Gasoline on skin feels cold as it evaporates off. Similarly, steam
burns are much worse than water burns because the steam condensing on skin releases a lot of heat
into the skin. Heat pumps leverage these physical properties to cool and heat. Heat pumps circulate
a liquid, often called a refrigerant, in a closed circuit. In the cool area, there is an evaporation
chamber. For the hot area, there is a condensation chamber. An electric pump called a compressor
moves the liquid. In the evaporation chamber, the compressor reduces pressure and forces the
liquid to evaporate, and in the condensation chamber, the liquid condenses. The evaporation
chamber sucks up heat, and the condensation chamber pushes it out, and voila, a heat-pump.

The heat pump consumes electricity to move the heat
around, that’s why fridges and air-conditioners use
electricity. But when it comes to heating the house the
efficiency equation always benefits the heat pump. To
understand why the system is more efficient, a very
efficient electric heater has a coefficient of performance
COP of 1.0. This means that one unit of electrical
energy will cause the heater to produce one unit of
heat. But one unit of electrical energy can cause a
heat pump to move more than one unit of heat from
a cooler place to a warmer place. Ground source heat
pumps have a COP that is typically in the range of 3.5
to 4.0. The same argument applies when comparing
to gas furnaces. So even though gas energy is cheaper
than electricity, the heat pump is still cost effective
because of its high COP.
The biggest challenge in designing useful heat pumps

is achieving high COP, i.e. high efficiency. There are two types of heat pumps. The more common
type, called air-source heat pumps are essentially air-conditioners that have been modified to run
in reverse. In the summer, they run to pull heat from inside the house to outside the house. In the
winter, the refrigerant flow is reversed and heat is pulled inside the house. When the outside air
temperature drops lower than about 25oF, they cannot handle the heat load needed. But there is a
source of constant temperature that is very close for each and every house. About eight feet below
the ground, the temperature is a constant 50oF, summer or winter. Ground-source heat pumps
work by exploiting the earth’s constant temperature. Ground-source heat pumps circulate the
refrigerant through piping buried eight feet or lower into the ground. These underground piping
loops serve as a heat source in the winter and a heat sink in the summer. A well-designed heat
pump can concentrate the ground heat even in the middle of a Minnesota winter. And yes, in the
summer the very same heat pump will cool the house, at efficiencies much higher than a regular
air-conditioner.
According to the Environmental Protection Agency (EPA), geo-exchange heat pump systems are
the most energy efficient, environmentally clean and cost-effective space conditioning systems
available. Even in the coldest climates, heat pumps are still cost effective compared to alternate
systems. While the initial purchase price of a residential system is higher than that of a comparable
gas-fired furnace and central air-conditioning system, it is more efficient, thereby saving money
every month. For further benefits, in the summer cooling period, the heat that is taken from the
house can be used to heat the water, also for free.

Geo-exchange systems in both new
and existing homes can greatly
reduce energy consumption 50 to
75 percent compared to older or
conventional replacement systems
and thus has a corresponding
decrease in emissions. Annual
operating costs are lowest with
geothermal heat pumps. Heat
pumps are a viable option for
current and to-be homeowners.
Business and Financials

While heat pumps are cost effective, people are scared off because the upfront price for a heat pump
appears to be steep. There are two cost pieces to getting a heat pump installed; the costs of the heat
pump and secondly, burying a length pipe into the ground that will act as a heat source or sink.
This buried length of pipe is analogous to piping that you find on the back of refrigerators and
freezers. For existing homes where there is not much open land this pipe has to be buried very deep
and usually requires a well-digging rig. The cost of laying and burying the pipe is often larger than
installing the equipment.
For an existing 20-year old 2500 sq foot home in Minnesota, the following table represents a
typical cost benefit analysis for installing a heat pump versus furnace and AC combination. This
information is from a web-based calculator from the Center for the Energy and the Environment, a
Minnesota based nonprofit.
Furnace/AC Heat Pump
Equipment $9,000 $10,000
Piping $0 $16,000
Heat Pump Rebate ($7,800)
Utility Rebate ($2,500)
Other Fed Rebates ($1,500) ($1,500)
Total Outlay $7,500 $14,200
Annual (Gas $1.10 therm) $1,350 $750
Annual (Gas $2.00 therm) $2,300 $750

When the time comes to replace the 20-year- old furnace, the homeowner will spend about $7000
more to get a ground source heat pump. However, he will save about $600 per year in utility costs,
giving an 11-year payback. If natural gas prices rise to $2 per therm, what they were in July 2008,
the home owner saves $1500 per year, with a payback time of less than five years!
But there is more. The most expensive piece of the heat pump, the piping, is very durable, lasting
more than 50 years. Studies show that houses with renewable sources of energy or savings can sell
for up to 20 times the annual energy savings. Installing a heat pump could increase the value of the
house by $15,000 to $20,000. The increase in value of the home by itself can pay for the heat pump!
Of course, if heat pumps are installed in new construction, the buried piping costs are much lower
and pay back times correspondingly shorter. Heat pumps and heat pump installation are still niche
markets. As the market grows, the costs will come down.
Benefits
Heat pumps have traditionally been marketed for large
scale projects such as the Roseville Mall. Community
Promoting a heat pump industry
centers, schools, malls, even universities like Ball
would be an excellent way to
State in Indiana, use heat pumps for their heating
push the green economy, create
and cooling needs. The breadth of implementation
jobs and develop a new industry.
speaks to its flexibility in application and is a testament
to its soundness. In the past 10 years geo-exchange Retrofitting only 10 percent of the
heat pumps have finally started to move into private houses in Minnesota with heat
residences. But they are still quite rare in homes. This pumps can generate $3 billion in
is despite that fact that an Appleton, Minnesota-based direct economic activity.
company has been making cold climate heat pumps for
the home for over 20 years .
But the heat pumps have a lot going for them. Residential heat pumps are a green industry where
the core skills and technology are already in the market place. The technology has been around for
many years and can be retrofitted in most existing homes. Diverse skills such as HVAC technicians
and well diggers can be leveraged for this industry. The federal government is already providing
financial incentives. Promoting a heat pump industry would be an excellent way to push the
green economy, create jobs and develop a new industry. Retrofitting only 10 percent of the houses
in Minnesota with heat pumps can generate $3 billion in direct economic activity. This does not
include the new housing. As housing starts improve, popularizing heat pumps in new homes can
jump start the industry.

So what’s stopping Minnesota from enjoying the benefits of a tried and tested technology in their
homes? Our own personal experience shows that the primary issue is lack of awareness. Most
consumers are not aware of the value of heat pumps. But perhaps even more important, the
heating and cooling contractors are not aware, not trained, or interested in installing heat pumps.
Part the problems is a very legitimate fear of installing something new and then finding out that
it does not work. Also, heat pump installation bring groups of contractors together who never
worked together, HVAC contractors and well diggers. Like any nascent industry, inertia and lack of
knowledge can stall growth.
The key to developing a residential heat pump industry is disseminating knowledge. The state and
local government organizations can do just that very cost effectively.
3) Community Colleges: Installing heat pumps does not require fundamentally new training.
Custom-designed short courses could rapidly bring HVAC technicians, general contractors
and well diggers up to speed.
4) State Government: The state through DEED Workforce Centers and county resources is
already helping people find work by leveraging their existing skills. In difficult economic
times the state can follow the federal government’s lead and try to direct people in the
housing and related industries towards the growing renewable industries like heat pumps.
5) Public Officials: Legislators and state’s constitutional officials have a powerful bully pulpit
that can effectively legitimize this new industry.
6) Local Government: Installing new green technologies can often get caught up in a code
ambiguity zone and slow the process down. Sometime all that is needed is clarification of the
code.
Minnesota should also strongly encourage all new homes built in Minnesota to use heat pumps.
Minnesota can lead in heating homes from the ground up using heat pumps!

Suburb-to-Suburb Bus Transport
A family moves to Minneapolis from Houston. They find a nice house in Plymouth where they
like the school district and they’re near one spouse’s job in NW Minneapolis. But the other’s job
is in Eagan. The commuting spouse has steeled herself for the 40-minute stressful commute and
after living in Houston she is ready for it. But this is Minnesota and there is a TCRCD or Twin
Cities Rapid Commute District. The commuter just has to sign up on the TCRCD website and is
then directed to park at a nearby church to start her commute. There, a bus with assigned seating
and Wi-Fi internet picks her up and drops her at her office complex. The commuter spends the
40-minute commute getting work done. After moving to Minnesota, the commuter suddenly
recovers an extra hour per day of time. That’s Minnesota nice!
Unfortunately, this scenario is still hypothetical. The Twin Cities Metro area, like most metro areas
in the United States, has become poly-centric with jobs being distributed all over the suburban
regions. Many commutes originate from one suburb to another suburb. And for the typical two-
income families, there is no option of moving close to both their jobs. Ring routes like I-494/I-694
have become critical commuter thoroughfares. These long commute times have become the bane of
modern times. That’s why, whenever viable public transport is offered, commuters flock to it.
One of the best ways to get commuters out of their cars is to develop transportation options from
suburb to suburb. Custom point-to-point bus routes can be economically set up. In addition to
being better for the environment, the bus system can be made
very desirable for commuters. However, the buses would need One of the best ways
to pick up people from parking lots near their homes and drop to get commuters out of
them off very close to their work. The buses would need to their cars is to develop
be equipped with internet and enough seating to ensure that transportation options
commuters could use their commute time efficiently. from suburb to suburb.
Dedicated bus commute systems can be done for as little as $40 million upfront costs and $10
million a year operating costs for a 5000 commuter system. Since the system will start after
individual commuters have signed up, initial ridership figures will be very high. There is also a
high likelihood that the private sector and/or individuals will contribute to costs. With the right
financing model, the fiscal impact on the public purse could be non-existent to very low.
The suburb-to-suburb bus transport is not an alternate for traditional public transport, bus or light
rail systems. The traditional public transport systems deliver complete transportation functionality
in high density population areas or highly traveled corridors worldwide. The suburb-to-suburb bus
idea is a narrowly focused approach to replace single occupancy cars going from suburb to suburb
twice a day during the weekdays. It is a new approach that is geared toward a typically American
commute in a typically American city.

