Xcel Energy Inc. CEO Ben Fowke said Aug. 1 that natural gas-fired generation will play a crucial role in the utility's exit from coal in the Upper Midwest by 2030 as the company works to achieve a 100% carbon-free system by midcentury.
"For now, we need to take early action and gas is the avenue to get us there," Fowke said during a second-quarter earnings call with investors.
Fowke delivered his comments a week after the Minnesota Office of Attorney General filed comments urging state regulators to reject Xcel Energy subsidiary Northern States Power Co.'s pending acquisition of the 760-MW gas-fired Mankato Power Plant from Southern Power Co.
Xcel Energy said in its July 1 integrated resource plan filed with the Minnesota Public Utilities Commission that the gas-fired resource is necessary to "satisfy significant capacity and operational need created by coal closures."
However, the state attorney general's July 26 comments asserted that Xcel Energy and Southern Power "negotiated and structured the proposed acquisition in an opaque backroom deal and in the absence of any competition, transparency or meaningful need or alternatives analysis."
Despite the comments opposing the $650 million sale, Xcel Energy executives told investors that they are cautiously optimistic that the commission will approve the acquisition. "We believe we've demonstrated the economics of ownership are still compelling despite the disagreements on modeling highlighted by the comments," Bob Frenzel, Xcel Energy's executive vice president and CFO, said on the call.
Frenzel added that the company anticipates hearings and a commission decision on the proposed sale in September.
Addressing the utility's goal of cutting carbon emissions from 2005 levels 80% by 2030, Fowke dismissed the idea that natural gas will compete against renewables after that target year. "I don't think they'll really compete with each other, they'll support each other at that point," Fowke said.
But Fowke was more circumspect when asked if he sees a role for gas on a 100% carbon-free power system by midcentury, saying, "By 2050, unless those plants are burning renewable gas, which is certainly a possibility, you wouldn't want them on the grid."
In the interim, Fowke highlighted the need for further innovation in energy storage. "We get to that 80% mark, and as I've said before, we're going to need to work on those technologies to get that last bit of carbon off of our system," he said.
Xcel Energy reiterated in its earnings presentation for investors that its Minnesota integrated resource plan foresees adding approximately 1,700 MW of firm dispatchable, load-supporting resources between 2031 and 2034, with utility-scale storage expected to make up an integral part of that mix.
Xcel Energy's posted ongoing earnings of $238.0 million, or 46 cents per share, in the 2019 second quarter, down from $265.0 million, or 52 cents per share, in the prior-year period. The S&P Global Market Intelligence consensus normalized EPS estimate for the quarter was 53 cents.