Southern Minnesota power generator commits to being 80% carbon-free by 2030

Southern Minnesota Municipal Power Agency plans to replace its main source of electricity generation — coal — with renewable power, moving to 80% carbon-free energy by 2030.

The plan laid out Wednesday by the nonprofit power provider is linked to the proposed early closure of the big Sherco 3 power plant in Becker, Minn. Rochester-based Southern Minnesota Municipal Power Agency (SMMPA) owns 41% of the coal-fired plant, while Xcel Energy owns the rest.

Minneapolis-based Xcel announced in May it plans to close Sherco 3 in 2030 — a decade ahead of schedule — and also exit coal-fired generation completely in that year. Xcel had already announced that its wholly owned Sherco 1 and Sherco 2 generators will close early in the mid-2020s.

"We have a unique opportunity to re-imagine [SMMPA] and are excited to take the agency in a new direction," Dave Geschwind, the organization's chief executive, said in a news statement.

Sherco 3 is by far the largest power source for SMMPA, which provides electricity to 18 Minnesota municipalities, including Rochester, Owatonna, Austin and Fairmont. The agency said it expects that its remaining debt on Sherco 3 will be paid off by 2027.

SMMPA currently draws up to 360 megawatts of electricity from Sherco 3. It also operates two gas-fired plants, one each in Owatonna and Fairmont that together have 64 megawatts of generation capacity. The agency also buys more than 200 megawatts of wind energy from regional sources.

By the time Sherco 3 goes offline in 2030, SMMPA will need significantly less power. The agency's contracts with Rochester and Austin — respectively its largest and third-largest customers — will expire in 2030, said Chris Schoenherr, head of external affairs for Southern Minnesota Municipal.

Even with those departures, SMMPA will need more generation capacity when Sherco 3 closes. "Really tentatively," the agency plans to add 190 megawatts of new solar energy, likely through power-purchase agreements with solar farms, Schoenherr said.

Also, the agency "may need to use some natural gas" in addition to what it already has, Schoenherr said. That could mean building a small natural gas plant akin to its current 25-megawatt Fairmont generator. It could also entail buying generation capacity in the wholesale power market, he said.

Gas and coal-fired power plants can provide electricity constantly, while wind and solar energy are variable.

J. Drake Hamilton, science policy director at St. Paul-based Fresh Energy, called SMMPA's plan a "really good commitment" to renewable energy. "This is very important because it is evidence of a company moving from coal and replacing it with wind and solar."

Fresh Energy is a renewable-power research and advocacy group.