Minnesota utility regulators Thursday approved CenterPoint Energy's ambitious $106 million plan for a host of clean energy pilot projects, including renewable natural gas and geothermal heating.

CenterPoint says the five-year program will cost its average residential ratepayer about $1.50 a month.

The Minnesota Legislature in 2021 passed the Natural Gas Innovation Act, a bipartisan law aimed at fostering gas utility investments in new technologies that cut carbon emissions. CenterPoint, Minnesota's largest gas provider with more than 920,000 customers, submitted a proposal under the new law in 2023 and Thursday it was accepted by the Minnesota Public Utilities Commission (PUC).

"Decarbonizing the natural gas sector is going to be harder than decarbonizing the electric sector," said PUC Commissioner Joe Sullivan. "It is really important to do this work."

While electricity can be made from renewable sources such as wind and solar, gas for heating and cooking is primarily composed of methane, a potent greenhouse gas. CenterPoint says its plan should eliminate about 14% of its Minnesota greenhouse gas emissions (as tabulated in 2020).

The largest of CenterPoint's 17 pilot projects calls for $40 million in purchases of renewable natural gas (RNG), which is made from organic detritus, particularly food waste and landfills. The RNG would be injected into CenterPoint's system.

CenterPoint would prioritize RNG produced in Minnesota, but it will also be able to buy it from outstate suppliers.

The PUC approved a separate $6.5 million proposal for CenterPoint to buy RNG specifically from an anaerobic digestion plant planned for Scott County. The plant would utilize food waste from the Twin Cities.

After RNG purchases, CenterPoint's next largest proposal — costing $13.6 million — is retrofitting residences for electric heat pumps with gas backups. CenterPoint's heat pump pilot is expected to include 204 single-family homes and 34 multifamily buildings.

Other spending plans include $11.6 million on a "networked" geothermal heating system so homes would be equipped with geothermal heat pumps, which would all draw on a shared geothermal source as opposed to individual wells; $7.1 million on a pilot program aimed at commercial customers who want to replace their gas-fired HVAC systems with hybrids that use electric heat pumps with gas backups; and $10.6 million on gas research and development.

"It's part of our efforts to advance Minnesota's clean energy future," Joshua Solis, a CenterPoint spokesman, said of the company's overall plan. "We are excited about the promise it shows."

Ratepayer advocacy and clean energy groups had mixed reactions to the plan as approved by the PUC.

The Citizens Utility Board of Minnesota (CUB) generally supported CenterPoint's plan, but with several modifications, said Brian Edstrom, the group's senior regulatory advocate.

"We intended to create guardrails to ensure that ratepayers funds are spent appropriately. The pilots have to be cost-effective. We are a little disappointed the [PUC] didn't approve more guardrails recommended by the CUB and others like the clean energy groups and the [Minnesota] Attorney General's Office."

Caitlin Eichten, senior policy associate at Fresh Energy, also said she was disappointed the PUC didn't adopt modifications proposed by her organization and two other clean power groups, the Sierra Club and the Minnesota Center for Environmental Advocacy.

For instance, clean power groups unsuccessfully petitioned the PUC to allow RNG acquisition only through direct gas purchases — not through buying credits. CenterPoint can purchase credits from out-of-state RNG producers, but they would not eliminate carbon emissions in Minnesota, Eichten said.

"We feel the (gas) industry kind of won out over the public interest today," she said.

The Minnesota Department of Commerce, tasked with looking out for ratepayers before the PUC, had opposed much of CenterPoint's proposal, recommending a plan that would have involved only $18 million to $22 million in spending, according to the PUC. The state's Attorney General's Office, another ratepayer advocate, had recommended a roughly $80 million plan.

The Attorney General's Office, the Commerce Department, CUB and the clean energy groups uniformly opposed CenterPoint's planned — and PUC approved — $4.6 million hydrogen plant in Mankato. The pilot plant would use electricity to produce hydrogen, which would be blended into CenterPoint's gas system.

Hydrogen doesn't emit greenhouse gases, but opponents said the project would produce underwhelming environmental benefits. The Commerce Department recommended the PUC nix the project due to the "poor performance" of CenterPoint's existing $2 million hydrogen pilot in Minneapolis.

CenterPoint rejected Commerce's assessment, and noted that the new Mankato hydrogen plant would be powered partly by dedicated solar panels.