CEO: Xcel will likely need gas or nuclear power to reach carbon-free goals

While Xcel Energy aims to produce 100% carbon-free electricity by 2050, renewable energy alone will not meet that goal.

"The grid can't be 100 percent renewable," Xcel CEO Ben Fowke told state public-utility regulators Wednesday. "That last 20 percent [from 80 percent to 100 percent] has to be carbon-free, and it has to be dispatchable."

Dispatchable refers to electricity that can be brought onto the grid on demand — and it comes primarily from "baseload" power plants, which today burn fossil fuels or produce nuclear energy. Wind and solar power, given their variability, cannot provide constant power and thus can't be dispatched at all times.

"If we don't have [grid] reliability, then the clean-energy transformation comes to a screeching halt," Fowke said.

Fowke spoke before the Minnesota Public Utilities Commission (PUC) on the heels of Xcel's announcement Monday that it would exit coal-fired power by 2030, a decade ahead of schedule. The utility also wants to extend the life of its Monticello nuclear plant by at least 10 years and more than triple its solar power capacity.

Those are the highlights of Xcel's long-term resource plan, which will be formally filed with the PUC in July. All investor-owned utilities in Minnesota file such plans every few years.

Fowke occasionally addresses the PUC to update Minneapolis-based Xcel's big-picture plans, with his last appearance in October 2017.

Xcel, Minnesota's largest electricity provider, has set some of the most ambitious decarbonization goals of any U.S. utility. The company has acknowledged that the last stretch of total decarbonization — getting from 80% to 100% — will require technologies that haven't yet been developed.

Nuclear power is the only well-established form of carbon-free, baseload electricity. Xcel's three nuclear generators in Minnesota — the one in Monticello and two at Prairie Island near Red Wing — provide 29% of the electricity in Xcel's Upper Midwest region, which primarily covers Minnesota, but also includes western Wisconsin and parts of the Dakotas.

The federal licenses of Monticello and the Prairie Island reactors expire in 2030 and 2033 and 2034, respectively — well before Xcel's carbon-free zero hour of 2050. Xcel wants to re-license Monticello to extend its life to 2040, with an option for it to run until 2050.

Such an extension requires state and federal approval, and the federal re-licensing process takes many years. Monticello and Prairie Island were built in the early 1970s and each was initially licensed for 30 years and later re-licensed for another 20 years.

With its proposed Monticello extension, Xcel would be one of only a handful of U.S. power companies that have so far asked federal regulators for a third round of re-licensing.

The electricity industry has soured on building new conventional nuclear plants given their huge costs. However, smaller reactors are being developed that eventually may be deployable at far lower costs — possible "next generation" technology that Fowke noted at Wednesday's PUC meeting.

Large batteries that store renewable power are seen by environmentalists and clean energy advocates as important in decarbonizing electricity production.

Xcel's clean-energy plan for Colorado — its other main market besides Minnesota — includes a healthy battery component over the next few years. However, battery-storage projects were absent from the utility's Minnesota resource plan unveiled this week.

The financials don't work as well yet in Minnesota, Fowke told the PUC. "We are very interested in nurturing batteries, but today batteries with storage don't quite meet the economic [test]. But in five years, they might."

Fowke told the PUC the company plans over the next decade to add smaller gas-fired generators known as "peaker" plants. They essentially operate as a reserve, dispatching power when demand is high, particularly in the summer.

In an interview, Fowke said that new gas peaking plants "right now are probably a better bet than batteries."

Natural gas currently accounts for 12% of Xcel's power generation in the Upper Midwest, while coal accounts for 30% and wind 18%. Xcel is counting on natural gas, which emits about half as much carbon dioxide as coal, to play an important role in supplying dispatchable power as the company exits coal and increases renewables production.

Xcel plans to build a large natural gas plant in Becker, which would open in the 2020s as the three large coal generators there begin closing.

The Becker gas plant — if it's to meet Xcel's 2050 no-carbon goal — must eventually adopt some sort of carbon capture technology to store its green house gas emissions. Carbon capture is still a relatively nascent technology. Fowke has said Xcel is open to it — if it becomes cost-effective.

"If we achieve our 2050 vision, we can't be using natural gas the way we are today," Fowke told the PUC.