Effective public transport usually results in a virtuous cycle improving the economy, house prices
etc. Public transport also reduces gasoline consumption and America’s dependency on foreign oil.
Releasing millions of wasted man hours on labor cost will be another benefit. This system has the
benefit of being both green and cost effective.
Product and Service

Public transportation systems in most cities are the hub and spoke routes that are geared to
bringing commuters from the suburbs to dense downtowns. Routes are based on aggregated traffic
flow patterns and change only very slowly. The routes are decided and then commuters follow
the routes. This approach does not work for commutes between lower density suburbs. It is not
financially prudent to put in the minimum density of routes between suburbs that would make
daily commutes feasible. However it should be possible to design suburb-to-suburb bus commutes
based on the following ideas.
• Identify and target specific employment areas e.g. office park complexes.
• Design bus routes based on individual commuter needs.
• Focus on longer commutes.
• Limit the number of pickup / drop-off points.
• Design routes that are point to point and without transfers.
What we get will be the 21st century version of the company bus, an open service provided for the
decentralized employment that is today’s America.
This idea for a suburb-to-suburb bus commute is based on the Google Bus service, an employment
perk that Google initiated to keep its workforce happy. Google has a well-deserved reputation
for being one of the best companies to work for. Many of its employees put a high premium
on a comfortable commute. Google developed bus routes that would pick up daily commuters
in comfortable and green buses. This is the old company bus idea brought up to date. Google
developed customized bus routes for its widely distributed work force that opted into the program.
With 32 buses, Google was able to serve 1200 employees. The buses have comfortable seating
equipped with Internet connections. The bus allows many of the employees to get up to 1 ½ hours
per day back into their lives and has received rave reviews from its employees.
The Google bus idea can be modified for a public system. The key is in developing a system that
identifies specific commutes and then designs the routes for them. For the idea to be successful, the
routes have to be like express bus lines with a limited number of stops. That means both pick up
and drop off points have to be clustered close together.
Most workplaces are part of large office parks. The morning drop off points can easily be clustered
together in office parks and complexes. For example, there could be several drop-off points in Eden
Prairie office complexes near the Vikings offices.

The challenge is morning pick up points. Suburban housing does not have enough density to have
a few pick up points that are within walking distance from each commuter’s residence. Therefore,
street corner pickup points will not work, it will require too many of them. Some of the commuters
could get dropped off, but many will need to park their cars. However, there is another under-used
physical resource found in most suburbs that can be leveraged for this system; a very large number
of empty parking spots found in churches and in strip malls. These spots normally sit empty for
most of the week and are only used on the weekends. These spots can be used during the week and
can help in avoiding large park and ride building structures. By repurposing existing infrastructure,
commuters can enjoy convenient public transportation with minimal capital costs. Already existing
Park and Ride ramps, like the one in Eden Prairie, use local church parking for overflow parking.
To be cost effective the routes will have to be highly targeted. Most suburban commuters are getting
onto the freeway and then getting off the freeway in a different suburb. No public transport system
duplicates this behavior but it is possible to automatically design such routes from commuter data.
These routes will have to be designed like the express bus routes, picking up commuters from a
group of close pick up points and dropping them off at another close set of points. See attached
diagram. The drop-off points are the various office complexes that the commuters are headed
toward.
potential bus routes

The key technology enabler for suburb-to-suburb bus comes from advances in the software
industry. The main technical hurdle is developing bus routes from individual commuter data.
This would have been a major technical hurdle even a decade ago but is quite feasible now. It will
require two systems:
1) A system for collecting and collating commute data from thousands of commuters spread all
over the city. Today’s web based systems can easily handle this type of activity. A system can
easily be constructed from off-the-shelf software.
2) A system for designing custom routes from very large data sets. Advances in logistics
algorithms for delivery companies and routing software found in GPS systems can be
modified for this purpose.
This approach produces a new approach to public transport. Routes are designed after ridership
has been confirmed by identifying specific named individual commuters. The system is highly
focused and only geared toward commuters. Because of its personalized nature, there are better
opportunities to get private partnerships for financing the system.
The buses themselves would have to be comfortable and green. To entice professional commuters
out of their cars, the buses should allow them to work, that means Wi-Fi access and proper seating.
Most professional commuters have experience working in airplanes. GPS locating of buses with
web-based and cell-phone notifications of bus arrivals will deliver the customer service aspect of
the system expected by professional commuters.
The buses acquired for the system can be the greenest feasible. The system can use plug-in hybrids
with the latest efficiency features such as bio-diesel capability or even the higher efficiency gas
turbine and electric motor hybrids. Since the system is using the existing infrastructure of roads,
freeways and parking spaces, startup capital needs are drastically reduced, and bus costs are the
only upfront capital costs.
The objective of the system is to move single occupant commuters out of their cars by providing
them with a better alternative.
Business and Financial Case

Over 70 million people drive alone to work each day in the US. Based on national trends, the
Twin Cities metro area has an estimated half a million commuters who drive alone each day. The
key reason for driving alone is convenience and flexibility. There is plenty of evidence that many
commuters would leave their cars if they can get a fast, reliable and comfortable public transport.
The ridership of the Hiawatha filled up very fast. In the Twin Cities even a 20 percent market
penetration for single occupancy cars would get 100,000 cars off the freeways every day during
commute hours.

Consider a simple costing model using the following assumptions.
• Bus cost: $250,000.
• Maintenance cost: $0.55 per mile. Typical industry standard
• Diesel costs: $3 per gallon
• Bus mileage: 4 mpg: Will be better for greener buses.
• Bus driver pay: $25 per hour.
• Commuters per bus: About 60 to 80 for 3 to 5 trips one-way
• Software development: $15 million.
• Parking spot rental: $300 per annum
Assuming reasonable administrative and other overhead gives:
• Initial outlays: $6,000 - $8,000 per commuter
• Operating costs: $2,000 - $3,000 per commuter per year
A pilot system for 5000 commuters can be initiated for as little as $40 million dollars and $10 million
a year. Compare this to $700 million to start the Hiawatha line.
This simple cost model does not include any revenue; it is only intended to legitimize the need for
a full-scale feasibility study. It is important to recall that this idea is inspired by a private system,
the Google bus. There are short term direct reductions of costs to the commuter. Each commuter
will probably save easily $1200 per year in fuel costs. And the one hour to one and a half hour time
recovery easily translates into $6000 to $10,000 of labor savings in the target commuter market.
In designing the finances for the system, the cost savings for the commuters should be leveraged.
The system should be a public-private partnership. Individual commuters will contribute because
they find the system very convenient and low cost. That includes reducing the wear and tear on
their cars and gas savings. Many employers will consider contributing because, like Google, they
will be providing a fairly desirable perk.

Benefits from the Business and Industry
Well-designed public transport systems usually have a positive economic impact, benefit the
environment, and improve the quality of life for the community. There is tremendous pent up
demand for public transport systems as is evidenced by the fact that new commuter light rail lines
such as the Hiawatha tend to fill up very fast. This has been true nationwide.
A bus system has several unique benefits:
• For Society:
◦◦ Saving gas (National Security and Global Warming benefits)

◦◦ Reducing impact on infrastructure
• For the State: A Low Cost System
◦◦ Can start on a small scale

• For Businesses: Employee productivity improvement
• For Commuters: Easy stress-free commute
Gas Savings: Like all public transport systems, the suburb-to-suburb bus system will reduce gas
consumption. For each commuter signing up, gas consumption will be reduced by about 250
gallons per year. And if the buses are running on fully renewable sources, then each commuter
being signed up will result in a savings of 500 gallons of gas a year. Gas consumption reduction will
reduce global warming as well as reducing America’s dependence on foreign oil.
Infrastructure Expenditures: Reducing the number of cars on the road will reduce wear and tear on
the road and mitigate the need to expand roads. The savings in road maintenance and expansion by
itself could be substantial
Cost Effective: This system has a very narrow purpose and can be built very cost effectively. And
just as important for getting the project launched, this system can be piloted on a very small scale.
The system co-exists very easily with the cars. The system also does not require major upfront costs.
Time Savings: The single biggest benefit is recovery of time for individual commuters. Commuters
can save 250 to 400 hours per year. It is important that this value be captured and one way to do
that is to ensure that it is possible to work on the bus, like airplanes. However, some commuters
may choose the commute time as their stress free down-time in which case it is a high value fringe
benefit for them.
Once people start using public transport, the support for other more expensive but better systems
like light rail line also increases. The network of buses does not compete with light rail lines or
traditional rail but once a system is setup, commuter corridors would emerge. After the commuter
corridors are identified, it is more likely that that there will be support for expensive but dedicated
better public transport options like light rail.

Suburb-to-suburb transport is a case where the greatest barrier for a private or public entity to setup
a pilot project is lack of information. Traditional traffic patterns studies will not help in designing
the types of routes that are described in this report. The first step is to commission a pilot study.
The study should partner with companies to promote people to signup. The target would be to get
enough people to sign up so that profitable routes could be constructed for a pilot program of 1000
or 5000 commuters.
After the study, the state can facilitate the project:
1) Minimize
conflict with existing transportation infrastructure.
2) Ensure that there are no problems with churches or shopping malls participating in the
parking program.
3) Identify
ways for employers to subsidize the program.
Finally, it should be remembered that the system was inspired by a business trying to provide
fringe benefit to its employees in a competitive employment. It should be possible to create public-
private partnerships where there is good potential for demand for the service.

