Xcel's plans in Becker would create one of largest solar plants in country

Xcel Energy plans to build another major solar array in Becker, creating one of the largest solar power complexes in the country.

Xcel said Monday it will ask Minnesota utility regulators to add a 250-megawatt solar array to the 460-megawatt Sherco Solar project in Becker that is already approved. The plan is to complete the entire complex by the end of 2025.

"We are committed to moving the Sherco Solar project forward to deliver significant new clean energy to our customers and communities," said Chris Clark, Xcel's president for Minnesota, in a statement. "These projects will be the lowest-cost solar on our Upper Midwest system and demonstrate our focus on clean energy without compromising affordability."

Still, Xcel acknowledged in a regulatory filing late Friday that costs for new solar farms — and clean energy projects generally — have been soaring. In a recent bid for solar proposals, Xcel found only two projects that were cost-effective for its customers.

One is the Sherco addition, the other a 100-megawatt solar project in Polk County, Wis., being developed by National Grid Renewables. Xcel would buy power from National Grid under a long-term agreement. Xcel would own and build the two Sherco projects.

The Sherco addition and the Wisconsin project total 350 megawatts, well short of the 900 megawatts of solar that Xcel was seeking in a request for proposals made in October.

In some cases, "bids were significantly above the price level we view as prudent," Xcel said in the regulatory filing. The disappointing outcome of the bid is "emblematic of the broader marketplace."

The 710 megawatts of total solar power capacity at Sherco — with the proposed expansion — would help replace electricity lost from the retirement later this year of a 680-megawatt coal-fired generator in Becker.

Of course, solar — while clean — is variable power, while coal power can be dispatched on demand.

The three large coal generators at Xcel's Sherco power station in Becker, which are big carbon dioxide emitters, are all expected to close by 2030.

Solar currently provides about 3% of Minnesota's electricity, and the majority of that comes from smaller solar arrays that are 5 megawatts or below. The largest "utility-scale" solar project currently is Xcel's 100-megawatt array near North Branch.

But a buildout of large projects is on tap, and the biggest is Xcel's 460-megawatt Sherco project, which the Minnesota Public Utilities Commission (PUC) approved in September despite concerns about its price tag.

Originally slated to cost about $575 million, Xcel disclosed in October that due to inflationary pressures, the price is now expected to be $690 million. New tax subsidies created by a landmark 2022 federal clean energy law will help cover cost increases for the 3,500-acre project, Xcel has said.

Xcel didn't disclose the estimated cost of the new Sherco solar project, which will take up 1,750 acres, in a filing Friday with the PUC.

However, the company noted a "constellation of factors" that have been driving up prices for solar projects. Those include "ongoing supply chain constraints, high labor costs, and rising interest rates that increase borrowing costs," the filing said.

The massive trove of tax credits created by President Joe Biden's 2022 clean energy legislation has helped cover some of those cost increases.

But at the same time, the legislation has "further increased demand" for clean energy projects, "putting upward pressure on prices," Xcel said in the PUC filing.

Edison Energy's Q4 Renewables Market Report shows that median solar PPA (Power Purchase Agreement) prices in the U.S. overall were 48 percent higher in the fourth quarter of 2022 compared to one year prior, Xcel noted in the filing.

Construction began on the first phase of the 460-megawatt Sherco solar project last month. That project will create 300 construction jobs, while the 250-megawatt addition — if approved by the PUC — would produce another 90 trades jobs, according to Xcel.

The Sherco addition would create an estimated $110 million in payments to landowners and local taxes, in addition to an estimated $240 million in local economic benefits from the first two solar projects, Xcel said.

The combined Sherco solar projects would generate enough electricity to power more than 150,000 homes each year on average.

The PUC has permitted five other solar farms — ranging from 60 to 200 megawatts — in the past couple of years, including in March the 200-megawatt Byron Solar project in Dodge County. Several more solar projects are pending before the commission.

All of those are also facing rising costs, and some of them — though not Sherco and Byron — are waiting in a long line for approval to connect to the regional electric grid.