As many U.S. power companies fight the federal Clean Power Plan, Xcel Energy took a different path Friday, declaring the utility’s Minnesota operations are “nearly certain” to comply with the plan’s greenhouse gas reductions through cost-effective investments over the next decade.
The strategy, which Xcel first laid out last year and firmed up in a regulatory filing late Friday, calls for $6 billion in wind and solar energy investment, retirement of two Minnesota coal-burning units, construction of a nearly $1 billion natural gas-fired generator and further investment to retain the carbon-free energy from its two nuclear power plants.
“We think it is a good business plan, period,” said Laura McCarten, a regional vice president for the Minneapolis-based utility, as it submitted details to the state Public Utilities Commission.
McCarten said Xcel’s analysis of the strategy, which speeds up wind and solar investment in this decade, shows it to be a cost-effective way to reduce greenhouse gas emissions by 60 percent by 2030 — likely beyond Minnesota’s requirements under the Clean Power Plan.
Xcel also responded to concerns by state regulators about the ballooning cost of preserving its two nuclear power plants in Minnesota. The utility defended the projected investment of $1.2 billion or more over 15 years as cost-effective but said it is open to discussing early retirement of the Prairie Island nuclear plant in Red Wing, Minn.
The utility’s positive outlook on the U.S. Environmental Protection Agency’s Clean Power Plan comes two days after 61 utilities, including three Upper Midwest power cooperatives, petitioned the U.S. Supreme Court to block the plan after failing to win a stay in a federal appeals court.
The federal plan, announced in August, aims to reduce power-sector carbon emissions in 2030 by 32 percent from 2005 levels, a goal that could doom many coal power plants. States can draft their own compliance plans and have until late 2018 to finish.
Xcel isn’t the first utility to say it can comply. Some in the Northeast that participate in a carbon cap-and-trade program also have declared they will meet carbon-reduction targets, said Jeff Deyette, a Boston-based energy analyst for the nonprofit Union of Concerned Scientists.
“What’s unique about this is you have got a major utility in a coal-intensive region … making decisions demonstrating that utilities can in fact cost-effectively invest in these technologies and transition themselves to a much lower carbon profile in a fairly quick fashion,” Deyette said. “Xcel should be touted for that.”
Jim Rubin, an energy and environmental attorney at Dorsey & Whitney law firm in Washington, said utilities — even those fighting in court — are all looking at how they might comply, but “Xcel certainly is in the forefront in this particular area.”
Xcel projects investing $3 billion in wind energy and $3 billion in solar in its Minnesota region by 2030. The wind power additions would be the equivalent of nine of Xcel’s largest existing wind farms, with four projects built by 2020. Much of that investment would benefit from a recent five-year extension by Congress of renewable energy tax credits.
The federal subsidy brings down the cost of wind and solar by 30 percent. Xcel has said new wind power, with the subsidy, costs less over time than buying fuel to burn in existing power plants. That’s one reason Xcel estimates the entire plan’s effect on Minnesota electric rates would be moderate — about 2.4 percent annually through 2030. Recent rate hikes have been higher.
In its regulatory filing, Xcel reiterated plans to retire in the 2020s two, large coal-burning units at its Sherco power plant in Becker, Minn., and build a large natural gas-burning power plant there. That will mean a loss of jobs in the city 45 miles northwest of Minneapolis because not as many workers are needed at natural gas plants. But Xcel said the cutbacks will happen through retirements and transfers over several years. One coal unit would remain operating at Sherco.
“We have done this transition with coal plants before,” said Greg Chamberlain, Xcel manager of energy supply, referring to coal power plant conversions in the St. Paul, Minneapolis and Burnsville. “ … We have not had layoffs.”
Xcel told regulators that it remains committed to upgrading its 1970s-era Prairie Island nuclear power plant, allowing it operate into the 2030s. Xcel already has made costly upgrades to both its nuclear plants. The other one is in Monticello, Minn.
The next phase of upgrades, including replacement of Prairie Island’s cooling towers, security-related work and major pumps, is expected to cost $569 million, up $175 million from earlier estimates. Future upgrades at Prairie Island, in the 2020s, are expected to cost $600 million to $900 million, Xcel said.
Xcel said “it is impossible to perfectly forecast costs for the remaining 19 years of the plant’s licensed life” and conceded that pressures might arise to retire Prairie Island earlier to save money.
The utility said its analysis shows “near-term retirement would be significantly more costly than one in the mid-2020s or beyond.” But Xcel said it is willing to do further analysis if regulators want to consider early retirement of the twin-reactor plant.