Xcel Energy Inc. is facing fresh pressure from clean-energy groups — and for the first time from a state agency — to curtail at least some coal burning at its giant Sherco generating station in Becker, Minn.
The plant on the banks of the Mississippi River is Xcel's largest power plant, with three generators constructed in the 1970s and 1980s. It also is the state's largest emitter of carbon dioxide linked to climate change, according to federal data.
The state Commerce Department, which analyzes Xcel's power plant needs on behalf of ratepayers, recently recommended the utility convert one of the two older Sherco units to burn natural gas in 2025. Clean-energy groups want state regulators to require Xcel, the state's largest power company, to retire both of the older Sherco units even earlier.
"The time for excuses is past," said J. Drake Hamilton, science policy director for Fresh Energy, a St. Paul nonprofit that for the first time conducted its own analysis of Xcel's costs and needs, relying on the same modeling software used by the utility. "These are very old, very dirty units, not just in regard to carbon but with regard to soot pollution that is damaging to human health."
In January, Xcel said it wanted to retain the 1970s-era Units 1-2 until 2030, run them less and invest in more renewable energy. Sherco Unit 3, which is newer, recently rebuilt after an accident and part owned by another utility, would keep operating.
Sherco is getting renewed attention because every two years investor-owned utilities like Xcel are required by state law to review whether to build or retire power plants and other infrastructure. The idea is to plan ahead for major capital spending and shutdowns to avoid disrupting electric service.
The state Public Utilities Commission likely will vote later this year or in 2016 on Xcel's latest long-range plan. If Sherco units are designated for retirement — an idea the PUC wanted Xcel to examine — it could set the stage for additional investment in other energy sources.
Hamilton said Fresh Energy's modeling found that Xcel customers would be better off — saving a modest $7.5 million — if one Sherco generator were shut down in 2021 and a second in 2024. It also would cut 11 million to 12 million tons of carbon dioxide emissions.
Fresh Energy and other environmental groups have called for more investment in wind and solar power and generators that burn natural gas, which releases half the carbon of coal burning. The groups call the strategy the Clean Energy Plan.
That's not to be confused with the Obama administration's Clean Power Plan, which would require utilities to reduce coal power plant carbon emissions by turning to renewable energy, efficiency programs and natural gas generation. The plan's final rules are expected to be released by the U.S. Environmental Protection Agency this summer, and their effect on Sherco's fate is not known.
The impending federal rules are an important consideration that Laura McCarten, a regional vice president for Xcel, says should be factored into state regulators' review.
"We really should wait to see what EPA comes out with," McCarten said.
She said Xcel also is studying what effect the retirement of Sherco Units 1 and 2 would have on electric reliability. The utility, which serves 1.2 million Minnesota electric customers, has until early September to formally reply to the Commerce Department and other interests that submitted comments in July.
Even if regulators don't order early retirement of the older Sherco units this year, the issue likely will arise again in the next two-year review.
Xcel also has support to hold off retiring the Sherco coal burners. Large industrial customers, worried that investments to replace coal plants could drive up rates, have urged regulators to be cautious, noting Xcel is projected to have surplus generating capacity until 2024.
"[T]here does not appear to be any need to put further upward pressure on rates with near-term additional capital expenditures or by making decisions to retire resources that would require significant capital expenditures to replace," said Sarah Johnson Phillips, an attorney for four large industrial power users, in a recent regulatory filing.
In Becker, Minn., a city of about 4,800 people, city officials fear cutbacks at Sherco will hurt city residents and municipal finances. Taxes paid by the power plant account for at least three fourths of the city's $6 million annual budget, Council Member Rick Hendrickson said.
"As to who it would affect, we are definitely ground zero," he said.
If one or more existing unit was replaced with natural gas, it still could result in lost jobs as coal-handling positions disappeared. The plant employs 275 workers.
"They get paid union, career wages," Hendrickson said. "They all buy houses either in Becker or close to it."