What Xcel’s Western Coal Fleet Can Learn From its Northern One

, Senior Energy Analyst | March 17, 2021, 10:47 am EDT
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Xcel Energy made a huge splash when, in 2018, it announced that it would be charting a path to 100 percent carbon-free electricity. But they didn’t necessarily win over everyone, including us at UCS. That’s because we know that goals (ambitious or otherwise) have to be judged by actions. The evidence so far is that Xcel isn’t as committed to its climate goals as it would like you (and the media) to think.

Sure, Xcel is making some progress in its “Northern States” territory (which includes Minnesota and some surrounding states) by setting near-term retirement dates for coal plants and committing to running them less until they’re closed. But out West (in Colorado and surrounding states), Xcel’s actions tell another story.

Xcel Energy service territory (in red) encompasses parts of eight states.

In fact, a couple of news stories from the past month illustrate the stark contrast of these two different service territories.

A “state of the art” coal plant fails and reveals it isn’t exactly economic.

In Colorado, Xcel still owns some coal plants that it plans on running well past 2030, with the company’s newest (and most ‘state of the art’) coal plant slated to run until 2050. Xcel says it will rely on that newest plant less use after 2040.

Turns out, it has to start relying on it a lot less right now.

Why?

Because the coal plant keeps breaking down.

Xcel projected that this state-of-the-art plant would run at a 91 percent capacity factor. In reality, on an annual basis, its capacity factor has never exceeded 73 percent and only ran at a 2 percent capacity factor in 2020. Over the past ten years, it averaged less than 60 percent.

One of the reasons for this is that the state-of-the-art plant has been plagued by breakdowns and malfunctions. When it breaks down, the parts are a challenge to replace because they are outdated technologies.

This makes all the times the company refers to it as a state-of-the-art plant a bit ironic.

The situation became so problematic that the Colorado Public Utility Commission hired an independent auditor to investigate. The report is now public, and tucked away in the report is the following observation and conclusion:

“During September, [November,] and December of 2020, having Comanche  3 offline actually saved customers money, suggesting that cycling Comanche 3 for month- or season-specific operation is worth further investigation.”

“Season-specific operations” is interesting because that is how Xcel now operates its Minnesota plants.

Midwestern juxtaposition

In Minnesota, Xcel Energy has already switched coal plants over to seasonal operations. Just this year, it finalized its decision to only operate the third unit at the Sherco coal plant when it is economic to do so and operate the other two units only in the summer. (Aside: promising to only operate a coal plant when it is economic should really be the lowest possible standard to hold companies to, shouldn’t it?)

This is the most recent step in a long process to get Xcel’s Northern States operations to be less reliant on coal. The steps, according to Xcel’s projections when it proposed the switch, would save customers upwards of $30 million a year and about 5 million metric tons of CO2  annually for the remainder of the plants’ operations.

The move was lauded by regulators, consumer advocates, environmental advocates, and the media. So much so, that the company’s CEO said that they’d be considering it for all their coal plants, including those in the Western States territory.

Wait…

A year later, an independent audit shows that over the fall and early winter seasons, market purchases would be cheaper than burning coal at the plant.

So why hasn’t the company already committed to seasonal operations?

The Colorado Commission can catch up

When Xcel did eventually decide to stop operating its remaining Minnesota coal plants for the bulk of the year, it was due to the fact that it was pushed by advocates like UCS, Fresh Energy, and Sierra Club. It was also prodded by a local news outlet. And, Xcel; was asked some hard questions by the regulators who were proactive in investigating the utility’s operations.

If folks in Colorado want Xcel to reduce customer bills while also reducing its pollution, then someone is going to have to make them do it.

And that is where the PUC can come in.

The independent audit makes it clear that operating Comanche 3 seasonally makes financial sense. The PUC needs to open an investigatory docket into this issue, the way Minnesota did. It should press Colorado’s utilities for answers as to why they operate polluting coal plants during months when it would be cheaper to buy electricity from other sources.

UCS has helped commissions set up these types of investigations in other states, and we’d be happy to help out Colorado, or any commission in any state, on how to best initiate a proceeding that will ultimately lead to reduced emissions and consumer savings.

Will von Dauster, NOAA
Xcel

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