Xcel Energy has signed 20-year deals with two new wind farms. But there's worry that prevailing winds in Washington won't help.
Two more start-up Minnesota wind farms will help Xcel Energy meet a state requirement that it get 25 percent of its retail electricity sales from wind by 2020.
The new southern Minnesota wind farms are part of a flurry of wind farm construction around the country that's being driven by industry fears that the federal Production Tax Credit will not be extended by Congress when it expires at the end of 2012.
On Friday, Xcel signed a 20-year electricity production contract with a planned 200-megawatt wind farm near Luverne, Minn. It earlier signed a 20-year contract with a controversial 78-megawatt Goodhue County wind farm that the Minnesota Public Utilities Commission approved Thursday. Terms of the contracts weren't disclosed.
Jim Alders, Xcel's director of regulatory administration in Minneapolis, said his firm wanted to lock in another 200 megawatts of power from the Luverne wind farm before the Production Tax Credit runs out next year. If the credit isn't extended, reduced federal support is expected to push wind-generated electricity prices "substantially higher," he said.
"In a political climate with great concern about deficit spending, there is increased concern that the Production Tax Credit may not survive in its existing form," Alders said.
In addition, the Prairie Rose Wind Farm near Luverne is to be completed before the end of 2012 in order to stay within the life of the current tax credit law, said Blake Nixon, president of the Edina-based Geronimo Wind Energy that is running the project. The facility is expected to cost about $350 million.
"Historically there's been a boom-and-bust cycle for wind farms based on tax-credit financing," Nixon said. "So the timing of our construction is being significantly driven by the potential expiration of the tax credit."
The $179 million Goodhue County project has been controversial since neighbors complained about having wind generators built so close to their properties. The PUC approved the project, to be located near the city of Goodhue, Minn., but ordered that wind turbines be kept nearly a third of a mile from neighboring properties.
Alders said the location of the wind generators was a local issue that did not affect Xcel's contract for the facility's electricity.
Asked how Xcel can contract for electricity 20 years out when no one knows what electricity prices would be then, Alders said wind farms typically negotiate electricity prices that cover their own projected operating costs rather than anticipated future market prices for power.
Under state regulations, a total of 30 percent of Xcel's retail electricity sales must come from renewable fuels by 2020, Alders said. In addition to the 25 percent that will come from wind, the qualified renewable energy sources Xcel can use for the other 5 percent include biomass, solar and small-scale hydro power.
Today, Xcel gets 13 percent of its electricity from renewable fuels, and expects to hit 17 percent by the end of next year, Alders said. That doesn't include the Prairie Rose wind facility that "will bring us a few percentage points more. Under current conditions, we'll hit 30 percent by 2020."
Steve Alexander • 612-673-4553