Proponents say their alternative to Xcel's plan for new gas-fired power plants could save customers billions • Minnesota Reformer

Xcel Energy's latest long-term plan to meet Minnesota's electricity needs calls for six new peak-load power plants that critics warn could be obsolete before customers make their payments.

Comments filed last month by clean energy advocates and the state's attorney general's office oppose the utility's plan to build a fleet of small fossil-fuel plants while otherwise ramping up its clean energy investments. The plants would run sparingly, for just a few hours at a time on days when the grid is overloaded and wind, solar and other clean energy sources cannot meet demand.

But there are more economical options, as a coalition of clean energy organizations that commissioned experts to model alternatives concludes that Xcel could save its electricity customers as much as $3.5 billion by opting for a single new gas-fired power plant and relying more heavily on existing facilities, energy storage, efficiency and demand management, and buying excess power from the regional grid.

Clean energy groups include Fresh Energy, which publishes the Energy News Network (Fresh Energy's management and policy staff do not have access to ENN's editorial process).

At issue is the utility's latest integrated resource plan – the first submitted to state regulators since Minnesota Gov. Tim Walz signed a law last year requiring utilities to use only clean energy by 2040. Xcel Energy supported the law and has proposed various scenarios for reaching the goal. However, there remains disagreement among stakeholders about how to achieve the goal, particularly around cost and equity issues.

Different approaches to modelling

Allen Gleckner, director of policy and programs at Fresh Energy, said Xcel's proposal for a gas-fired power plant is similar to the one in its last integrated resource plan, which asked regulators to approve two new peaker plants that would provide up to 800 megawatts of electricity. Xcel ultimately agreed to an open, fuel-neutral competitive bidding process that allowed clean energy companies to propose alternatives. That process is still ongoing, and an administrative law judge is expected to make recommendations.

Consultants for the clean energy groups used the same software program as Xcel to create a plan that calls for building a new 374-megawatt gas-fired power plant, 3,800 to 4,800 megawatts of wind power, 400 megawatts of solar power and 800 to 1,200 megawatts of energy storage capacity by 2030. Extending contracts for existing peak-load plants could add 970 megawatts, and energy conservation measures could reduce consumption during periods of high demand.

According to Gleckner, Xcel took an exceptionally conservative approach by mostly creating scenarios that did not take into account the availability of power from neighboring systems or MISO's regional transmission grid. According to Gleckner, Xcel does not operate as an island and never has, because MISO supplies power to its customers through a shared resource pool.

“Xcel uses a kind of fictitious modeling because in reality we are part of a regional network,” he said.

The result is a plan to “build a number of new resources that we know are either inconsistent with our state's laws or are costly and likely to result in premature closure,” he said.

Amelia Vohs, climate program director at the Minnesota Center for Environmental Advocacy, praised Xcel for not asking regulators to extend the life of existing fossil-fuel plants, unlike its counterparts in other states. Unlike previous long-term plans, Xcel's latest plans envision a future in which large gas and coal plants are not the backbone of the system.

What that grid will look like remains a challenge, Vohs said. Added to that is the increasing demand for electricity from data centers, manufacturing, and the electrification of buildings and transportation. Still, Vohs believes clean energy is ready to take a leading role.

“It's a much better solution that is flexible in this time of uncertainty without having to make such a big commitment to gas resources for the next 40 years,” Vohs said.

Patty O'Keefe, senior field strategist for the Minnesota Sierra Club, said proposed peaker plants with combustion turbines pose “significant environmental and public health risks” because they potentially emit more carbon and nitrogen oxide than larger, more common combined cycle plants. They are also often built in communities that already suffer from higher pollution levels.

The Sierra Club wants Xcel to focus its planning on energy efficiency rather than power generation. Efficiency reduces demand and makes “the transition to clean energy smoother and less expensive,” O'Keefe said.

Risk management

Meanwhile, the office of Minnesota Attorney General Keith Ellison has also spoken out, warning that the investments being made now could turn out to be outdated “stranded assets.” This means that the plants could become unprofitable or be shut down before they have delivered the expected benefits to customers.

In its filings with the Securities and Exchange Commission, Xcel acknowledged the risk of stranded assets generally, but not specifically with respect to the planned gas peaking power plants.

For utilities, expanding power generation is an incentive because investors get a return on investment. The attorney general argues that Xcel's electricity customers won't have to pay for retrofits and other investments to reduce emissions when the plants become obsolete or switch to other forms of energy, such as hydrogen.

In its filings with state regulators, Xcel said it was concerned about whether enough dispatchable power would be available to quickly meet rising demand at certain times of the day. By 2030, the company will have ended its use of coal to generate power, after closing four coal-fired plants this decade. The proposal suggests Xcel may need to add even more peaker plants between 2030 and 2040.

Xcel spokesman Kevin Coss said the company will “add a significant amount of wind and solar power to our energy mix” and complement that generation “with always-on power – power that we can deliver whenever it's needed – to strengthen the reliability of the grid.”

Coss said Xcel identifies generation sources in a technology-neutral manner, so it can choose not to use natural gas combustion plants in the future. The current integrated resource plan provides for fewer firmly controllable resources than the 2019 version, he said.

The conservative modeling “avoids excessive dependence on the energy market, which could expose our customers to excessive risk,” Coss said.

Residents, businesses and organizations have until October 4 to submit comments on the Integrated Resource Plan to the Public Utilities Commission. The commission is expected to make a decision on the plan in February 2025.

This article first appeared on Energy News Network and is republished here under a Creative Commons license.