Residential Rooftop Energy
Annual Power (kWh)

What is one of the easiest ways for an average City Typical 4kW PV Array
US consumer to get carbon-free green electricity?
Phoenix 6462
Purchase rooftop solar panels of course, even
in a cold northern place like Minnesota. Many Miami 5951
Minnesotans are not aware of our state’s high San Francisco 5778
potential for solar energy using rooftop solar
Minneapolis 5375
power. Calculations done by the National
Renewable Energy Laboratory show that Boston 5138
Minneapolis has more available rooftop solar Duluth 4970
energy potential than New York, Seattle, Portland
and even Houston. Despite our cold winters, we Houston 4884
have many sunny days, and our summer days are New York 4874
very long. Chicago 4869
Portland 4701
Seattle 4067

Residential scale solar electric power is generated by photovoltaic (PV) cells, commonly known
as solar cells. Solar cells are electronic devices that convert the sunlight into electricity. The light
particles from sun, called photons, move the electrons in the material. The moving stream of
electrons is what we call an electric current. In short, a solar cell is a device that produces an electric
current when light falls on it. While solar cells have been around for over a 150 years the modern
solar cell was developed at Bell Labs in 1954. By 1958, solar cells were being used to power satellites
in space.
The most widely available solar cells are made from silicon semiconductor. They are manufactured
using the same basic semiconductor technology that is used in the manufacturing of electronics
and computer chips. Advances in the computer industry have also advanced the solar cell industry.
Silicon-based solar cells are commercially available for residential rooftop implementations and are
the most common type.
However, there are several other types of solar cells with different materials that are also being
introduced into the mass market. They often are called thin-film cells, but this is an umbrella term
for many different materials. Thin film solar cells include amorphous silicon (a-Si), Cadmium
Telluride (CdTe), and even a material called Copper Indium Gallium Selenide (CIGS). They are just
starting to hit the mass market.

The other major innovation in the industry is called
concentrators. The idea behind concentrators is that
since solar cells are expensive, it may be cheaper to
concentrate the sunlight and use less of the expensive
solar cell material. For example, using a magnifying
glass to concentrate the sunlight by 10 times requires
one tenth the solar cell material. Solar concentrators
have proved to be problematic in the residential
market. The current solar concentrator technology is
only good for utility sized arrays. However, there are
companies that are planning to bring it to the home
market shortly.
From the customer perspective, there is only one property of solar cell that really matters—the
price. The electricity is the same from any type of solar cell and all types of solar power are
inherently green. Therefore, all the different companies and competing technologies are all focusing
on bringing the costs down. The advantage of multiple solar cell technologies is that there is
internal competition that will drive down cost to reach grid cost parity.
The energy industry has recognized the potential market for home-based solar power.
Manufacturers are making specialized solar cell panels that are designed for residential rooftops.
These come with all the electrical paraphernalia that connect the system to the state’s power grid.
These grid-connected systems allow the homeowner to use whatever electricity they need, and the
surplus is distributed into the electric grid system. Residential systems are also sturdy enough to
withstand high winds short of a tornado and up to one inch hail.
As the underlying technology costs come down, aesthetics and looks will become important. Most
home owners will pay a premium to have their homes look good. Companies are already making
solar cells that mimic roof tiles and blend into the roof. Other companies are incorporating thin film
solar cells into windows. These will be very thin films that look like one-way films found on many
automobile windows but generate electricity in addition to keeping the glare of the sun out.
Many companies all over the US and Minnesota provide turnkey services to install and setup a
residential rooftop solar electric power system. In short, residential solar power is rapidly becoming
mature technology that is backed by a full-service industry.
Financials and Business Case

Residential electric power in Minnesota costs about 8 cents per kWh hour. The national average is
about 10 cents per kWh, with the highest being in Hawaii at 18 cents per kWh. The cost of sunlight
is free. Inherently, it is the upfront cost of solar cells that makes solar electricity expensive. For
a well designed system, there are virtually no running costs. Unfortunately, solar cells are very
expensive, and solar energy has historically been one of the more expensive ways to generate
electricity. But the good news is that the costs have come down and are expected to continue
going down. The industry is just about to hit the tipping point .

Like other renewable energy sources, there are rebates and credits available for solar rooftop
systems. The basic regulatory framework is already in place in Minnesota. The State runs a rebate
program for residential solar power. Some of the utilities provide additional rebates. There are also
federal and state tax credits, reinforced by the Stimulus Package. Another critical piece is the energy
buy-back provision. The State requires that all utilities operating in Minnesota must
buy-back any surplus residential power at retail rates. In practice, the electric meter runs backwards
when the house is generating more power than it is consuming. This means that all
the power generated by the system counts toward the homeowner’s bottom line, not just the
amount they use.
The final key piece of the financial component is the increase in the home’s value. An empirical
study done in California in 2004 found that home values increase by 20 times the annual
energy savings. So for every $100 per annum reduction in electric bills, the home value will increase
by $2000.
A typical four-bedroom house would probably install a 4kW (4000 W) panel. In Minnesota, a
4kW panel would produce about 5200 kWh of electricity. At 8 cents per kWh, this would save the
homeowner $416 annually or about 30 to 50 percent of their electricity bill. There is virtually no
running cost for the solar array.
The biggest expense of solar panels is the upfront cost. This includes the solar panels and
installation. Installation includes attaching the panels to the roof and connecting it to the household
electric circuits and the grid. In the later half of 2009, the price of installed residential solar panels
was running at $8 per W. While the base cost is very high, state and federal
incentives make it financially viable.
Cost per W installed (2009) $8
Array Size (W) 4000
Cost of Array $32,000
MN Rebate ($2 per Watt) ($8,000)
Fed Tax Credit (30%) ($7,200)
Cost to Homeowner $16,800
Less Home value Increase (est.)

($8,320)
20 times annual energy savings
Effective Price $8,480

At today’s prices, installed solar panels will pay for them selves in about 40 years on a cash basis
or in about 20 years if house appreciation is taken into account. While these financial benefits seem
small, they are perfectly in line for early adopters of the green revolution. For comparison, sales of
hybrid cars have taken off despite there being no purely financial benefits or payback unless gas
prices went over $6-$7 a gallon.
Over the next two to three years the financials are expected to continue to improve. Silicon Valley
startups are now creating prototypes of solar cells with substantially lower costs. An existing
silicon shortage is also starting to ease up. The market expects solar cell costs to go down by around
30 to 40 percent within three years. If installed solar panel prices reach $6 per W and electricity
prices reach US average of 10 cents per kWh, the payback period becomes only two years if house
appreciation is taken into account. And when solar panels reach $4 per watt, with California
like electric rates of 12 cents, the payback period becomes six years without any state of federal
incentive.
Nevertheless, the high upfront cost of solar panels is sparking a new approach to financing the
panels. There are companies in California and a startup in Minnesota that will install a rooftop
solar panel and charge a fixed monthly lease amount for it. As these companies install more and
more panels and the prices come down, they will be able to pass off the cost reduction to the early
adopters. This approach allows homeowners a hedge against the expected falling price of solar
panels.
Benefits
Widespread adoption of solar power will greatly benefit the people of Minnesota in achieving their
targets for renewable electricity. If 25 percent of Minnesota’s single family houses get rooftop solar
power, it would represent 10 percent of Minnesota’s installed electric power generation capacity. In
particular, this power will be available when people need it
the most, running air conditioning during the day during If 25 percent of Minnesota’s
the summer. single family houses get
rooftop solar power, it would
There are other advantages of residential solar power as represent 10 percent of
opposed to large centralized power stations. Distributed Minnesota’s installed electric
power generated close to consumption saves transmission power generation capacity.
costs and reduces the load on the transmission
infrastructure. The economic benefits are also distributed widely as contractors, small businesses
and homeowners directly see the benefit of the economic activity. Twenty-five percent of Minnesota
homes getting rooftop solar panes represents over $5 billion of economic activity.
Finally, tapping the financial resources of individuals to deploy a new technology has many
advantages. Individual early adopters will not to be as fiscally conservative as utility executives.
Like all technology product purchasers, these early adopters help seed and refine the market. These
retail-sized power stations also allow the market to grow organically rather than justifying the need
for millions of dollars of investment at a time. The homeowner is also working off the retail electric
price and not the wholesale price and will see value even with a higher cost structure.

There are many people who place a very high value in going green. The rising sales of hybrids are
proof that people put a premium on going green. State and local government should support this
enormous reservoir of political will in the public for going green. Residential rooftop solar energy
represents another way to channel this political will toward the greening of the economy. Minnesota
already has the basic regulatory framework and incentive packages in place. As the solar energy
industry grows, Minnesota has the potential to become a leader in rooftop solar power generation.
The residential rooftop solar panel industry is a particularly good option since it is unlikely to need
any incentives in a few years.
Financial Incentives: As the industry grows, the state needs to ensure that the current rebate
program is capable of handling the growth while remaining fiscally responsible. The state also
should ensure the rebate and tax credits are consistent throughout Minnesota and easily accessible
to all. One key point is to ensure that incentives remain in place if the homeowner chooses to use
alternative financing or rental type agreements to pay for the systems. There are companies in
California that provide co-ownership or rental arrangements to provide homeowners with solar
panels without any up-front cash.
Regulatory Framework: Minnesota should be ready for newer solar cell technologies and different
types of solar panels as they come into the market place. The rebate structure and energy buy-back
provisions need to be flexible and technology agnostic. The requisite monitoring of the system
should be simplified and automated. Finally, state and local government should clarify the sun
access rights in residential neighborhoods. Once a $20,000 solar array is in place, a new tree by a
neighbor can be much more than a nuisance.
Solar power has many advantages and it should be part of the repertoire that society uses to
combat global warming. Many states and local governments are taking the lead. The Governor of
California, Arnold Schwarzenegger, announced California’s Million Solar Roofs initiative in 2006.
Recently, the City of San Francisco developed its own rebate program for rooftop solar panels. In its
most recent budget, the State of Pennsylvania also introduced rebates for rooftop solar panels. The
State of Minnesota should continue to be a leader as the rooftop solar revolution truly gets under
way.

