Xcel Energy ranks third among mid-America utilities that have sold expensive coal-fired power into the electric grid when cheaper renewable and natural gas power was available, costing ratepayers millions of dollars, according to a new study.
Xcel, Minnesota’s largest electric utility with 1.1 million customers, disputed the study’s findings.
The study by the Union of Concerned Scientists (UCS), which used 2018 data, notes steps taken by Xcel earlier this year to run two of its four Minnesota coal plants on a part-time basis, saving money for ratepayers and reducing carbon emissions.
The study released this week looks at the issue of “must-run” status for coal-fired power plants. Such plants get dispatched to provide electricity in wholesale electricity markets, sometimes when wind and gas-fired power are cheaper.
“The value of the study is that we quantify the costs to consumers,” said Joe Daniel, senior energy analyst at UCS and co-author of the report.
In wholesale power markets, electricity is generally dispatched based on variable costs. Wind is free fuel, and the number of wind farms has mushroomed over the past decade, boosted by federal tax credits and falling equipment costs.
At the same time, natural-gas-fired plants have increasingly displaced coal power, too. They are cheaper to operate, and natural gas emits half the carbon dioxide that coal does.
Regional grid operators often allow coal plants to “self-commit” to wholesale markets and run continuously. This must-run practice leads to the unneeded dispatch of costlier power that is passed down to consumers through fuel clause charges on their bills, the UCS study said.
Uneconomical must-run coal plants cost customers $350 million in 2018 across the Midcontinent Independent System Operator (MISO), a nonprofit that runs the electric grid in parts or all of 13 mid-America states, including Minnesota, the report said.
That works out to a cost of about $60 for the average customer in MISO in 2018 and $54 in Minnesota alone (including all coal-fired power in Minnesota, not just from Xcel), the study said.
Xcel’s uneconomic operation of coal generators in Becker and Oak Park Heights led to a $56.9 million loss in 2018, according to UCS report. Cleco Power, which operates in Louisiana, was the worst with a $123.3 million loss; DTE in Michigan was second at $94.7 million.
Xcel disagreed with the UCS numbers. “We feel those estimates are not accurate and we’ve operated our plants to benefit our customers,” the company said in a statement.
Daniel said that UCS found that 18 to 19% of must-run coal generation in MISO was dispatched uneconomically in 2018.
MISO, in a study released in April, found that 12% of self-committed coal on its grid was dispatched uneconomically in 2019. Must-run coal power is declining, and utilities have “valid reasons” to keep their coal plants running at all times.
Those include avoiding the costs and wear and tear of turning coal generators on and off; contractual obligations; and meeting needs for electricity reliability.
The Minnesota Public Utilities Commission (PUC) last year launched an inquiry into the economic efficiency of self-committing coal plants.
Soon after, Xcel proposed to suspend normal operations at two of its four Minnesota coal generators during the spring and fall shoulder seasons, when demand is lowest. The two coal generators would be started, however, if they are needed for reliability — a power demand surge — in the regional grid.
The PUC approved Xcel’s plan last week. “That is a great example of what [regulators] and utilities can do to solve this,” said UCS’ Daniel.
Xcel plans to close all four of its Minnesota coal generators between 2023 and 2030.