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Xcel to exit coal in Upper Midwest by 2030 amid 'massive growth in solar'

Xcel Energy Inc. plans to eliminate coal-fired generation from its Upper Midwest power mix by 2030 while adding at least 3,000 MW of solar power, expanding energy efficiency and purchasing an existing natural gas generator, according to a settlement agreement with clean energy and labor groups filed May 20 with the Minnesota Public Utilities Commission.

The settlement, reached between Xcel and its subsidiary Northern States Power Co. as well as the Sierra Club, the Union of Concerned Scientists, the Laborers District Council of Minnesota and North Dakota, and other organizations, calls for the retirement of the utility's 511-MW Allen S. King coal plant in Washington County, Minn., no later than 2028, in addition to closure of the third and final unit of Xcel's 2,238-MW Sherburne County Plant (Sherco) by 2030.

As part of the agreement, the utility also committed to reducing its use of Sherco Unit 2 by offering it on a seasonal basis only to the Midcontinent ISO until its retirement in 2023. The environmental and labor groups said they would support the utility's request to recover from ratepayers the remaining costs associated with the two coal-fired facilities.

SNL Image

The settlement grew out of Xcel's proposed $650 million purchase of Southern Power Co.'s Mankato Power Plant, a combined-cycle natural gas plant, and negotiations over the utility's forthcoming 2019 integrated resource plan. Northern States Power Co. already purchases power from the existing 377-MW Mankato facility, according to S&P Global Market Intelligence data, and has signed another 20-year agreement for an additional 345 MW under construction.

"This is a significant step forward as we are on track to reduce carbon emissions more than 80% by 2030 and transform the way we deliver energy to our customers," Chris Clark, president of Xcel Energy's operations in Minnesota, North Dakota and South Dakota, said in a news release.

Xcel cited the agreement as a critical part of its Upper Midwest Energy Plan, a comprehensive roadmap that it intends to file with Minnesota energy regulators in July, and its previously stated mission to entirely decarbonize its multistate power generation portfolio by midcentury.

The company's clean-energy transition also includes adding 1,850 MW of wind power by 2022, expected to cover nearly one-third of its Upper Midwest customers' energy use by that time, and operation of its 646-MW Monticello nuclear power plant in Wright County, Minn., "until at least 2040," Xcel said, which would require an extension of its operating license.

Solar and efficiency expansion

Environmental groups applauded the settlement, but some still oppose Xcel's commitments to natural gas and nuclear power.

"The important thing is we were all able to come together to advance the ultimate goal of 100% clean energy," said Sierra Club spokeswoman Rebecca Kling. The group, however, opposes extending Xcel's license to operate Monticello and does not support its acquisition of Mankato, although it refrained from formally opposing the transaction.

James Gignac, lead Midwest energy analyst for the Union of Concerned Scientists, in a May 20 blog post pointed to the "massive growth in solar power" foreseen in the settlement. Xcel's commitment to add 3,000 MW of solar to its system by 2030, including utility ownership of at least 1,500 MW of that, dwarfing the roughly 1,100 MW of solar capacity currently installed in Minnesota.

The settlement also calls for Xcel to expand its energy savings to an average of 706.4 GWh to 767.7 GWh annually between 2020 and 2029. That goes beyond the utility's current electricity savings in Minnesota, equal to about 2.35% of its retail sales, according to Gignac.

"Investing in energy efficiency helps utilities avoid more expensive measures and helps reduce customers' energy bills which promotes energy affordability and reduces the energy burden," he said.