Utility regulators authorize Xcel generating projects

Minnesota utility regulators on Monday authorized more than $500 million in new electrical generating units for Xcel Energy, including the state's largest solar power project.

"It was a big day for solar power," said Nathan Franzen, director of solar power for Geronimo Energy, the Edina-based renewable energy company planning to build the $250 million Aurora solar project by 2017 with panels sited at up to 20 locations across Xcel's service area.

The solar project competed successfully against three other proposed generators fueled by natural gas. In a groundbreaking ruling last December, an administrative judge concluded solar was a better deal.

But the state Public Utilities Commission, concerned about projected future retirements of Midwest coal-fired power plants, on Monday also authorized building two large natural gas-fueled generation units for Xcel's 1.2 million Minnesota electric customers.

One project, proposed by Xcel, would be built at the utility's Black Dog power plant in Burnsville, where two remaining coal-burning units will be retired in 2015. The 210-million-watt turbine will be the second gas-fired generator there. The first was installed in 2002 when two other coal units were repowered.

Calpine Corp., a Houston-based independent power generating company with the nation's largest fleet of natural gas-fired plants, also was a winner in the competition. It was picked to build a 345-million-watt power generator next to its existing gas-generating unit in Mankato.

That project will be the largest combined-cycle natural gas power generator in the state. Combined-cycle plants marry gas turbines, which are similar to jet engines, and traditional steam turbines to extract the most energy from natural gas.

Both of the new natural gas plants would be completed later in the decade, possibly 2018 or 2019. Regulators rejected a third natural gas project, proposed in Cannon Falls by Chicago-based Invenergy.

When the utility commission launched the first-ever power bidding war under a state energy law, Minneapolis-based Xcel projected a need for 450 million watts of additional generating capacity. As the nearly two-year bidding process wore on, Xcel scaled back that estimate, citing less electrical demand growth and other factors. It recently suggested delaying the projects altogether.

But utility regulators expressed concern about potential retirements of coal power plants across the Midwest as utilities shift from that fuel to lower-carbon natural gas and renewable sources. Commissioners also said the bidding had produced competitive prices, even though they are secret for now. The Star Tribune has requested that the prices be disclosed under the state Data Practices Act.

"It is about the ratepayers and reliability of the system," said Commissioner Dan Lipschultz.

John Flumerfelt, Calpine's director of government and regulatory affairs, said the Mankato project will employ 200 to 300 construction workers and take two years to complete. He said the project shares some equipment, including a steam turbine, with its sister plant completed in 2002-2003.

The Aurora Solar Project would be built near scattered Xcel substations to reduce transmission line expense. The sites range from Pipestone in southwest Minnesota, to Albany in the central part of the state, to Hastings and Zumbrota.

It is part of a wave of planned solar projects. In October, Xcel said it has tentative deals with other developers to build three more large projects near Marshall, North Branch and Tracy. The utility also opened the door last week for energy developers to begin offering community solar gardens to Xcel customers who want solar power, but can't or don't want solar panels on their properties.

Betsy Engelking, vice president for Geronimo, said the Aurora sites still require state permits, a process expected to take until next June. The project must be completed by 2017 to qualify for a 30 percent federal tax credit. It is expected to employ 450 people at its peak, she said.

Aurora Solar also faces review in North Dakota where Xcel operates. In North Dakota, a land of coal, oil and natural gas extraction, state law doesn't allow accounting for carbon reduction in electricity pricing, as is routinely done in Minnesota, including with the Aurora project.

Chris Clark, who takes over as Xcel's regional CEO in January, said the utility will present the benefits of the Aurora project to North Dakota officials in the hope of winning approval. If that fails, Minnesota regulators face a future decision on whether to accept the project anyway. Only about 5 percent of the energy from Aurora is destined for North Dakota.