Sherco power plant: The wrong project, for the wrong reasons, at a big cost

A bipartisan group of state lawmakers, including Gov. Mark Dayton, last week endorsed Xcel Energy's plan to build a new natural gas plant in Becker, Minn. What they've left out is that this project is a multibillion-dollar boondoggle.

Fortunately, there's still time to stop it.

Led by Xcel and labor groups, proponents say the plan will safeguard jobs lost when Xcel shutters coal-fired generators at the site in the mid-2020s. But the new facility is projected to employ just 150 workers, roughly half the number currently employed by the coal operations. It's hardly worth the $1 billion upfront price tag and billions more in fuel costs borne by ratepayers — especially when there are cheaper ways to protect the workers and generate the power.

Last fall, when asked for their approval of Xcel's proposed plant, regulators expressed deep skepticism that the proposed 786-megawatt gas facility is the most cost-effective option. Now, Xcel is trying to get around regulatory review and manipulate the economic fears of one Minnesota town — and the admirable desire of legislators to help — to obscure the costly reality of its proposal.

Construction will cost $800 million, per Xcel estimates, not including another $200 million needed to build gas pipeline infrastructure feeding into the plant. Ratepayers will pick up the tab for that, plus another $5 billion in estimated fuel costs over the first 20 years of the facility's life. That's an eye-popping cost of nearly $40 million per job.

The legislation, which cleared the House on Thursday and is steamrolling through the Senate, does not hold up to even a rudimentary cost-benefit analysis. Aside from the hefty per-job cost, the project would compete with a growing array of alternatives — from efficiency to wind to solar to energy storage — that would more responsibly replace the capacity and add more jobs. It also sets a disturbing precedent that the state will sacrifice environmental gains to preserve jobs in a dying industry.

Just as an illustration, if Xcel replaced its coal-fired generation with 2,300 megawatts of wind power — the amount needed to offset the lost capacity — it would create 1,150 permanent jobs and generate $1.48 million in local tax revenue, and cost Xcel's ratepayers $1 billion less over 20 years.

We cannot preserve fossil-fuel jobs forever, but we can prepare those workers for similar jobs that will last into the future. Based on analysis by researchers at the University of Massachusetts Amherst, a roughly $10 million investment would cover wage insurance, relocation and retraining for workers affected by the Becker coal plant closures. In raw numbers, this cost falls well short of the price premium of a gas plant. It also better positions the region's workforce in an evolving marketplace. A report released last week by the Environmental Law and Policy Center showed that the state has more than 100 companies working in burgeoning wind and solar industries, with room to grow.

Choosing a less costly alternative to a new natural gas plant also leaves money in the budget for local government aid to support Becker when the existing coal plant is shuttered. Surely it will cost less than $1 billion to support the economy of one small town.

Besides being a poor way to address the concerns of power capacity or economic impact, this legislation sets another uncomfortable precedent: that Xcel Energy is willing to open its ratepayers' pocketbooks for ill-conceived power plants if it means a generous return for shareholders. State lawmakers have so far bought Xcel's politically expedient argument that a massive, multibillion-dollar gas plant is the only safeguard for Becker's labor force and economy. Lawmakers may have missed the significant conflict of interest. The monopoly utility stands to rake in a nearly guaranteed 10 percent return on the $1 billion cost of the facility and associated pipelines, and avoid the scrutiny of a comprehensive cost-benefit analysis.

The Legislature should absolutely consider how to protect displaced workers and Becker's economic future. But subsidizing a monopoly utility's bottom line is a high price to pay for a solution that only goes halfway. The clock is ticking with a full Senate vote expected this month, but it's not too late for lawmakers to thwart this boondoggle.

John Farrell and Karlee Weinmann guide the Energy Democracy Initiative at the Minneapolis-based Institute for Local Self-Reliance.