Improving the Grid, the New Network for
Minnesota’s Green Economy
In 2000 and 2001, California suffered brownouts and blackouts. The wholesale
electricity price fluctuated wildly, utilities went bankrupt, and businesses and
residents were very angry with the state. The spectacle of Silicon Valley, the
global leader in technology, being beset by third-world-like rolling brownouts became a national
embarrassment. The electric crisis was probably the single most important issue that brought
down California Governor Gray Davis who became the 2nd governor in the history of the US to be
recalled by a public vote. After the debacle there was plenty of blame going around. Some blamed
the deregulation effort, others blamed the regulators for botching the effort, and yet others pointed
the fingers at the energy traders for manipulating the market. But everybody from Governor Gray
Davis to President George Bush wanted California grid improved as a part of the fix-it effort.
It should not be surprising that failing electric supply can bring down a governor. The US
economy went from a 20 percent reliance on electricity in the 1940s to 60 percent in the 1980s
placing the electric grid at the center of economic activity. But America’s electric grid has been
falling behind the 21st century needs and is in no shape to support the new green economy. The
Obama Administration has been promoting a new Smart Grid. Our current grid, often called
“the most complex machine in the world,” was developed over the past century without any
coherent planning. It now stands fragmented with distributed ownership that often necessitates
management by nonprofit intermediaries. Despite the problems, the grid runs 24/7 because it has
to run 24/7. When it stops running, a huge number of people and businesses are affected.
The grid was originally designed for simple load patterns with large power plants constructed
close to cities. The large coal, gas and nuclear power plants were a stable and predictable supply
of power. Large cities with businesses and homes with traditional appliances had a predictable
demand for power. However, today’s rapidly growing demand and the explosion of electronic
gadgets creates new demands and stresses on the grid. The new renewable sources of power, the
wind and sun, are neither stable nor predicable and are usually far from major demand centers.
The creation of a ‘smarter’ grid means at least three things:
1) Manage
the complex demand to control peak demand
2) Transmit
large amounts of power over long distances efficiently.
3) Manage
supply distributed and variable sources such as solar panels and wind turbines.
To become smart the grid will have to meet all these needs while remaining in balance 24/7. And
the key to doing that is requiring that automation can deal with a lot of the issues. That’s the term
Smart Grid, i.e. a grid that will use modern electronics to balance complex supply and demand.

Technology and Business
Today’s electric grid is powered by large centralized power plants, designed to maximize economies
of scale. When electricity is transmitted over long distances, it needs to be transmitted at very
high voltages, at hundreds of thousands of volts. As the electricity gest closer to the customer, the
grid branches out, and the voltage is reduced. The change over happens at electric substations by
devices called transformers. The electricity is shunted off to different secondary substations where
transformers push it down to household voltages of 110V or maybe 220V.
The electric grid consists of the wires,

poles, substations, transformers and shunts.
In essence, it is the network that moves
electricity from the producers (power
stations) to the consumers. As such it is
similar to a network of pipes that move
water from reservoirs to your home or like
the internet that moves information from
servers to your computer. However, in
some ways the electric grid is more fragile
than the other two. In the water system a
large supply of water is available ready for
use, allowing operators to turn up supply
when demand goes up. On the internet,
information only gets pulled from the server
when the consumer needs it. The water supply and the internet become unbalanced in very extreme
circumstances. The electric grid on the power must be consumed the moment it is produced. Excess
supply or excess demand can cause the grid to fail. The need for instantaneous balance in the
electric grid is the key to its fragility. It is truly remarkable that the US electric grid—run by many
operators and managed by different state regulators—runs 24/7 virtually all the time.
The grid is kept in balance by a process where all new power is allowed into the grid only after a
careful engineering study. In Minnesota, this process is controlled by an independent organization
operated jointly by the power producers in the industry. This organization, the Midwest ISO,
carefully controls the influx of new power into the grid. It ensures that the new power or new
consumption will not destabilize the grid. Therefore, it sometimes takes up to six months for new
wind power sources to be approved.

For most people the Smart Grid means demand management. Instead of having to build new plants
to manage the few days of peak demand in the summer, utilities can save money and pass the
benefits on to the consumer for only a slight inconvenience . The idea is to spread the demand out
so that peak power needs are controlled. For example, instead of running your dryer during the
day when demand and cost are highest, the system would encourage you to do your drying in the
evening when demand is low, giving the consumer a price break. Many utilities are already doing
demand management to shut down air conditioners on peak demand days, which allows customers
to get a break on their bills. This is a very rudimentary piece of the smart grid. The idea is to allow
the utility to manage and monitor many electrical devices in the home to better control and predict
demand. Xcel Energy has a large scale Smart Grid pilot currently running in Boulder, Colorado. The
project went live in September 2009 and steadily incorporating more features such as adding smart
meters and incorporating plug-in-hybrids into grid management.
The Obama Administration is also pushing another key piece of the new grid—long distance
power transmission. Utilities have to locate power production wherever the wind blows and the
sun shines. Wind power is available in the Midwest, especially the upper Midwest. Solar power is
primarily available in the southwest. However most of the demand is on the coasts. In other words,
a large quantity of power will have to be transmitted over very long distances. This is something
the grid was not designed to do. The grid is more like a network of single lane highways with
short and local multi-lane freeways. What are needed are long distance multi-lane freeways. A
second component to the smart grid is a new type of electric transmission, called DC High Voltage
transmission that can transmit power efficiently over very long distances. DC High Voltage has
been around since the time of Edison, but in the last two decades, it has become technically feasible
on a commercial scale.

The third challenge, and perhaps the most important piece of the Smart Grid, is managing green
power. Wind and solar electricity place new demands on the grid because they are intermittent
power sources. Current green contributions to the grid are about 2 percent and do not have
an impact, but if the 20 to 30 percent goals are reached, utility companies may have difficulty
regulating power since the grid needs to be balanced all the time. But perhaps the most exciting
piece is energy storage. If part of solar power could be stored during the day and released during
the night, solar power becomes a stable base- load power like coal or nuclear. The same argument is
applicable for wind power. Utilities are starting to work on large batteries and other energy storage
ideas. In poor countries where electric supply is unreliable, most middle class households have
some kind of UPS system for electricity storage. They are not very expensive. Local distributed
storage can buffer demand or supply fluctuations.
Putting automation into
These three issues are tied to keeping the grid balanced all the current grid is the
the time. One of the most critical developments taking place industry’s key strategy
is putting sophisticated automation at the various choke for cost effectively
points of the grid. The grid has the ability to shunt power modernizing the grid.
from one section of the grid to others. But putting more
automation in this process has the option of making existing infrastructure far more robust and
flexible. Putting automation into the current grid is the industry’s key strategy for cost effectively
modernizing the grid.
Benefits
President Obama’s economic strategy is riding on a market wave that has already started; green
business. One of the key tenets of this administration’s strategy is to invest in alternative sources of
energy and to upgrade the grid to a ‘smart’ status. Even before the election of 2008, conservative oil
businessman T. Boone Pickens invested $5 billion in green technology last year. He may not be an
environmentalist, but there are sound economics behind greening the economy. And one of the key
talking points in both the McCain and Obama campaigns was about building a better grid.
Upgrading the grid is central to all the renewable energy plans. For example, Google recently chose
to develop a large server farm in rural Washington State to be close to a hydroelectric plant and
avoid reliance on the grid. Google is a world class company and is not satisfied by the current state
of the electrical grid. The US economy prides itself on its capacity for innovation, but it must have
a progressive infrastructure upon which its businesses can innovate. The funding and political
momentum is there, and Minnesota needs to be at the forefront.
Minnesota growth opportunities lie in harnessing wind and solar power. Both green electricity
sources are distributed as intermittent. If Minnesota can improve the grid, the free market will find
it much easier to develop wind and solar power, as it will provide access to the customer.

What can Minnesota Do?
There are ample opportunities for Minnesota to develop all three parts of the Smart Grid.
Western Minnesota is home to many wind farms. The people in western Minnesota would be
very interested in participating in programs that could grow the local economy. Developing a safe
load management component of the Smart Grid requires pilot programs that encompass entire
communities. Xcel Energy has a pilot program in Boulder, Colorado. Western Minnesota is home to
many small communities that could be used to develop a rural and multi-community pilot program
for Xcel.
Minnesota is between the wind resource-rich Dakotas and the load centers of Chicago and the
east coast. Any transmission lines to utilize wind power from the upper Midwest will have to go
through Minnesota. There is also opportunity for greater utilization of Minnesota’s own wind
resources if efficient and modern transmission lines are built. While this is in part a national issue,
Minnesota is uniquely positioned to be a leading state for development and subsequent benefits.
Finally, Minnesota should also lead in developing technology and techniques to manage production
fluctuation. This piece probably has the best short-term opportunity for Minnesota. With great
wind and roof top solar power potential, Minnesota stands to benefit greatly from energy storage
solutions. In the past Minnesota has led in renewable energy, from wind
power to ethanol.
In the short run there are two key developments that can help Minnesota.
1) Open Model of Grid: While MISO is doing an excellent job of managing the grid, it is
sometimes difficult to identify opportunities for putting power into the grid. A study
commissioned by the state, Minnesota Grid Study for CBED legislation, found some
interesting opportunities. If the grid is modeled in a computer system and is made widely
available, entrepreneurs could explore and validate their new ideas easily.
2) Distributed Power Storage: Large power storage systems are still being developed. However,
small scale energy storage systems are already available. Deploying distributed storage close
to consumption (i.e. close to homes) may be the most economical way to get intermittent
power into the system.

