Xcel’s Plan to Cut Carbon 60 percent is Affordable and Will Benefit Minnesota’s Economy

October 9, 2015 | 1:13 pm
Steve Clemmer
Director of Energy Research & Analysis

Growing up in Minnesota, I have very fond memories of going fishing with my Dad in the land of 10,000 lakes.  Whether it was slaying crappies on Lake Minnetonka or catching walleyes on our summer trips to Bemidji, I’ll never forget the times we had enjoying Minnesota’s great outdoors.

Big Turtle Lake in Bemidji MN where my Dad and I used to fish for walleyes.

After moving to Massachusetts in 1997 to start working at the Union of Concerned Scientists (UCS), my Dad would often send me articles about all the good things Minnesota was doing to advance clean energy to grow the state’s economy and protect the environment.

Fortunately, my job at UCS has given me the opportunity to come back to my home state many times over the past 18 years to help advance the clean energy policies that have made Minnesota a national leader.  Xcel Energy’s announcement October 2 proposing to cut its carbon emissions 60 percent below 2005 levels by 2030—by retiring two units at the state’s largest coal plant (Sherco) in 2023 and 2026 and replacing them with more wind, solar, energy efficiency, and natural gas—continues this legacy.

Xcel’s plan is affordable

In contrast, Xcel’s original plan filed in January would have reduced emissions 40 percent below 2005 levels by 2030.  Xcel’s new plan, described in comments filed with the Minnesota Public Utilities Commission (PUC), aligns with other parties’ comments that much more carbon emission reduction was possible now at low cost.

Xcel’s initial rough estimate is that the revised proposal would likely raise electricity rates by a modest 2-3 percent. They go on to say that including a relatively low value for reducing carbon emission at $21.50 per ton of CO2 (after 2019) would result in rate impacts near the low end of the range.

An alternative “Clean Energy Plan” developed by several state Clean Energy Organizations (Izaak Walton League of America, Sierra Club, Fresh Energy, Wind on the Wires, and the Minnesota Center for Environmental Advocacy) – using the same computer model as Xcel but with more realistic assumptions – found that similar emissions cuts as Xcel’s revised plan could be achieved at the same cost as Xcel’s original, higher carbon, plan.

They also assumed Xcel could achieve slightly higher levels of cost-effective energy efficiency savings that are still below the levels being achieved in other leading states. Xcel’s new plan agreed and committed the company to meet the state requirement of 1.5 percent per year energy savings.  This will help lower customer electricity bills.

Xcel’s plan prioritizes renewables

Xcel’s revised proposal would accelerate investments in renewable energy by adding 800 MW of wind power and 400 MW of solar power before 2020, and a total 1,800 MW of wind and 1,700 MW of solar by 2030.  According to Xcel, they are doing this to take advantage of lower costs and replace coal:

Advancing renewables benefits our customers in that we can capitalize on favorable market pricing and anticipated tax credits. The acceleration also brings replacement generation online to ensure reliable service for our customers during the Sherco transition.

Figure 1 below from Xcel shows that these new investments would more than double the contribution of wind and solar from about 15 percent of Xcel’s electricity mix in 2015 to 33 percent in 2030.  The increase in renewables would make up for some of the decline in coal generation, while most of the rest would come from increased natural gas generation. In fact, Xcel’s supply today is long on capacity through the middle of the next decade, so the utility does not need a 1-to-1 replacement for the first unit retirement at Sherco.

Xcel IRP Figure 1

Source: Xcel

Increasing clean energy is good for Minnesota’s economy

Over the past 15 years, employment in Minnesota’s clean energy sector has more than doubled from 8,600 in 2000 to 15,300 in 2014, according to a 2014 report from the Minnesota Department of Employment and Economic Development. The 78 percent growth in this sector during this time far outpaced the 11 percent growth of the entire state economy, including maintaining steady growth through the recession.

A UCS analysis released earlier this year shows that Minnesota could go even further than Xcel’s proposal and produce 40 percent of its electricity from renewables by 2030, with significant benefits for Minnesota’s economy.   Achieving these targets, as proposed in a bill that was introduced last legislative session, would result in more than $6 billion in new capital investments, $14 million in tax revenues for local communities, and $9 million in payments to landowners that host wind farms. We also found that these benefits could be achieved at a cost of roughly 12 cents per month for a typical household.

According to Xcel, jobs at the Sherco plant would decline from 310 employees currently to 150-160 workers after the two older coal units are retired and replaced with a new natural gas plant and a 50 MW solar array at the site.  At least 35 percent of those workers will reach retirement age in the next few years, and the company is examining transitioning other workers to the new plants and to other Xcel positions.

Xcel’s plan is “the right thing for our customers”

Chris Clark, president of Xcel’s Minnesota regional operations, summed it up best in a recent interview:

This is really a business decision about what we think is right for the future…I think we are going to be industry leaders, but we are really doing this because we think it is the right thing for our customers. It provides certainty to our community and our employees about what our plan is.

As one of Xcel’s former customers, my Dad would agree.  While he passed away in March, he would be very proud of Minnesota’s continued leadership to increase clean energy and address climate change that will allow me to enjoy fishing with my kids for many years to come.