Minnesota commission supports Sherco coal units – for now

The Minnesota Public Utilities Commission on Feb. 27 accepted a Life Cycle Management Study filed by Xcel Energy (NYSE: XEL) for the coal-fired Sherco Units 1 and 2, but ordered more information to be filed by July 1 about the remaining life of these units.

In November 2012, the commission issued an order directing Northern States Power d/b/a Xcel Energy to submit a Sherco Life Cycle Management Study that examines the feasibility and cost-effectiveness of continuing to operate, retrofitting, or retiring Sherburne County Generating Station (Sherco) Units 1 and 2. In July 2013, Xcel initiated the current docket when it filed its study, which recommended continued life for these units. The commission received comments on it from the Minnesota Pollution Control Agency (MPCA), environmental groups that want those units shut and the Minnesota Chamber of Commerce, as well as more than 11,000 members of the public.

The commission said in its Feb. 27 order that it will accept Xcel’s Sherco Lifecycle Management Study for informational purposes. The commission declined to direct Xcel to retire Sherco Units 1 and 2 at this time, but did direct Xcel to study the matter in more detail in Xcel’s next resource plan. All three units at the plant have a current resource planning retirement year of 2049. Sherco 3 is bigger and newer, with more environmental controls, so it is considered separately from Units 1 and 2. Unit 3 just came back in 2013 from a forced outage that lasted nearly two years.

Sherco is Xcel’s largest power plant in terms of generating capacity, steam production, and coal consumption. Xcel built Sherco Units 1 and 2 in Becker, Minn., in the 1970s, and added Unit 3 in 1987. All three Sherco units use low-sulfur coal from mines in Montana and Wyoming, from suppliers that include Westmoreland Coal. The plant burns more than 9 million tons a year. Together, Sherco 1 and 2 have a generating capacity of almost 1,400 MW and supply approximately 20% of the energy consumed by Xcel’s customers.

Multiple environmental regulations apply to coal-fueled generators such as Sherco, the commission noted. Some of these regulations pertain to efforts to limit the emission of greenhouse gases such as CO2. But for purposes of the current docket, Xcel gave special attention to the regulation of oxides of nitrogen, including nitric oxide (NO) and nitrogen dioxide (NO2) (collectively, NOx).

The most rigorous method of controlling NOx emissions is through the use of selective catalytic reduction (SCR) technology. Xcel estimates that each SCR installation could cost $170m and take four to five years to complete. Consequently, the need to install SCR technology will influence the decision to retain or retire Sherco Units 1 and 2, the commission pointed out. SCR for each of Units 1 and 2 could be needed late this decade, depending on regulatory decisions.

Xcel argued that it currently meets all pollution control requirements for NOx without the need for SCR technology. But Xcel anticipates two possible regulatory changes that might trigger the need for SCR technology: the regulation of haze, and of ozone and particulates.

Xcel was told by the commission to file its next resource plan by July 1, 2014. As part of that filing, Xcel needs to do the following:

  • Evaluate the feasibility and cost-effectiveness of continuing to operate, retrofitting, repowering, or retiring Sherco Units 1 and 2.
  • Analyze retiring Sherco Units 1 and 2 in 2020 and thereafter.
  • Include any updated externality values.
  • Include sensitivity cases for phasing in carbon costs (various cost amounts) in 2017 and thereafter.
  • Evaluate energy efficiency potential among customers – including customers that are exempt from participation in conservation improvement programs.
  • Model a possible legislative increase in the renewable energy standard to 40% by 2030.
  • Ensure that reliability on the Xcel system is carefully evaluated.
About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.