Wind Power for Minnesota: Utilizing
Stranded Wind
Wind power is a very old technology. Mankind has been using windmills to pump
water and mill grain for centuries. In the 21st century, the windmill, now called a
wind turbine, powers electric generators to make electricity for the grid. Wind-based
electricity is clean and green, but the supply is intermittent and is only available
where the wind blows, not where the power is needed.
Wind-powered electricity is already an established industry worldwide, and Minnesota is one

of the leaders in wind power. Minnesota currently has about 1800 MW of installed wind power
capacity. The state has passed a law where by 2021 Minnesota utilities must generate between 20
and 25 percent of power using the wind.
But Minnesota’s wind potential is much more than that. Estimates by the American Wind Power
Association show that Minnesota has about 75,000 MW of potential wind power capacity. That
means that Minnesota is currently using only 2½ percent of its capacity. Under the current
mandates, even by 2021, Minnesota will be using at most 10 percent of its potential wind capacity.
Tapping into more of Minnesota’s wind power to generate more electricity runs into two problems.
• The grid cannot reach many sites where wind farms can be built. New power lines need to be
built to access the wind power.
• The grid will not be able to handle additional wind power due to its intermittent nature.
Some type of energy storage technology or other means will have to be used to create
controlled power output from wind-based generation.
Both these challenges are expected to be ultimately met, but will require millions and maybe
billions of dollars of investment and perhaps a few decades of time. In the meantime, the wind
continues to blow. The wind power industry has a term for it: stranded wind. Approximately 90
percent of Minnesota’s wind resources are stranded wind, i.e. there are no plans to use it either
because there are no grid connections or it is not possible to accept any more wind power into the
grid.
While waiting for grid and energy storage to mature, perhaps it is time to go back to the roots of
wind power and use it where it is generated.

Localized Use of Wind Power
The localized use of wind power is well suited for creating a product that meets three criteria:
1) Energy
intensive process
2) Easily
transported or locally available raw material
3) High
value and easily transported final product.
The approach is to mimic the windmill-based grain milling process where wind mills were located
in the farmlands. During historical times, grain milling was a relatively energy intensive process
and used local raw material to produce flour. While flour manufacturing would not meet these
criteria today, there are other products that do.
Wind to Fertilizer
Commercial farm fertilizer is typically made from a gas called ammonia. This is a very large
and very energy intensive business. By some estimates up to 1 percent of the worldwide energy
consumption is used for manufacturing ammonia. Most of the commercially used ammonia is
manufactured from natural gas and thus releases CO2 emissions. Using a green source of
energy will cut the emissions from ammonia
manufacturing. Minnesota uses about $300 million Minnesota uses about $300
worth of ammonia for farming each year. The state million worth of ammonia for
has more than enough wind resources to make all this farming each year. The state
ammonia and then some. has more than enough wind
resources to make all this
Today most of the ammonia is made using natural ammonia and then some.
gas. Natural gas is heated with steam to produce
hydrogen. The hydrogen is then mixed with nitrogen from the air and using a century old
technique called the Haber-Bosch process, ammonia is manufactured. When German chemist
Fritz Haber was developing the process, he used hydrogen that he made by splitting water
molecules with electricity. Later on when the process was industrialized, hydrogen from natural
gas replaced hydrogen from water. But now it is possible for industry to come back full circle by
creating hydrogen from water using green electricity from the wind. Since water and air are widely
available, this process would essentially be converting wind to fertilizer.
The University of Minnesota’s West Central Research and Outreach center has already initiated a
pilot project for wind to fertilizer. They have attached a small ammonia plant to a wind turbine and
produced green ammonia. Researchers at the U believe that a green fertilizer industry can easily use
up to 2000 MW of wind. No grid investment or energy storage technology is needed for this work.
Minnesota and other farm states already have infrastructure to manage ammonia distribution.

Wind to Green Fuel
Minnesota has the unusual good fortune of having two green resources, wind and agricultural
waste biomass, close by. This provides an opportunity for simultaneous use of corn-based
agricultural waste and wind power. Any biomass can be converted to syngas, gas that is the basis
for green fuels. (See Syngas section) Converting biomass usually requires heat, typically done by
burning some of the biomass or syngas. But the best type of heating is by using electricity and
using a process called electric plasma heating. Plasma heating makes the biomass very hot, and this
ensures a good quality of clean syngas.
Since plasma heating requires electricity, it can be expensive. At this time plasma heating is
currently only being used to incinerate household waste. But a company in California is using
plasma heating to convert biomass to jet fuel. But if the same technology is used to create electricity
from windmills and biomass from agricultural waste, the resulting fuel would be green and
efficient.
Minnesota has been focused on using wind to power our grid. And it should continue to do that.
Using wind to power the general purpose grid is probably the best use of the grid. However,
Minnesota’s wind resources are much greater than can be absorbed into the grid in the foreseeable
future. Therefore policymakers should also look at other options.
There are probably many ideas for using stranded wind; only two were presented in this section.
The key policy objective of using stranded wind should be to create incentives that are functionally
equivalent to those for existing wind to grid incentives. Awareness that such incentives could
materialize will spur entrepreneurs to bring their ideas to the table and encourage investment.

From Economical Plug-in Hybrids to an
Electric Car Industry
Imagine a car, a silent smooth car, a powerful fast car and one that refuels right in your garage.
This is the promise of an electric car. The quest for the electric car was originally driven by the need
for zero emissions vehicles. But electric cars also have another advantage that will endear them to
American drivers; efficiency that does not come at the expense of engine power. It will be possible
to get muscle cars, light trucks and mini vans that have Prius-like efficiency and whisper-quiet
smoothness of a Roll Royce with no emissions.
However, all of this promise is being held back by the limitations of the current battery technology.
Nevertheless, due to the tremendous advantages of electric cars, key players are jumping into
the electric car race. There are many different approaches to developing the electric car industry.
Launch with pure electric cars into niche markets, use plug-in hybrids as a stepping stone, or
develop rapid recharging infrastructure everywhere. When the California startup Tesla Motors
announced its high performance all-electric sports car, GM followed suit with their mass market
plug-in sedan the GM Volt. Yet another California startup Better Place is partnering with national
governments and car companies to create a rapid recharging infrastructure.
The nascent electric car industry is focusing on upper end

and niche markets. Tesla spent hundreds of millions of
dollars to produce $110,000 all-electric sports car. GM is
spending about a $1 billion to get a $40,000 plug-in hybrid
compact sedan launched. The average price for a new car
in the US is $27,000. And building a new rapid recharging
infrastructure will probably cost billions of dollars. The
traditional view is the electric car industry will have to
spend billions of dollars and produce very expensive cars
before they get to the mass market. Both the Tesla Roadster
and the Volt are excellent cars, but they are quite expensive for their class. It will be a many years
before either company produces a truly mass market car.
But it does not have to be that way. That is the lesson from the curious tale of White Zombie, an
all-electric street legal dragster. In the early nineties, John Wayland of Oregon was tired of all the
problems with imported oil and decided to go oil free. He acquired a white 1972 Datsun 1200,
gutted its innards and put in an all-electric drive-train. Thus was born the White Zombie. The car
was created in his garage with a big helping of American ingenuity but without a multi-million
dollar budget. John Wayland liked speed so he built the White Zombie to go fast, very fast. He
started taking his car to the drag races and easily defeated cars like Corvettes, Masaratis and BMW
sports cars. YouTube videos of an ancient white Datsun zooming past a shiny new Corvette are
quite amusing.

The White Zombie will not win against
specially constructed and expensive
professional drag racers. But that’s
actually its strength. What John Wayland
accomplished is the key to driving the
electric car revolution, accomplishing good
enough performance economically.
Clayton Christianson of Harvard Business

School has studied business innovation
and written a very influential book called the white zombie
the “Innovators Dilemma.” He shows that
disruptive innovation, the kind of innovation that overturns industries, usually comes with good
enough products that are economical and start by taking over the low end of the market. And the
companies that generate the disruptive innovation are usually outsiders.
As the technology stands today, the high tech battery is the only bottleneck to an electric car
industry. New battery technology is needed to give electric cars a long gasoline-free range, but it
also makes the cars expensive. Using today’s battery technology will still give about five to 10 miles
of battery range. A study by Carnegie Melon scientists has show that the most cost effective strategy
is plug-in hybrids with a range of just seven miles. A system with economical cars and a lightweight
network of simple charging stations at workplaces can be built on today’s technology. The simple
network of recharging stations could be just outlets at commuter and company parking lots. Such
a network would not suffice high tech batteries but would double the gas free range for low tech
battery cars up to 10 to 20 miles for daily commutes.
This is the fastest way to get a large number of electric cars out in the market place. From an
environmental perspective, it is better to get a million cars that have 20 percent reduction in CO2
emission than to have 10,000 cars that are truly zero emission. And widespread economic benefits
only come from mass market products. From both economic and environmental perspectives,
wide scale deployment of incrementally green cars would be much better than waiting for the best
battery technology.
But from a marketing perspective incremental improvements are difficult to sell. Both
environmental and business interests tend toward wanting dramatic improvements in technology.
The paradox of commercializing an emerging technology is that getting to market fast is the
critical factor in minimizing costs. A good enough product that gets to the market faster is better
than getting a better product later. The key is identifying the minimum threshold that can get the
product out into a mass market. Electric cars with simple battery technology are at that point. The
key is to legitimize this approach.

