Minnesota Approves Xcel Energy Plan: More Renewables, Less Coal, Hold on Natural Gas

, senior energy analyst | October 20, 2016, 11:23 am EDT
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In a decision that will further strengthen Minnesota’s leadership position in the clean energy transition, the Minnesota Public Utilities Commission (PUC) approved Xcel Energy’s 15-year resource plan that will retire nearly 1,400 megawatts (MW) of coal capacity and move the state’s largest utility towards 40 percent renewable energy by 2030.

The commission also declined to officially approve the utility’s proposed 780 megawatts (MW) of new natural gas capacity to help replace the retiring coal units—leaving the door open for the utility to continue making its case in future proceedings.

Aggressively pursuing a clean energy future for Minnesota

Investments in renewable energy facilities, like this wind farm in southern Minnesota, is a direct result of Minnesota's ongoing efforts to build a cleaner, more sustainable, and lower-risk energy future for its ratepayers.

Investments in renewable energy facilities, like this wind farm in southern Minnesota, is a direct result of Minnesota’s ongoing efforts to build a cleaner, more sustainable, and lower-risk energy future for its ratepayers. Photo: @Michael/CC BY (Flicker)

The unanimous PUC decision, a culmination of more than a year of deliberations, sets the stage for Minnesota’s continued transition to a cleaner, safer, and lower-carbon electricity sector. Its key components include:

  • Authorizing the closure of two units, totaling 1,362 MW, at the Sherburne County (“Sherco”) coal-fired power plant, the state’s largest single emitter of carbon dioxide. The closures will occur in 2023 and 2026.
  • Approving the development of 1,000 MW of new wind capacity by 2019 and 650 MW of new solar by 2021, and potentially another 800 MW of wind and 750 MW of solar by 2030.
  • Directing Xcel Energy to achieve at least 400 MW of demand response in the near term and examine the feasibility of achieving 1,000 MW of demand response in outer years. (Demand response typically entails developing programs and promoting technologies that reduce energy demand at peak times, therefore avoiding the need to build new power plants.)

These moves are expected to make renewable energy as much as 40 percent of the energy portfolio and cut carbon pollution by 60 percent across Xcel’s Minnesota system by 2030 (compared to 2005). The fact that this can be accomplished as part of Xcel’s least-cost plan speaks volumes about clean energy’s current cost-effectiveness and potential to continue growing its share of meeting future energy demand.

By approving Xcel’s plan, Minnesota will be able to take advantage of federal tax credits for wind and solar over the next five years, while lowering costs to their customers. And as we look out into the future, Xcel’s customers will benefit from technological advancements and continued price reductions that will further improve renewable energy’s cost-competitiveness with electricity from fossil fuel.

These factors, combined with growing political and public demand to lower carbon emissions and address the growing threat of climate change, are making renewables and efficiency the most attractive options for utility investments.

Recognizing the risks of an overreliance on natural gas

Another big piece of Xcel’s proposed resource plan did not get the go-ahead last week when the commission deferred approval of Xcel’s proposal to build a 780 MW natural gas plant at the Sherco power plant site.

The PUC did not rule out approving the project, but left the final decision to future proceedings where Xcel will bear the burden of proving that the proposed natural gas facility is the best option for its ratepayers.

energy-minigraphic-natural-gas-price-volatility-vs-renewable-energy

Protecting against future volatility of natural gas prices is one of the key benefits to ratepayers of diversifying with renewable energy.

The PUC’s thoughtfulness in this regard will serve Minnesota well. The many risks associated with an overreliance on natural gas are typically borne by ratepayers, meaning utilities and states should think hard about making large investments in this resource going forward.

Volatile fuel prices, market shifts—such as expanded international export or increases in demand from industry or transportation sectors—or potential costly investments in pipelines and other infrastructure could significantly reduce the cost-competitiveness of natural gas as an electricity resource. So giving final approval for a large, long-term investment such as Xcel’s proposed 780 MW natural gas plant warrants further consideration as we see how things play out in coming years.

In all, last week’s decision by the Minnesota PUC marks another big step forward in the state’s transition to a cleaner, more affordable, and lower-risk electricity sector that will serve ratepayers well for decades to come.

As we continue to see renewables and efficiency rise to the top of utility options for meeting energy demand, other Midwestern states should follow suit and join the march towards a truly clean energy future.

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  • solodoctor

    Great news for Minnesotans! I hope other states, especially Calif where I live, will do similarly in the next few years.