Xcel Energy plans more wind, solar power and less coal — and sooner — in Minnesota

Xcel Energy said Friday that it will accelerate cuts in its Minnesota-region greenhouse gas emissions by increasing wind and solar power investment in this decade and replacing two big coal-burning generators with a natural gas-fired unit in the mid-2020s in Becker, Minn.

The plan, submitted to state regulators who could approve or reject it, would mean a 60 percent cut in the electric utility's Upper Midwest carbon-dioxide emissions by 2030, compared with 2005 levels. Until now, Xcel had aimed for a 40 percent greenhouse gas reduction over that period.

Two of the three coal burners at the Sherco power plant in Becker would be retired in 2023 and 2026 under the plan announced Friday. That plant, Xcel's largest in the region, is also the state's biggest emitter of greenhouse gases. The two units, built in the 1970s, would be replaced by a new power plant fueled by natural gas, which emits half the carbon dioxide of coal, Xcel said.

"This is really a business decision about what we think is right for the future," said Chris Clark, president of Xcel's Minnesota regional operations, in an interview. "For us the time to move is now. We think we benefit from certainty. It is the right time to focus on the future. I think it is what our customers want us to do."

Environmental groups led by Fresh Energy, as well as the state Commerce Department had urged Xcel to consider earlier retirement of the Sherco units. Xcel had planned to keep them running, but at a lower pace, until 2030.

"It's a great outcome for Minnesota," said J. Drake Hamilton, Fresh Energy's science policy director, which advocates for cleaner energy. "These commitments directly follow the recommendations of climate scientists that we need to cut carbon emissions across our economy very much like what Xcel is proposing."

Rep. Pat Garofalo, chairman of the Minnesota House energy and jobs committee, said the plan to replace the Sherco units will eliminate jobs and drive up electricity prices, which also hurts the economy.

"A lot of people are going to pay more," said Garofalo, R-Farmington, who placed blame on federal policies like the Clean Power Plan and did not criticize Xcel. "A lot of people are going to be hurt. These policies have consequences."

Xcel said the prospect of expensive pollution control upgrades to the decades-old Sherco units along with the 2030 carbon-reduction targets under the Clean Power Plan make it sensible to retire the coal burners earlier. The U.S. power sector, mainly because of coal burning, is the largest source of the nation's greenhouse gas emissions.

Gov. Mark Dayton praised Xcel for its commitment to clean energy. "And I deeply appreciate the company's continued commitment to the Becker community, where the construction of its proposed natural gas plant would create many good jobs," he said.

Overall, jobs will disappear at the plant. Clark said Sherco's 310 employees would decline to 150-160 after the two older coal units are replaced with a natural gas-burning power plant, which requires fewer workers.

The city of Becker relies on Xcel property taxes to cover more than half of its budget. Mayor Lefty Kleis said the plan for a new power generator is "some excellent news" for the tax base, but he wants to see details.

Although Xcel already intended to double its investments in wind and solar power by 2030, the utility's revised plan now calls for speeding up that effort, with significant renewable power additions before 2020. Clark said solar and wind power costs have dropped significantly, and he wants the utility poised to seize opportunities if Congress extends the federal wind production tax credit.

Xcel, which operates in eight states and serves 1.4 million electric customers in Minnesota, has been the nation's most windpower-reliant utility for 11 years. Today, Xcel gets 15 percent of electricity from wind, and 37 percent from coal in its Minnesota region that includes North Dakota and South Dakota. If this plan goes forward, Xcel expects 33 percent of its regional electricity to be generated by wind and solar in 2030, while 15 percent would still come from coal.

"The vision here is great, the challenge is to do it at a competitive price," said Bill Blazar, senior vice president of the Minnesota Chamber of Commerce, which has argued before regulators that rising industrial power rates are making the state less able to compete.

Clark said the proposed investments are expected to raise customers' rates by 2 to 3 percent, but offered no details on the dollar impact.

Nuclear power would remain a key carbon-free source, and the utility told regulators they need to look toward the 2030s, when its three Minnesota reactors' licenses expire. At that point, the plants in Monticello and Red Wing will be 60 years old, and the question of further extending their licenses is sure to be complex and controversial.

The announcement was a revision to Xcel's 15-year business plan released in January. Utilities are required to submit such documents to the state Public Utilities Commission. It has authority to approve or reject major investments by investor-owned utilities like Xcel, and likely will act on this proposal next year.

Xcel also said it wants by 2025 to build a natural gas-fired generating unit in North Dakota. Xcel further has committed to energy efficiency investments, including smart technologies that Clark said can help shift power usage to low-demand periods.

"I am really excited about what we are doing," Clark said. "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. It lets us focus on the future."

David Shaffer • 612-673-7090 • @ShafferStrib