Product and Technology
Electric cars have been around for a long
time. Jay Leno’s garage full of antique cars
includes a 100-year-old production electric
car. Electric cars lost out to gasoline cars
very early on because of limited battery
capacity. Nevertheless, the electric motor is
inherently superior to the gasoline engine
for automobiles.
• Efficiency: The electric motor is very

efficient and its efficiency does not
depend on speed or motor size. This
means that the electric motor gets the
same high efficiency at city driving 100 year old electric car
and freeway driving, in large cars or
small cars.
• Power or Torque: The electric motor produces very high torque, and the torque is available at
all speeds. That means that the car can accelerate fast from a standing start and does not need
to shift to higher gears. No transmission needed.
• Zero emissions: The electric motor does not produce any pollution. If the electricity is from
renewable sources like wind, then the car is truly zero emissions to run.
The hybrid cars like the Prius are the first attempt to take
advantage if the electric motors inherent superiority. In
today’s hybrids both the gasoline engine and electric motor
can drive the cars. The gasoline motor can also recharge the
battery. Complex mechanics and software ensure that both
are used to maximize efficiency.
In the electric car an electric motor exclusively drives

hybrid car drive train the car’s wheels, referred to as an all-electric drive train.
Electric cars come in two types:
• Pure Electric: These cars only have an electric

motor and battery. They need recharging stations
and usually require several hours to recharge.
The only fast way to ‘refueling’ them would be a
network of battery-swap stations.
• Plug-in Hybrid: Also called series hybrid or

extended range electric vehicle. These cars have an
Electric Car Drive Train on-board gasoline or diesel generator to recharge
the battery when it runs out.

The electric car is inherently simpler. The electric motor has fewer parts, e.g. does not require oil
changes and other maintenance. Most electric cars will probably not need a transmission since there
will be no need to shift gears. The White Zombie is such a direct drive, and it reverses by reversing
the electric motor. The overall simplicity will lead to lower manufacturing costs once the economies
of scale start to apply.
The battery remains the Achilles heel for the electric car. Despite vast improvements in battery
technology, there is still no available battery technology that can power a typical car for 300 miles
and recharge in 10 minutes. And even if such a battery technology were available, recharging the
cars would severely overstress the electric grid. Companies are approaching the problem in three
ways.
• Niche Market Cars: Tesla has opted to start with a high-cost battery-only car. Even though
this is a battery only car, it is a niche market sports car and will not stress the grid too much.
They are hoping that the utilities or the government will have improved the grid by the time
they bring out mass market cars.
• Electric Cars and a Recharging Network: Nissan and Better Place are teaming up with
Denmark and Israel to create a rapid recharging network for battery-only cars. Nissan sells
cars, Better Place builds infrastructure with the help of national governments.
• Plug-in Hybrids with Built in Gasoline Generator: GM is basing its Volt strategy on this
approach. The Volt can recharge on a garage overnight and go 40 miles without recharging.
Once the batteries deplete, the on-board generator recharges them.
Many industry insiders think that plug-in hybrids are the safest choice since they won’t need
any new infrastructure. The car depends on the existing grid and existing gasoline supply chain.
Nevertheless, GM still managed to spend over a billion dollars and came out with a $40,000 car.
The reason for that is that GM went for longest possible electric-only range. GM developed and
commercialized bleeding edge battery technology and wrung out the most efficiency by designing a
new chassis and body.
GM could have greatly reduced the cost by reducing electric-only range. Researchers in Carnegie
Melon found that plug-in hybrids are more efficient than plain hybrids. But trying to increase the
battery-only range dramatically increases the price and weight of the car since the battery is both
expensive and heavy. The economical sweet spot for battery-range in a plug-in hybrid is seven
miles. The 40-mile range of the Volt is overkill. Low battery range cars could be built on existing
chassis and bodies with economical battery packs. They could easily be charged at home. They
could also be easily charged in garages and with simple network electrical outlets in parking
lots, not unlike the engine block heater outlets found in Northern Minnesota. No billion dollar
development cost or billion dollar infrastructure upgrade needed.

Business and Financials
Market demand for cars is assured for the foreseeable future, but it is a saturated market with
well-defined price points. Any new entrant will require competitive advantage and must fall within
existing pricing structure. Electric cars will start having one key advantage, more green than the
primary competition. The electric engine can also give cars a performance edge for a cost. However,
the flip of the argument is to provide good enough performance for lower cost. The average price
of a new car in the US is $27,000. This price includes the upper end cars. To be a truly disruptive
technology for the mass market, the electric will have to penetrate the entry level market, e.g. a four
door sedan/hatchback priced at $20,000, preferably $10,000.
To keep the car economical, the business model needs to focus on cost as a key competitive
advantage. However, the automobile market is a mature market, and there is a certain threshold
of performance and reliability that must be met. Otherwise, the economical electric car will suffer
the fate of the Yugo, where poor reliability killed the brand completely. Lowering costs should be
achieved by minimizing development and launch costs and minimizing the bill of materials. The
experience of the White Zombie is that existing commercially available technology can go very far
when it is stitched together intelligently.
Costs need to be controlled by keeping both development costs and the bill of materials costs low.
Development Costs: The cars should be built on existing platforms—body and chassis—as much as
possible to minimize developmental costs
Unit Costs: Key to limiting unit cost is minimizing battery costs and keeping performance to good
enough for its class.
Like the computer industry, the supply chain for electric cars will have independent sectors,
the battery and electric generator being separate. In the computer industry, separate hard disk,
graphic cards sector’s internal competition drove the technology. Hard disks kept on getting
better. Similarly, battery technology will improve, and the battery range will go up until finally,
the gasoline generator will no longer be needed. Already researchers in Stanford University have
developed a material that can create long range batteries that also can recharge very fast. The
electric car promises to be a major disruptive technology in the automobile business.
Finally, it should be noted that this type of hybrid design, where a gasoline generator is driving an
electrical drive train is neither fundamentally new nor risky. Most people don’t realize that ‘diesel’
locomotives are diesel powered electrics and have all-electric drive trains. The diesel engine just
runs the generator to make electricity and the electric motor drives the wheels. The rail industry has
been successfully running them for decades.

Benefits from the industry
An electric car industry can be a source of global warming control and economic development at
the same time. The fastest way to get a large number of electric cars out in the market place is to
target the mass market. From an environmental perspective, it is better to get a million cars that
have 20 percent reduction in CO2 emission than have 10,000 cars that are truly zero emission. And
widespread economic benefits only come from mass market products. From both economic and
environmental perspectives, wide scale deployment of incrementally green cars would be much
better than using the best battery technology for expensive cars.
Cars that have five to 10 mile of battery range can log 3000 to 5000 miles per year of electric-only
travel. That could save up to 120 to 200 gallons of gas per car. And when these cars run out of
battery range, they will have the fuel efficiency of a hybrid, e.g. 50 to 60 mpg for a small sedan.
In short, these cars could reduce gas consumption by 60 to 70 percent as compared to a regular
gasoline car.
The US car market is about 17 millions cars per annum. Even a 1/10th of one percent is more than
10,000 cars. Even the 10,000 cars seed market represents approximately $100 million of revenue. The
automobile market is so large that even a small piece is a huge incentive.
But real incentive is a real chance that Minnesota could become the center of excellence for new
electric car industry. These are times of turmoil, and older companies are contracting. Minnesota
has two key sets of skills that can be leveraged, a small nucleus of automobile industry experts
from the Ford plant and an electrical engineering base from medical technologies and the sensors,
automation and control industry. Minnesotans have the skills needed to launch the electric car
industry.
In 2008 Ford was persuaded to keep their light truck plant open in St. Paul. While it is very
important to keep today’s automobile manufacturing in Minnesota, we should also be
looking towards future. Where will automobile manufacturing be in the next 10 years? Gov.
Schwarzenegger convinced Tesla to setup their new manufacturing plant in California instead of
New Mexico. What can Minnesota do to compete in the Great Electric Car race?
The worsening economy is slowing down the nascent electric car industry. Tesla has already
announced a delay in starting their new factory. Cash strapped GM may not be able to sell the Volts
at as low a price as it wants. In this climate, any state or region that can legitimize and facilitate a
lower cost approach can attract the industry. Minnesota can take five concrete steps.
1) Legitimize the low tech battery approach. The state can use its bully pulpit and partner with
advocacy groups to popularize this approach. The very act of the state pushing the solution
can create a seed market of early adopters.

2) Ensure that incentives are properly targeted. The state should ensure that the incentives do
not discriminate against electric cars with lower tech batteries.
3) Help with the regulatory framework. The nascent electric car industry will need help dealing
with state and federal regulations. Sometimes the regulations may need to be simplified. And
sometimes the only requirement is help to navigate complex regulations.
4) Develop
a network of simple charging stations. The simple charging stations will typically be
standard outlet not unlike the engine block heater outlets common in northern Minnesota.
The state can partner with electric utilities and employers to create a network.
5) Create
a seed market by purchasing some electric cars for state projects and state fleets.
Minnesota has all it needs for a disruptive electric car industry to form here—automotive
experience and electrical engineering talent. The Twin Cities Ford Motor plant that is slated for
closure makes Ford Rangers. The Ranger body style, a basic light truck, is an excellent candidate for
electrification. Whether or not the plant has any value depends on what it will cost to reconfigure
it? Nevertheless, a key resource is the skilled workers. Leveraging the skills of the workers—people
who have years of experience in the business— is important. In 2009, Fisker Automotive, an electric
car startup, acquired a GM manufacturing plant in Delaware. Fisker is also planning to utilize the
services of GM workers that were made redundant with plant closings. And these are unionized
workers. Fisker management understands that trained staff is central to the success of any company.
Minnesota has a highly educated workforce and a state government with a history of supporting
environmental businesses like wind power. By providing the right incentives, we have a great
chance of becoming an electric car industry cluster and a leader in the Great Electric Car Race.

