Xcel maps out resource planning for Upper Midwest operations

Xcel Energy (NYSE: XEL) underlined in its Jan. 29 earnings statement a resource plan filed earlier in the month with the Minnesota Public Utilities Commission (MPUC) that charts out new power generation development.

Northern States Power-Minnesota filed its 2016-2030 Resource Plan with the MPUC, proposing to achieve a 40% reduction in carbon emissions from 2005 levels through the significant addition of renewables, continued commitment to specific conservation improvement program annual achievements, and the continued operation of its existing cost-effective thermal generation. The plan positions NSP-Minnesota to be responsive to future environmental requirements and market trends, builds on the significant investments already made in the NSP System, and acknowledges the divergence in state energy policies within the NSP System, Xcel noted.

Key points of the resource plan include:

  • Adding 600 MW of wind by 2020 and 1,200 MW by 2027, bringing total wind power on the NSP System to over 3,600 MW;
  • Adding 187 MW of large-scale solar energy by 2016 and an additional 1,700 MW of large-scale solar and 500 MW of customer-driven small-scale solar; bringing total solar power on the NSP System to approximately 2,400 MW;
  • Operating the Monticello and Prairie Island nuclear plants through their current licenses; and
  • Continuing to run the coal-fired Sherburne County (Sherco) Units 1 and 2 with gradually decreasing reliance through 2030.

The resource plan brings together other pending resource proceedings including the Competitive Acquisition Plan (CAP), in which the MPUC required NSP-Minnesota to add capacity to its system to meet a resource need in the 2018-2019 time frame, as follows:

  • Enter into an agreement for 100 MW of distributed solar with Geronimo Energy LLC;
  • Enter into an agreement with Calpine Corp. for a 345-MW expansion at its gas-fired Mankato Energy Center; and
  • Construct a 215-MW Black Dog Unit 6 gas-fired combustion turbine.

NSP-Minnesota also proposed use of a collaborative stakeholder process to guide its five-year action plan, and to facilitate the necessary update of its resource analysis to incorporate the December 2014 CAP outcomes and significantly higher than expected response to its Community Solar Gardens program.

Said the resource plan filed at the MPUC about the two smaller, older coal units at Sherco: “We recognize that the future of Sherco Units 1 and 2 is of fundamental interest to all of our regulators and other stakeholders. Through our Preferred Plan we present one potential vision for the future of Sherco. Specifically, our Preferred Plan assumes the continued operation of Sherco Units 1 and 2 through 2030, recognizing that operation beyond 2030 without [selective catalytic reduction] is unlikely. This Preferred Plan therefore has the potential for Sherco Units 1 and 2 to cease operations in 2031.

“Our Preferred Plan allows our customers to continue to benefit from our investments in these low cost units while still achieving a 40 percent reduction in CO2 emissions from 2005 levels. That said, pending environmental regulations provide uncertainty with respect to the need to make significant investments in environmental controls at Sherco Units 1 and 2, namely the installation of Selective Catalytic Reduction (SCR) technology to control nitrogen oxide (NOX) emissions. Building off of the analysis we undertook in the Sherco LCM Study and based on information we know to-date, we believe that we can continue to operate Sherco Units 1 and 2 through the planning period (2030) without making significant investment in SCRs. However, the outcome of pending environmental regulations may change this analysis.

“Given this uncertainty around future environmental regulation, we analyzed alternative scenarios to our Preferred Plan. These scenarios include a single Unit retirement, retirement of both Units, significant investment in environmental control equipment, or some combination of these. While our analysis indicates that our Preferred Plan performs as well or better than those scenarios that contemplate retirement of one or both of Sherco Units 1 and 2, we look forward to discussing the future of Sherco Units 1 and 2 with our stakeholders during this resource planning process.”

The plan noted that several potential key changes during the planning period include:

  • 2023: Blue Lake Units 1-4 cease operation (153 MW)
  • 2025: Manitoba Hydro contracts expire (850 MW)
  • 2026: Cottage Grove Combined Cycle Energy Center contract expires (262 MW)
  • 2027: Mankato Combined Cycle Energy Center contract expires (357 MW)

The plan noted: “Blue Lake Units 1-4 are oil-fired peaking units that are dispatched only a few times a year to provide energy during peak demand periods. We believe we can accomplish a short extension to their operating life through 2023. Further, we anticipate only minor improvements and repairs in order to extend the life of these units through the 2020-2023 period. This work will require a small amount of capital, fixed and variable O&M. Consequently, our planning models assume this life extension.”

The company’s five-year action plan is:

  • Wind – It expects that the 750 MW of wind generation resulting from a 2013 request for proposals (RFP) will achieve commercial operation in 2015. If production tax credits (PTCs) are extended beyond 2014, it proposes to issue an RFP in 2015 to add up to 1,000 MW of additional wind resource that achieves commercial operation by December 2017. If no PTC incentive has occurred by 2018, it proposes to issue an RFP in 2018 to add 600 MW of non-PTC wind by 2020 to meet identified CO2 reduction objectives and further buffer compliance with renewable energy requirements.
  • Solar – It has proposed adding 187 MW of utility-scale solar, which is pending the commission’s consideration. If the commission approves the portfolio of solar resources it proposed, NSP anticipates that these projects will be operational by the end of 2016. Additionally, it will continue implementing small-scale solar programs to add additional solar energy to the system.
  • Hydro – NSP anticipates adding 75 MW of energy and capacity through a new diversity agreement with Manitoba Hydro in 2015.
  • Natural Gas/Oil Peaking – NSP anticipates retiring all three Combustion Turbines at its Key City facility in 2015. And, it anticipates extending the life of Blue Lake Units 1-4 through 2020-2023, providing 153 MW of capacity to the NSP System.
  • Coal – It will retire the coal-fired Black Dog Units 3 and 4, comprising 230 MW, in 2015.
  • North Dakota Restack – NSP will continue to work through negotiations, and in 2015, intends to seek approval of the North Dakota Public Service Commission on a System Restack proposal. It believe additional discussions with all relevant state commissions will be necessary during the five-year action planning period to address divergent energy policies and changes in cost allocations that may result. 
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.