Early Prairie Island retirement comes up in Xcel’s Minnesota resource plan case

Xcel Energy (NYSE: XEL) said in its Aug. 4 quarterly Form 10-Q report that the Minnesota Public Utilities Commission (MPUC) is expected to decide this fall on a resource plan from Northern States Power-Minnesota that includes future early retirement of coal and possibly nuclear capacity.

In January 2015, NSP-Minnesota filed its 2016-2030 Integrated Resource Plan  with the MPUC. Subsequently, NSP-Minnesota proposed revisions to the plan, which addressed stakeholder recommendations as well as the CO2-reducing Clean Power Plan (CPP) issued by the U.S. Environmental Protection Agency (and currently stayed by the U.S. Supreme Court). The revised resource plan is based on four primary elements:

  • accelerate the transition from coal energy to renewables;
  • preserve regional system reliability;
  • pursue energy efficiency gains and grid modernization; and
  • ensure customer benefits.

The provisions included in the plan would allow for a 60% reduction in carbon emissions from 2005 levels by 2030 and is expected to result in 63% of NSP System energy being carbon-free by 2030. Specific terms of the proposal include:

  • the addition of 800 MW of wind and 400 MW of utility scale solar to the pre-2020 time-frame;
  • the addition of 1,000 MW of wind and 1,000 MW of utility-scale solar between 2020-2030;
  • the retirement of the coal-fired Sherburne County (Sherco) Unit 2 in 2023 and Sherco Unit 1 in 2026;
  • the addition of a 230-MW natural gas combustion turbine in North Dakota by the end of 2025;
  • replacement of Sherco coal generation with a 786-MW natural gas combined cycle unit at the Sherco site no later than 2026; and
  • operation of the Monticello and Prairie Island nuclear plants through their current license periods in the early 2030s.

In January 2016, NSP-Minnesota filed supplemental economic and technical information in support of its revised plan. Additionally, NSP-Minnesota addressed forecasted cost increases at Prairie Island (through end of licensed life) and committed to provide additional information if the MPUC wishes to further explore alternatives to operating Prairie Island through its current license periods.

In July 2016 in this case, the Minnesota Department of Commerce submitted its comments, which:

  • concluded NSP-Minnesota’s revised plan is the most cost-effective after analyzing alternative retirement scenarios for Sherco Units 1 and 2 and a possible retirement of the King plant;
  • recommended a separate detailed analysis of early Prairie Island retirement;
  • recommended no additional solar beyond the community solar gardens program for the first five years; and
  • recommended adding up to 1,000 MW of wind by 2019.

The Department of Commerce (DOC) in its July 8 comments said its concern about the viability of Prairie Island out to its license expiration date was triggered by this Northern States Power response to an inquiry: “We determined that operating the plant to the end of its current license would require substantial increases in capital for the period 2021 through 2034, primarily due to the reliability risks of aging equipment and anticipated costs for compliance with additional [Nuclear Regulatory Commission] NRC requirements. While it is difficult to predict the specific investments that may be required in this timeframe, we believe that capital expenditures would likely need to increase by roughly $600 to $900 million over this fifteen-year period.”

The department said it agrees with Xcel that a decision to shut down Prairie Island should not be made at this time. Rather, the department’s analysis is an initial high-level screening review to begin to respond to the commission’s inquiry about Xcel’s costs at the nuclear plant, specifically as to whether further, more detailed analysis of an early retirement should be pursued. Xcel said this work could be completed within 18 months. The department said it defers to the commission to set the deadline for such a filing. In the meantime, the department intends to continue its analysis of Prairie Island costs.

Renewable energy developers love this plan

As might be expected, renewable energy developers like the utility’s plan. Said EDF Renewable Energy in July 8 comments filed in this case: “EDF Renewable Energy strongly supports Xcel Energy’s Current Preferred Plan as proposed in its January 29, 2016 Supplement to their 2016-2030 Upper Midwest Resource Plan. We wish to specifically emphasize our support for Xcel’s long-term plans to add 1800 MW of wind energy and 1400 MW of largescale solar through 2030. We also support their 5-year action plan to add 800 MW of wind energy and 400 MW of solar energy. We support Xcel beginning to procure wind energy through an RFP issued as soon as possible this year.

“Finally, we support a mix of IPP-ownership and utility-ownership of projects. Given the robust competition between utility and non-utility corporate off-takers for the best renewable energy projects available, the limited window of time available for exercising the federal Renewable Energy Production Tax Credit (PTC) and Business Energy Investment Tax Credit (ITC), and the unique grid benefits of wind and solar energy, Xcel’s ratepayers stand to benefit from the company procuring renewable energy this year and in-the near-term. Given the positive outlook for renewable energy over the longer-term, Xcel ratepayers will also benefit from continued renewable energy procurement through 2030.”

Said Enel Green Power North America (EGPNA) in its own July 8 comments: “EGPNA applauds Xcel’s effort to increase its share of carbon-free energy sources as detailed in its Plan. As a global power company that provides electric and gas utility services throughout the world, Enel has a company commitment to be carbon-neutral by 2050. Thus, Enel understands the challenges Xcel faces as an investor-owned, regulated utility transitioning its generation fleet. But, by taking the lead in the renewable energy space and becoming an innovative mover in the market, Xcel will be able to take full advantage of federal incentives and prime wind and solar resources to optimize benefits for its ratepayers.

“As other Midwestern states rush to develop renewable energy projects as the price point for these technologies continues to decline, Minnesotans will be well positioned to affordably comply with carbon emission reduction regulations harnessing Minnesota’s vast clean energy potential. The U.S. Department of Energy projects that Minnesota could produce enough wind power by 2030 to power the equivalent of 1.3 million average American homes, up from 896,000 homes in 2015. Additionally, the Minnesota Department of Commerce indicates on its website that Minnesota has an annual solar resource similar to areas of Texas and Florida and that demand for solar in Minnesota will continue to rise. Xcel’s ability to cost-effectively achieve an energy mix that is 63 percent carbon-free by 2030 will move Minnesota closer to its goal of an 80 percent carbon reduction by 2050 in a responsible manner.”

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.