Nuclear Power for Minnesota
A few years ago Dr. Patrick Moore, a one-time founding member of Greenpeace, came out in favor
of civilian nuclear power. Since then it has become clear that due to global warming concerns,
support for nuclear power does not follow the traditional left-right divide. There are many younger
progressives who feel that nuclear energy should be part of the mix used combat global warming
while keeping the electric supply secure. At the same time, many people feel strongly that nuclear
power too dangerous to be viable for large scale and long-term civilian use, especially when other
alternatives are available.
Nuclear energy has come a long way from the very first reactor built underneath a basketball
court at the University of Chicago during World War II. Today no one would advocate building an
experimental reactor in the middle of a large city. But even during the 1950s there was widespread
optimism that nuclear power would change the way society works. The Chairman of the Atomic
Energy Commission foresaw a time when electricity from nuclear power would be too cheap to
meter. But Hiroshima brought home the dangers of radioactivity and nuclear pollution. Nuclear
bomb testing and the close call at the Three Mile Island reactor turned public opinion away from
nuclear power. Only a handful of reactors came online in the US for almost 30 years.
However, the US is still the largest generator of nuclear-based electricity with 104 active reactor
generators producing 101 GW of electricity. We have almost twice the number of reactors as France,
the next largest nuclear power producer. With 20 percent of US and 25 percent of Minnesota’s
electric power coming from nuclear plants, nuclear power is here to stay for the foreseeable future.
But should we increase the number of reactors?
The difficulty with deciding on nuclear power is because when it is good, it is very very good
and when it is bad, it is very very bad. When a nuclear plant is working as designed, there is no
pollution, no CO2 emissions, and the volume of waste is so small that decades worth of waste can
be stored on-site. But when something goes wrong, it’s Chernobyl! Even a few pounds of misplaced
nuclear waste can become a major national security concern.
Technology
Splitting the atom, called atomic fission, creates lots of energy. One pound of uranium undergoing
fission produces as much energy as burning 32 million pounds of coal. However, nuclear reactions
are very choosy and only work with particular types of atoms. Atoms come in different types called
isotopes. The re is only one naturally available material that can undergo fission, the isotope of
Uranium called U-235. Natural uranium consists of very low concentrations of U-235, only .07% of
that is mixed in with another isotope of uranium called U-238. For nuclear power the U-235 needs
to be concentrated before it can be used and this process is called ‘Enrichment’.

All the civilian nuclear reactors in the US use enriched uranium as their fuel. The uranium is
fabricated into fuel rods. The rods are then inserted into a nuclear reactor. Inside there is material
called moderator. At its basics, the nuclear reactor is quite simple. If enough fuel rods are put in
close together, the nuclear reactions start naturally. The moderator allows the operators to control
the rate of the reaction. As nuclear
reaction proceeds, an enormous amount
of heat is used to run a steam turbine
that runs an electric generator. A typical
reactor provides 1 GW of electricity, day-
in and day-out.
The waste from a nuclear reaction

is highly radioactive material. The
amount is quite small, but the material
is exceedingly dangerous. Normally
the waste would have lost most of its
radioactivity in a few decades except for
one curious twist of nature. The enriched uranium still has U-238. By itself U-238 cannot undergo
fission, i.e. not useful for nuclear power. But inside a reactor something strange happens to U-238,
it becomes another element called Plutonium—in particular the isotope Pt-239. And Pt-239 is can
undergo fission. In fact Pt-239 is the major component of nuclear bombs. While Pt-239 can be used
in civilian reactors, due to nuclear weapons proliferation risk, the US decided that it will not be
used on civilian reactors. Pt-239 remains radioactive for thousands of year, is very dangerous, and is
present in nuclear waste.
Separating Pt-239 from the spent fuel rods is called nuclear ‘reprocessing’. Reprocessing tends
to quite expensive since it requires handling very dangerous materials. There are two benefits to
reprocessing.
• Reprocessing simplifies the nuclear waste problem. The waste in the US contains Pt-239
increasing waste volumes and requiring safe storage for thousands of years.
• Reprocessing greatly increases the nuclear fuel supply. The Pt-239 that was waste now
becomes fuel.
The US civilian reactors do not reprocess the fuel. French civilian reactors do. At the current rate of
use, the global supply of U-235 will last about 200 years. If use of nuclear power expands without
reprocessing, U-235 could easily run out in 50 to 70 years. However the supply of U-238 is 150 times
that of U-235. There is another material called Thorium that can be made fissile like U-238. Supply
of Thorium is 600 times that of U-235. Therefore, it is unlikely that there will be a major global or US
expansion of nuclear power without some kind of reprocessing.

But the need for reprocessing does not reduce its dangers. With the current nuclear technology,
reprocessing requires that the material be taken out of the reactor, transported to another site and
reprocessed. The fuel needs to then be fabricated and put back into the reactor. All these steps
involve risk. There are experimental reactor designs that accomplish reprocessing within the reactor
itself. But these are still on the drawing board.
While in the long run, nuclear reactors designs will evolve and perhaps improve enough that critics
will be satisfied. But R&D (research and development) and design certification cycles for nuclear
power plants are decades long. For the next 10 to 15 years, it is extremely unlikely that there will be
any commercial reactor that is significantly different from the ones that are currently coming online.
In the US these reactors do not reprocess and only use enriched uranium as fuel.
Advantages vs. Disadvantages

The debate over civilian nuclear power for the next decade has to be focused on reactor designs
that are already in the market place. The Nuclear Regulatory Commission will not and should
not approve new designs in a hurry. The debate then comes down to the cost of adequate safety.
Nuclear reactors can work safely and fuel can be stored in casks for decades, if not longer. And
nuclear power does not produce global warming gases nor increase dependence on foreign oil. But
what are the risks and the true costs? Nuclear reactors need to be designed with very high safety
margins since the risk tolerance for a nuclear accident is effectively zero. The cost of safety, from
huge reactor containment vessels to redundant systems, drives the construction costs of reactors
up to $5 to $6 billion. And then there are other operating costs, waste disposal cost, insurance and
decommissioning costs.
In the US, Japan and Western Europe, nuclear power plants have an adequate safety record. There
have been no serious accidents but there have been a couple of near misses. In the final analysis the
question for nuclear power is simply, is it cost effective?
In 2009 the Minnesota Legislature debated whether or not to remove the moratorium on new
nuclear power plants. Ultimately, the debate over whether the moratorium gets lifted or not is a
distraction. What is important is that the legislature gets consistent cost numbers from the nuclear
proponents. A comprehensive MIT study from 2002 assumed that upfront costs for 1000 MW
reactor would be about $2 billion. But market price for 1000 MW reactors that includes construction
and deployment is closer to $5 billion. In addition to construction costs, there are other costs that
also need to be accounted for.

Secondly, policy makers should determine if the money can be better spent elsewhere. Minnesota
has a competitive advantage in wind and biomass. While intermittency of wind power is a problem,
investing a few billion dollars in a smarter grid with better storage technology may produce much
better economic benefits for Minnesota. Both wind turbine and energy storage technologies have
much shorter R&D cycles.
Finally, nuclear plants are such big ticket items that it is better to spread the risk. For short
term it may be better for large states like Illinois or California that have huge energy needs but
limited renewable resources to try out the first few new reactors. In the longer term, the Federal
Government and the National Labs need to get back into nuclear reactor research. At this time, the
only fundamentally revolutionary reactors that are being built are being built in China and India,
albeit on an experimental scale. Both these reactors are based on ideas developed in the US. The US
should not fall behind on nuclear power technology.

Conclusion: A Call to Action
The recommendations in this report are ready for implementation. The time to act is now. There is
much work to be done in developing policy details for each of the technologies or industries. There
are also great opportunities to identify new technologies and businesses. This report provides a
roadmap for both, but success will depend on getting the details right. The details of any public
policy initiatives have to be grounded in sound science and market realities. Otherwise, policies
with the best of intentions will fail as history has shown in the past.
California’s attempt to start an electric car industry is a cautionary tale of what happen when
scientific and business principles are ignored. In early 1990, California’s Air Resources Board (ARB)
passed mandates that required manufacturers to start producing zero emission vehicles (ZEV). The
objective was to reduce the overall automobile emissions in California and develop a new industry,
both very laudable goals.
GM took up the challenge and produced their first mass market electric car the EV1. The car was
leased to selected customers from 1996 till 2003. The project was effectively a pilot program to field
test production electric cars. About 1,200 cars were built and were put into the hands of customers
for their daily use. But the program did not grow and was cancelled in 2003.
The EV1 program is generally regarded as a failure. GM spent one billion dollars on the project
with very little to show for it. And California had to back down from its green mandates. The
program’s termination generated strong feelings on all sides of the issue. There were probably
many reasons why the program failed. But one of the reasons was a critical point of failure. Given
the state of battery technology at in the 1990s it was impossible to make a battery-only car for the
US mass market. However, had the mandate been written differently, California could have gotten
its reduced emissions and the US could have had a thriving electric car industry.
The EV1 program was a debacle that should not have been. There are two concrete steps that
Minnesota can take to catalyze the green technology economy and implement the recommendations
of this report.
1) Encourage
good leadership.
2) Develop
widely available public domain information
The Importance of Leadership

The failure of the EV1 electric car initiative was clearly a failure of leadership. The facts about the
electric car were well known to many experts in the early 1990s. But lack of leadership allowed the
policy makers to flounder, and California ended up with a self-defeating policy framework. Strong
leadership in the early 1990s could have gotten the US an electric car industry.

