Xcel, environmentalists square off over planned gas-fired power plant

The rise of natural gas-fired power was long welcomed — or at least accepted — by both utilities and clean-energy groups. Gas vanquished coal, cutting both carbon dioxide emissions and wholesale electricity costs.

But to renewable-energy advocates, gas' days are numbered — at least as far as building big power plants such as the one Xcel Energy is planning in Becker, Minn.

They say an emission-free combination of new wind and solar — coupled with a fleet of grid batteries for power storage — is cheaper and just as reliable as a new gas plant.

"If we want to take climate change seriously, we can't build new fossil-fuel plants," said Ellen Anderson, climate program director for the Minnesota Center for Environmental Advocacy. "The time has come to move on from fossil fuels."

Not so fast, say Xcel and for that matter the utility industry: Gas will be needed for some time to ensure grid reliability, particularly as coal plants close.

"Natural gas is the right fuel to bridge us into the future and integrate renewables into the system," said Christopher Clark, Xcel's president for Minnesota. "This is a major transition, and it's important to do it in a way that respects affordability and reliability."

The debate over Xcel's gas plant promises to get hotter this year.

The legislature and then-Gov. Mark Dayton bypassed the Minnesota Public Utilities Commission and approved Xcel's roughly $800 million plant four years ago.

But the PUC still has a significant say over the gas plant as it undertakes a long-awaited review of Xcel's long-term power generation plans.

Minneapolis-based Xcel must show the PUC that the gas plant is in the public's — and ratepayers' — best interest, particularly in comparison to new renewable-energy projects.

The PUC has authority, too, over whether Xcel can eventually recover the plant's costs from its customers. Plus, Xcel's proposed gas supply pipeline to the new plant — which is likely to cost a few hundred million dollars — must be approved by the PUC.

"We strongly feel the law doesn't make the gas plant a done deal," said Allen Gleckner, energy markets director for research and advocacy group Fresh Energy in St. Paul. "It is not guaranteed."

Xcel, by far Minnesota's largest electricity producer, isn't alone in facing a gas-plant battle.

Such fights have flared across the country, including the Upper Midwest, where Duluth-based Minnesota Power plans to build a $700 million gas plant in Superior, Wis., which would be co-owned by Dairyland Power Cooperative.

The PUC narrowly approved the Superior plant despite an administrative law judge's recommendation that it be denied. Opponents appealed the PUC's decision, citing the lack of a Minnesota environmental review.

In October, the Minnesota Court of Appeals agreed, and the matter is now before the Minnesota Supreme Court.

Clean-power groups argue that Minnesota Power's and Xcel's new gas plants are not needed, particularly since both utilities have goals of producing 100% carbon-free power by 2050.

Xcel, the nation's leading wind-power utility, was the first U.S. electricity producer to make such a pledge.

"Xcel has said it is going to be 100% carbon free by 2050 but at the same time it has said it will build a new gas plant by 2027," said Annie Levenson-Falk, head of the Citizens Utility Board of Minnesota, a ratepayer watchdog group.

The two goals don't line up, she said. The gas plant's life span is 40 years. If Xcel shutters the plant early, ratepayers will be left paying for a "stranded" asset, said Levenson-Falk and other gas plant opponents.

"There is pretty strong evidence that it will be a stranded asset and that it is not necessary for it to be built," she said.

The costs of large capital investments like a power plant are treated as an asset that is depreciated over a long stretch of time. If a plant closes early, undepreciated costs remain stranded on a utility's books.

Clark dismissed the idea that ratepayers could be left holding the bag. Xcel has successfully converted major coal plants to gas in Minneapolis and St. Paul, and it plans to close its last four big coal generators — three of which are in Becker — between 2023 and 2030, he said.

"We have demonstrated with the coal plant transition we can do it cost effectively."

As for the incongruity of a new gas plant and Xcel's carbon-free-by-2050 goal, Clark said the company is betting on advancements in technology.

For instance, he pointed to the possibility of hydrogen, a carbon-free source of power that has tantalized many in clean-energy circles. "We plan to build our gas plant to run on hydrogen and have additional space for equipment to run on hydrogen," Clark said.

But using hydrogen as a substitute for gas could prove quite expensive.

Now, hydrogen can't even be blended into existing natural gas pipelines beyond a relatively low threshold, because of issues related to cracking and weakening pipeline steel, as environmental group the Sierra Club noted in a PUC filing.

Natural gas has long been viewed as a so-called "bridge" fuel from coal to wind and solar. Coal emits about twice as much carbon dioxide as gas.

But like coal, gas can provide steady electricity, helping to even out the variability of solar and wind power.

The advent of fracking has freed up enormous supplies of gas, making it a cheaper alternative to coal. The result: Gas has replaced coal as the top U.S. fuel for electricity generation.

In Minnesota, coal was still number one in 2020 with a 25% share of in-state generation, but that's down from 53% in 2011. (Those data don't include significant coal power produced in North Dakota and exported to Minnesota electric co-ops.)

From 2011 to 2020, gas has risen from 6 to 20% of Minnesota generation and wind power from 13 to 22%, according to the Minnesota Department of Commerce. (Nuclear power comprised 26% in 2020, solar 3%.)

The coal generators slated for closure in Becker are huge, together providing nearly 1,900 megawatts of production capacity for Xcel. The company said its roughly 750-megawatt gas plant, to be built in Becker, would help replace that lost power.

The gas plant is one element of Xcel's "Integrated Resource Plan," a 15-year forecast with a particular focus on the next five years.

Xcel's resource plan also includes tripling its solar-power production by 2030, adding legions of new wind turbines and significantly increasing its energy-efficiency programs, reducing its power production needs.

The company also plans to extend the life of its Monticello nuclear power plant from 2030 to 2040.

Environmental and clean energy groups have welcomed the renewable power and energy efficiency proposals. But in filings with the PUC, they said Xcel could add a lot more renewables and battery storage without the gas plant.

They note that in its forecasting, Xcel never modeled a scenario that didn't include the gas plant. Using Xcel's own modeling software, Fresh Energy, the Minnesota Center for Environmental Advocacy (MECA) and two other clean energy groups concluded that the gas plant wasn't the low-cost alternative.

The Citizens Utility Board, using a different model, came to the same conclusion.

A recent report from Bloomberg New Energy Finance concluded that new wind and solar farms are already cheaper in some parts of the country than new gas plants like the one Xcel intends to build.

Building out far more battery storage than Xcel has planned for Minnesota will ensure the grid remains reliable, the clean energy groups say. Batteries, like fossil fuel and nuclear plants, can inject power into the grid as needed.

Still, the technology of batteries must improve — currently they can store a limited amount of power — before they can be counted on for reliability, utility industry executives say.

"I hate to bet against technology, but I think [clean power advocates] might have a little bit of a rosy view," said Emily Fisher, senior vice president for clean energy at the Edison Electric Institute, a trade group whose current chairman is Xcel CEO Ben Fowke.

Whatever the view on batteries, the PUC will be exploring such non-fossil fuel options as it reviews Xcel's long-term resource plan; it's legally obliged to.

"The law is very clear," said the Minnesota Center for Environmental Advocacy's Anderson. "If you build a new fossil-fuel plant in Minnesota, you have to show that renewables are not in the public interest."

Mike Hughlett • 612-673-7003