Xcel Scrapping Plan to Build New 800-MW Gas-Fired Plant

Xcel Energy is pivoting from its plan to build a new 800-MW natural gas-fired power plant at the site of its Sherco coal-fired facility in Becker, Minnesota. Instead, Xcel plans to build two smaller gas-fired “peaker” plants, one in Minnesota and one in North Dakota, as part of a new initiative for the utility’s power generation in the Midwest.

Xcel also proposed two repowered gas-fired plants—one in the Minneapolis-St. Paul area, and another in Wisconsin—that also would run only during periods of high demand for electricity. The utility, based in Minneapolis and with operations in eight states, outlined its proposal in a plan submitted to the Minnesota Public Utilities Commission (PUC) on June 25.

Xcel’s still plans to close its Minnesota coal-fired power plants, include Sherco’s three units that have more than 2,200 MW of generation capacity, by 2030. Sherco—short for Sherburne County Generating Station—began operating in the 1970s. Xcel in the plan released Friday reiterated that it plans to keep its single-reactor nuclear plant in Monticello, Minnesota, operating until at least 2040, which is a decade beyond its current operating license. Xcel also said it would add more solar and wind power generation capacity in the region, along with energy storage for renewable energy, in the next several years.

Cost Savings, Emissions Reductions

Xcel said the latest plan would save the utility about $600 million compared to the earlier proposal. The utility said the new effort would reduce carbon emissions 85% by 2030 from 2005 levels, compared to 80% in its previous plan. The utility has said it wants to produce carbon-free electricity by 2050.

Investor-owned utilities in Minnesota are required by law to submit plans every two years to the PUC that outline how they aim to meet their energy demands for the next 15 years. Xcel filed its first IRP, which included construction of the new Sherco gas-fired plant, in 2019.

Xcel in announcing its latest plan said it acknowledged opposition to the new Sherco facility. The utility received thousands of comments related to its original resource plan that included the new facility, with much of the commentary related to why the utility would build a new, large fossil fuel power plant at the same time it set a carbon-free goal.

Public Opposition

Chris Clark, president of Xcel in Minnesota and the Dakotas, told Minnesota Public Radio, “We really did take seriously the comments that were filed. And we also believe we needed to step back and be able to answer for the commission whether there was an alternative to the [Becker] combined-cycle plant that would still preserve affordability and reliability.”

Bria Shea, director regulatory strategy for Xcel, said the four smaller gas-fired peaker plants would probably only operate about 5% of the time, usually when needed to back up renewable power generation, or in the event of a power emergency.

Xcel had received special authority in 2017 from Minnesota lawmakers to build the new plant at the Sherco site, forgoing the usual approval procedure from state regulators. The plant did have support within Sherburne County, particularly from those concerned about the economic impact of the coal plant’s closure. Clark said Xcel will work to support economic development in the region, and also plans to build a large solar power facility in the area. Xcel earlier had said it wanted to add about 500 MW of new solar power generation near the Sherco plant.

“I think that’s part of the dialogue that we want to have, is what are the things that we can do to continue to support the city of Becker, Sherburne County … that have been such a great host to the Sherco facility,” Clark told MPR.

The state PUC could still back Xcel’s initial plan, though Clark said the utility wants the PUC to support the new proposal. Shea said the PUC could ask for more public comment before issuing a decision later this year.

Environmental Groups Praise Move

The Minnesota Center for Environmental Advocacy, along with other environmental groups, issued a statement Friday saying the new Xcel plan reflects “a welcome and necessary realignment with the utility company’s promise to achieve a carbon-free electric system by 2050.” The statement continued: “We appreciate Xcel’s willingness to respond to Minnesota and the nation’s imperative to get to 100 percent clean energy sooner, while minimizing fossil fuels.”

“We applaud Xcel Energy putting forward an innovative solution that utilizes significant amounts of new wind, solar and transmission rather than a very large and risky new fossil gas plant,” said Allen Gleckner, lead director, Clean Electricity at Fresh Energy, another environmental group. “Creatively leveraging existing grid connections along with some of the Upper Midwest’s best wind and solar resources is a responsible way to both help Minnesota meet its climate goals and keep costs down for customers.”

The groups, though, said they will continue to look at the details of the plan. “While the new proposal is undoubtedly a significant improvement from Xcel’s earlier IRP, our CEOs look forward to taking a closer look at the plan and digging into the data and details in the coming weeks,” the statement read. “We want to see if data and modeling shows that other components of the proposal—such as the construction of two smaller peaker power plants that will run only occasionally—are truly necessary or whether alternative, carbon-free solutions are available.”

Xcel in 2020 received approval from the state PUC to run two of the three coal-fired units at the Sherco site on a seasonal basis, allowing the utility to idle the units for six months of the year to achieve cost savings and emissions reductions. Xcel had earlier conducted a seasonal dispatch analysis and found that seasonal operation would save customers nearly $1.5 million in 2020, and nearly $3.5 million by 2023. The utility has said Unit 1 at Sherco would be retired in 2026, with Unit 2 going offline in 2023, and Unit 3 shutting down in 2030.

—Darrell Proctor is a senior associate editor for POWER (@POWERmagazine).