Good leaders do not have all the answers but should be able to articulate a vision and get others
to follow. The good leader will get all the stakeholders together to develop a coherent and viable
approach. A good leader will bring the public and private sector together. A good leader will ensure
that competing interests all work towards a common goal.
In Minnesota, a good leader will ensure that DEED has As this report has shown,
the tools and resources necessary to provide support and Minnesota is ripe for the green
assistance to organizations and individuals interested in economy, but entrepreneurs
pursuing green technology and businesses. As this report need a public entity to help
has shown, Minnesota is ripe for the green economy, but them navigate the necessary
entrepreneurs need a public entity to help them navigate state rules, regulations and
the necessary state rules, regulations and programs along programs along the way.
the way. With the right resources and infrastructure,
DEED can provide these tools and support.
There is a tendency to ignore the importance of leadership in the public sector development. The
private sector has always understood importance of leadership in developing new businesses and
new industries. Successful senior managers in technology companies are expected to provide good
leadership for all stakeholders. Minnesotans should expect no less from their elected officials.
Minnesotans need to ensure that as we ramp up our green economy there is strong leadership in
place to deliver success.
How public domain information can help

During the development of EV1, many experts had the knowledge that could have prevented
failure of the project. Nevertheless, the decision makers both in the public and business sector failed
to understand the implications. The paradox was that information was available, but it was not in
a form that was useful for political leaders or the business community. The underlying information
was spread between different experts, and it was not organized around a product or market.
In a normal product development cycle, key decision makers are working off existing product
design and market place information. This existing body of work greatly reduces the risk in new
product development. When technology companies produce entirely new products, the risk of
failure is very high. For every new innovative winner, there are hundreds of losers. But innovation
does not have to be so risky.
The software industry has evolved an approach to reducing risk in innovation. It is known as Open
Source Software. The term refers to public domain software products, technology and information.
Many companies use open source software in their products and services. Using open source
software reduces the product development costs, time and risk. Even technology giants, such as
IBM, Apple and Google either have open-source software in their products or use it to provide
service. Open-source software has clearly benefitted development of the software industry.

A program of open source green technology products and services can similarly benefit green
economy development. Setting up such a program and effectively disseminating the information
could catalyze a green technology industrial cluster in Minnesota. This report represents a first step
in creating a pool of public domain information on green technologies.
Call to Action
Minnesota is well positioned to take advantage of all Minnesota has a highly

the technologies and industries described in this report. educated workforce, a history
Minnesota has a highly educated workforce, a history of of high technology clusters,
high technology clusters, and political leadership with a and political leadership with
long-term view. a long-term view.
This report provides a framework to identify the right approach. Strong leadership can get both the
public and private sector moving toward the future. And a green technology open-source initiative
can catalyze the movement.
Let’s get moving Minnesota. Our state has a history of innovation, and the green economy provides
new opportunities to jump start our state’s economy.
The author would like to thank the following people for their assistance:
Dr. Doug Cameron of Piper Jaffrey
Emmett Costel, student at Macalester College, Minnestota 2020

Undergraduate Research Fellow

Selected Sources for the Green Economy Report

The markets sizing calculations were done by the author. The opinions represented in the report are based on the author’s
judgment. A selection of the key sources is listed below.

Exec Summary, Dev of Green Econ and Selection Criteria
Vinod Khosla is a green VC.
http://www.khoslaventures.com/about.html

Garbage problems in poor countries: Authors personal observation.

California electricity deregulation
Book: Power to the People. Vijay V. Vaitheeswaran

Syngas
Biomass Resource Sizing Basics
MNCEE Report: http://www.mncee.org/public_policy/renewable_energy/biomass/index.php
EIA Report: http://www.eia.doe.gov/oiaf/analysispaper/biomass/
Availability of Corn Stover: http://www.agmrc.org/media/cms/29691_FF4DDBE878D2B.pdf

Ethanol Production Est. http://www.neo.ne.gov/statshtml/121.htm

Efficiency Issues: http://www.oilcrisis.com/netEnergy/WoodFischerTropsch.pdf

Heat Pumps
Heat Pump Company: http://www.econar.com/ in Minnesota

Heating and cooling calculator from Center for the Energy and Environment
http://www.mncee.org/siteapps/hvaccalc/index.php

Heat Pump pricing from the authors based on bids for the authors house from two contractors.
http://www.sbgeothermal.com/
www.architectmechanical.com
Suburb to Suburb Bus Transport
Idea based on the Google Bus: http://www.nytimes.com/2007/03/10/technology/10google.html

Driving Solo: http://www.csmonitor.com/2007/0625/p02s01‐ussc.html

Bus Pricing Information from
http://www.apta.com/
Payscale pricing info
http://www.payscale.com/research/US/Job=Bus_Driver,_School/Hourly_Rate

Home Solar
Solar energy potential calculator from NREL
http://rredc.nrel.gov/solar/calculators/PVWATTS/version1/

Array pricing estimated using info from http://www.ips‐solar.com/ a local solar power company

Minnesota Electricity
http://web.mit.edu/mit_energy/resources/factsheets/MnElectricityFactSheet.pdf

Info about Minnesota’s solar program
http://www.state.mn.us/mn/externalDocs/Commerce/Minnesota_Solar_Primer_092104053212_Solar%20Primer.pdf

Ammonia from Wind
Information about wind to Ammonia
http://renewables.morris.umn.edu/wind/ammonia/
http://windnh3.blogspot.com/2009/08/ammonia‐from‐wind‐likely‐to‐happen‐in.html

Electric Cars
General information about Chevy Volt
www.gm‐volt.com

White Zombie information
http://www.plasmaboyracing.com/

100 year old electric car
http://www.popularmechanics.com/cars/jay‐leno/vintage/4215940

Carnegie Mellon study for optimal battery capacity
http://www.cmu.edu/me/ddl/publications/2009‐EP‐Shiau‐Samaras‐Hauffe‐Michalek‐PHEV‐Weight‐Charging.pdf

Nuclear Power
Costs of Nuclear Power
Market costs of Nuclear Power as reported in the Media
http://www.tampabay.com/news/business/energy/article997461.ece
http://www.newsobserver.com/business/story/993686.html
http://www.cleanairalliance.org/node/686

MIT Nuclear Power Report
http://web.mit.edu/nuclearpower/

Minnesota 2020 is a progressive, non-partisan think tank, focused on what really matters.
2324 University Avenue West, Suite 204, Saint Paul, MN 55114

www.mn2020.org

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Table of Contents

The Development of the Green Economy. . . . . . . . . . . . . . . . . . . . . . . . . 5

Policy Options Outline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Syngas and Green Gasoline From the Farm. . . . . . . . . . . . . . . . . . . . . . . 13

Heating Minnesota From the Ground Up With Heat Pumps. . . . . . . . . . . . . . 19

Suburb to Suburb Bus Transport. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Residential Rooftop Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Wind Power for Minnesota; Utilizing Stranded Wind . . . . . . . . . . . . . . . . . 41

From Economical Plug-in Hybrids to an Electric Car Industry . . . . . . . . . . . . 44

Nuclear Power for Minnesota. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Conclusion: A Call to Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Minnesota 2020 - www.mn2020.org 1

Minnesota needs to stay in the race. Minnesota is a highly

2 Jump Starting Minnesota’s Green Economy

Electric Cars in Minnesota: Minnesota is surprisingly well positioned to become a

Heat Pumps: Heat pumps are the most efficient way

Minnesota 2020 - www.mn2020.org 3

4 Jump Starting Minnesota’s Green Economy

Minnesota 2020 - www.mn2020.org 5

6 Jump Starting Minnesota’s Green Economy

Minnesota 2020 - www.mn2020.org 7

Green Economy Policy Objectives

• Businesses must verify or demonstrate a reduction of emissions. The verification requirement

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Direct Action: Mandates and Tax-code Incentives

State Participation: Market Development

Minnesota 2020 - www.mn2020.org 9

State Support: Education & Service

• Community colleges developing rapid training for new technologies

• DEED training, programs and centers directing job seekers

• Collaboration with NGOs that train and assist the unemployed

• Clear and fair regulations

• Assisting businesses to navigate laws, especially federal law

• Ensuring interdepartmental cooperation

10 Jump Starting Minnesota’s Green Economy

Minnesota 2020 - www.mn2020.org 11

Economic and Business Factors

◦◦ There should be no expectation of substantial changes in consumer behavior. Any

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Minnesota 2020 - www.mn2020.org 13

Technology and Industry

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Finances and Business Development

Minnesota 2020 - www.mn2020.org 15

Corn stalk is a strategic biomass resource for Minnesota. Other

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1) Is the fuel green?

2) Does it help the economy?

3) Is it commercially viable?

Minnesota 2020 - www.mn2020.org 17

The biomass-to-fuels revolution is already underway. Biomass is one of Minnesota’s great

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Technology and Industry

Minnesota 2020 - www.mn2020.org 19

The biggest challenge in designing useful heat pumps

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Business and Financials

Furnace/AC Heat Pump

Equipment $9,000 $10,000

Heat Pump Rebate ($7,800)

Utility Rebate ($2,500)

Other Fed Rebates ($1,500) ($1,500)

Total Outlay $7,500 $14,200

Jump Starting Minnesota's Green Economy

Jump Starting Minnesota's Green Economy