$115M Minnesota fund could help match federal grants for energy projects

Pending state legislation would create a $115 million taxpayer-backed fund aimed at matching federal grants for new energy infrastructure in Minnesota.

The State Competitiveness Fund would provide money to state, local and tribal governments — as well as to electric cooperatives and investor-owned utilities — for energy projects, including for renewable energy and bolstering the electric grid.

"This will be transformational in providing money for matching grants," Sen. Nick Frentz, DFL-North Mankato, said at a news conference Tuesday.

The competitiveness fund would be used to match billions of dollars in public money available through two federal laws passed under President Joe Biden: the Infrastructure Investment and Jobs Act of 2021 and the Inflation Reduction Act of 2022.

"Nothing like this exists yet in this state," said Anjali Bains, lead director of energy access and equity at Fresh Energy, a St. Paul clean energy advocacy group. But other states have already created such funds after the passage of the 2021 federal legislation.

"This is [Minnesota] playing catch-up," Bains said in an interview.

The state fund would be administered by the Minnesota Department of Commerce. If an applicant were to receive a federal grant that requires matching funds, it could request state competitiveness fund money to cover part of its costs.

If the project is for a "disadvantaged community" as defined by the federal government, the department could decide to cover the entire match.

"We have grounded this proposal in equity," Commerce Commissioner Grace Arnold said at the news conference.

The state and federal money would particularly flow to projects involving electricity infrastructure, renewable power, work force development and other energy-related needs, according to the Commerce Department.

For instance, about 50 Minnesota cooperatives — along with some municipal electric providers — are applying to the U.S. Department of Energy (DOE) for $208 million to fund several transmission, distribution and battery projects.

The co-ops would put up $208 million to match that federal money. Some co-ops would then likely ask for state money to help pay their share of federally funded projects, said Darrick Moe, head of the Minnesota Rural Electric Association, a trade group.

Bills that would create the competitiveness fund have passed Senate and House energy committees and are now before each chamber's finance committees. Both bills initially called for a $156 million fund, but the amount has been whittled down to fit Gov. Tim Walz's budget.

Frentz, a co-sponsor of the Senate bill, said he thinks the legislation will reach the House and Senate floors this month. The Senate bill has one Republican co-sponsor, while the House bill has none.