An administrative law judge on Dec. 31 recommended that the Minnesota Public Utilities Commission approve the distributed solar generation proposal of Geronimo Energy over other, mostly gas-fired proposals to meet future power needs of Northern States Power.
In March 2013, the Minnesota commission concluded that Northern States Power Company d/b/a Xcel Energy (NYSE: XEL) had demonstrated the need for an additional 150 MW of generation by 2017. The commission further concluded that it was possible that this need could continue to increase to 500 MW by 2019.
Xcel in 2013 issued a request for proposals for new power supply and got several proposals back, including one for its own self-build generation. The offers were:
- Calpine (NYSE: CPN) – expand the existing natural-gas-fired Mankato Energy Center combined cycle facility by 290 MW of intermediate capacity and 55 MW of peaking capacity;
- Geronimo Energy – build 100 MW of solar generation using photovoltaic panels, located on up to 31 sites adjacent to substations, ranging from 2 MW to 10 MW per site;
- Great River Energy (GRE) – two capacity credit proposals to sell to Xcel Midcontinent Independent System Operator (MISO) Zone 1 Resource Credits (ZRCs);
- Invenergy Thermal Development – two peaking proposals for gas-fired combustion turbines (CT), one at an expanded Cannon Falls facility with one new CT unit, and the other a new Hampton Energy Center with two CTs;
- Xcel – two peaking proposals for gas-fired CTs, with one option to build one 215-MW CT at the existing Black Dog station (called Black Dog Unit 6) in Minnesota, and the other to build two 215-MW CTs at a greenfield site near Hankinson, N.D.
Due to the complexity of this case, the commission sought a report and recommendation from an administrative law judge, allowing a more complete development of the record. In October 2013, Administrative Law Judge Eric Lipman presided over an evidentiary hearing on the issues.
“The Administrative Law Judge concludes that the most reasonable and prudent solution is to select scalable projects that meet Xcel’s near-term shortfalls and for the Commission to conduct a second procurement for needs which may occur after 2019,” said the Dec. 31 judge’s report. “The Administrative Law Judge further concludes that combining Geronimo’s proposal with the GRE’s proposal, represents the most reasonable and prudent alternative to meet Xcel’s near-term needs.”
The judge recommends that the commission:
- select Geronimo’s proposal;
- determine if added capacity beyond 71 MW is needed before the end of 2019;
- select GRE’s proposal if added capacity beyond 71 MW is needed before the end of 2019;
- direct Xcel to undertake Purchase Power Agreement negotiations with the selected offerors; and
- conduct a second competitive bidding process for Xcel’s needs beyond 71 MW that are likely to occur after 2019.
The judge noted that Xcel’s needs for additional capacity are undergoing significant change because of three key factors: lower overall demand; the addition of 72 MW-200 MW of accredited capacity from solar resources, under Minnesota’s Solar Energy Standard; and new reserve margin requirements issued by the Midcontinent ISO. Taking into account only the first two factors – lower overall demand and the new solar resource standard – Xcel projects that it will have a generating capacity shortfall of 93 MW in 2017. This shortfall might conceivably grow to 307 MW by 2019.
However, if MISO’s reserve requirements are calculated on the basis of coincident peaks, as they are today, the projected deficit in generation capacity shrinks even further. If all three factors reducing the need for capacity are considered, Xcel does not face a shortfall of generation capacity until 2019. Moreover, this deficit grows only by 26 MW by 2019, the judge pointed out.