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Xcel Energy to invest $1.4 billion in renewables projects, retire Minnesota coal: company


2.878 GW owned, 1.591 GW under development projects

Plans to retire all its Minnesota coal plants by 2030

Q3 earnings of $1.14/share, up from with $1.01 last year

  • Author
  • Kassia Micek
  • Editor
  • Jennifer Pedrick
  • Commodity
  • Coal Electric Power
  • Topic
  • Energy Transition Environment and Sustainability

Xcel Energy plans to invest nearly $1.4 billion in additional wind and solar projects totaling roughly 5 GW between the end of 2020 and the second quarter of 2021, officials said Oct. 29.

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Spanning from Texas and New Mexico to North Dakota and Minnesota, the largest multi-state wind investment plan in the nation includes 2.878 GW owned and in-service projects, plus 1.591 GW of projects under development, with regulatory decision expected by the end of 2020, said Xcel Energy chairman and CEO Ben Fowke during the company's third-quarter earnings call.

In August, the 500-MW Cheyenne Ridge wind farm in Colorado, one of the largest single-phase wind projects in US history, went into operation ahead of schedule and under budget, Fowke said.

Xcel Energy, which currently has more than 760 MW of large-scale, universal solar capacity on its system, expects regulatory decision on its solar investment plan in Q2 2021. Earlier in the week, Xcel Energy announced a 74-MW solar array agreement with Western Mustang Solar, which will be the largest solar project in western Wisconsin when operations in 2022.

Xcel Energy was the first major utility in the nation to announce a vision to deliver carbon-free electricity to all customers by 2050.

Xcel Energy wind investment plan
Owned and in service
Cheyenne Ridge
Rush Creek
Blazing Stae 1
Grand Meadow
Lake Benton
Pleasant Valley
Under development
Blazing Star 2
Community Wind North*
Crowned Ridge*
Dakota Range
* build-own-transfer projects
Source: Xcel Energy

Energy transition plans

Xcel Energy is well positioned for the energy transition regardless of who is elected Nov. 3. If former Vice President Joe Biden wins, Xcel Energy plans to discuss how a 2035 time frame for a transition to clean power is very aggressive based on the current technology available. Xcel has a target of 2050 for a transition to clean energy.

Xcel Energy plans to enable 1.5 million in its service territory by 2030, which is 20% of the cars on the road now, Fowke said.

"While EVs are expensive today, we think that cost comes down," Fowke said. "A Biden administration might help that cost come down even more. And then we're getting more EVs out there, reducing the carbon footprint, obviously, and creating investment opportunities for us and additional sales load, which all customers benefit from."

Xcel Energy would welcome federal rebates for EVs purchases, which would make an overall impact to the industry-wide carbon goals, Fowke said. In addition, a public-private partnership could build fast-charging stations around corridors where people travel.

Xcel Energy is partnering with the Idaho National Lab and others to use excess electricity and steam to separate the hydrogen and oxygen molecules in water using a high-temperature electrolysis process, which is 30% more efficient and a sustainable way to produce hydrogen, Fowke said.

"While it's not currently economical, we think hydrogen has long-term potential to be a carbon-free form of dispatchable generation, which will allow the country to achieve its carbon goals while maintaining reliability," Fowke said.

Minnesota coal plant retirement

By 2030, Xcel Energy plans to retire all its Minnesota coal plants, according to Brian Van Abel, executive vice president and CFO.

Earlier this year, the Minnesota Commission opened a relief and recovery docket, inviting utilities to submit projects to create jobs and jump-start the economy, Fowke said, adding that Xcel Energy's proposal includes 650 MW from four wind farms with $750 million of capital investment. The proposal also includes 67 MW of repowered power purchase agreement extensions and 460 MW of solar facilities near the retiring Sherco coal plant to take advantage of the existing transmission.

"We are confident the commission will see the customer benefits of these projects," Fowke said.

Earnings report

Xcel Energy Q3 earnings were $1.14/share, up from $1.01 per share a year ago, Van Abel said. Most significant earnings drivers for the quarter included higher electric margins increased earnings by $0.20 per share, primarily driven by rises in rate outcomes, and flat operations and maintenance (O&M) expenses primarily driven by cost management efforts.

"Offsetting these positive drivers were increased depreciation and interest expense, which reduced earnings by $0.12 per share, reflecting our capital investment program," Van Abel said. "In addition, other items combined to reduce earnings by $0.02 per share."

Year-to-date earnings were on track with Xcel Energy's financial plan and the company is mitigating the impact of the coronavirus, Fowke said, adding that the company is narrowing the 2020 guidance range to $2.75 per share to $2.81 per share as a result.

An updated base investment plan reflects $22.6 billion of capital expenditures over the next five years and represents rate base growth of 6.3% off a 2020 base year, Fowke said.

"In addition, we've identified potential incremental CapEx of $1.4 billion associated with the Minnesota relief and recovery proposal, which, if approved, will drive rate base growth of 6.9%," Fowke said. "We're also initiating 2021 guidance of $2.90 to $3 per share, which is consistent with our 5% to 7% long-term EPS growth objective."

The pandemic had an adverse impact as Q3 weather-adjusted electric sales fell 2.4%, Van Abel said, adding O&M contingency plans were adjusted accordingly.

"We initiated 2021 earnings guidance of $2.90 to $3 per share, consistent with our long-term objective," Van Abel said. "We remain confident we can deliver long-term earnings and dividend growth within our 5% to 7% objective range."