What will best keep Xcel's grid reliable in a pinch: Gas plants or batteries?

The debate over the future of gas-fired power in Minnesota is likely to intensify, even though Xcel Energy has temporarily backed away from a controversial proposal that would have added two new plants.

Xcel, the state's largest electricity provider, recently excised the new gas plants opposed by clean energy and environmental groups from its long-term power generation plan. State regulators start hearings on the plan this week.

But the move is an effort to get the long-stalled plan approved, not an abandonment of the gas "peaking" plants. The company maintains the plants — which would operate only when the grid is strained — are critical to keeping electricity flowing.

"To really have safety and reliability for our customers, we need these [gas plants] as an insurance policy," said Christopher Clark, Xcel's president for Minnesota and the Dakotas.

Clean energy and environmental groups have roundly opposed any new gas plants, saying they're not needed as battery technology and pricing improves. (Batteries store electricity to be discharged onto the grid).

"You can provide all of the reliability and capacity services that you need with batteries," said Allen Gleckner, lead director for clean electricity for research and advocacy group Fresh Energy in St. Paul.

The Minnesota Public Utilities Commission (PUC) this week is slated to take up Xcel's Integrated Resource Plan, which lays out the company's long-term power generation plans. Investor-owned electric utilities must file such master plans every 18 months or so.

Xcel's latest plan — filed in May 2019 and updated last year — is packed with significant changes. It calls for Xcel to exit coal power in eight years with the respective early closures of its Allen S. King plant in Oak Park Heights in 2028 and Sherco 3 in Becker in 2030.

The PUC has already approved the early closures of Xcel's Sherco 2 and Sherco 1, two coal plants in Becker, respectively in 2023 and 2026.

Clean power and environmental groups have all lauded Xcel's coal plant closures. But there's been much rancor over the role of natural gas generators in Xcel's fleet.

Xcel's 2019 resource plan initially called for a roughly $800 million, 800-megawatt gas plant in Becker, which would effectively replace one of Sherco's three big coal generators. The gas plant was so contentious that Xcel successfully lobbied the legislature in 2017 to allow it to bypass the normal PUC approval process.

However, Xcel dropped the Becker gas plant in June, a move hailed by clean energy groups. At the same time, Xcel announced plans to build two smaller gas plants — one each in southwestern Minnesota and North Dakota — at less than half the cost of the Becker plant.

Both would be "peaking plants," designed to run only when the grid is stressed by peak electricity demand — on very cold or very hot days, for instance.

The peaking plants, one of which would be in Lyon County and the other near Fargo, would run about 6 % of the time, according to Xcel. The Becker gas plant would have operated 80 to 90 % of the time.

The peaking plants "are not a resource that will add significant carbon," Clark said.

However, the plants — which would come online in the late 2020s — could have lifespans that surpass 2050, the year that Xcel has committed to become a carbon-free electricity producer.

Xcel would build the gas plants to also burn hydrogen — a fuel free of carbon emissions — as well as "renewable natural gas." Still, there are technical barriers that hydrogen must surmount, while renewable gas supplies aren't likely to be plentiful.

Gas has been viewed as a "bridge fuel" to full-scale renewable power. It's generally been cheap for years, courtesy of the U.S. fracking boom. And gas-fired plants emit half the carbon dioxide of coal generators.

But clean power groups increasingly say renewable power, particularly solar, coupled with a fleet of grid batteries for storage, is cheaper and just as reliable as a new gas plant, including Xcel's planned peakers.

Several organizations — including Fresh Energy, the Sierra Club and the Minnesota Center for Environmental Advocacy (MCEA) — contend that Xcel's long-term power modeling overprices battery storage and limits its deployment, particularly in tandem with solar.

"The forecasts are completely at odds with actual pricing," said Fresh Energy's Gleckner.

In a PUC filing, the Sierra Club said Xcel "baked" the peaking plants into its modeling. "Xcel's reliability analysis is biased towards gas generators and against renewable and storage resources," the filing said.

Xcel has defended its modeling. Clark said Xcel is open to more battery deployment if it sees "better prices" but said batteries are not an adequate substitute for the gas peaking plants.

"On the coldest day of the year — on days when we don't have sun or we don't have wind — we need to make sure we can provide energy to our customers," Clark said. "Batteries cannot provide the kind of reliability — the insurance policy — we need on our system."

In a recent PUC filing, Xcel disclosed an agreement with clean power groups on key issues for its resource plan. (The groups are Fresh Energy, MCEA, the Union of Concerned Scientists and the Clean Grid Alliance. Three labor unions also gave support.)

They agreed that the PUC need not decide now on the Lyons County and Fargo peaking plants.

But they also agreed to direct the PUC to find that by the late 2020s, Xcel will likely need an additional 800 megawatts of "generic firm dispatchable" power — for example, production that can be turned on and off. It could be from gas plants or batteries — or a combination of both.

While the clean energy organizations agreed with Xcel's plans to extend the federal license of its Monticello nuclear power plant by ten years to 2040, the utility did agree to do a "deeper analysis" of battery storage and hydrogen in its next resource plan due in 2023.

Xcel considers its nuclear plants in Monticello and near Red Wing to be crucial — and constant — sources of carbon-free power as its coal plants close.

The agreement with Xcel is like a "truce" heading into the PUC hearings, Gleckner said.

Clean energy groups aren't backing down on demands that Xcel beef up its grid with batteries. And Xcel is "not saying they are giving up on the [gas] peakers by any means," Gleckner said.