Xcel Energy 2015 Upper Midwest Resource Plan: A “Best of the Above” Strategy
On January 2, 2015, Minnesota’s largest electric utility, Xcel Energy, filed its resource plan covering the planning period 2016 to 2030. As a former resource planner, I can tell you that it’s a remarkable document. Although not a perfect plan from any one stakeholder’s perspective, the plan can be characterized as a “Best of the Above” strategy – not simply “all of the above” but one that proposes a least-cost, best-value mix of a diverse set of resources that continues the utility’s national leadership on energy efficiency, renewable energy and carbon emission reduction. In addition, the utility proposed a promising collaborative approach to engaging stakeholders in resource planning, borne from the e21 Initiative Phase I work.
The plan that the Minnesota Public Utilities Commission ultimately approves will likely be somewhat different than the one that Xcel Energy has proposed, but Xcel Energy’s initial plan is a terrific start to that conversation. Xcel Energy’s resource plan can be summarized as follows:
Demand-side Efficiency: Maintain the utility’s nation-leading achievements on energy efficiency at 1.5 percent of annual retail sales throughout the planning period
Xcel Energy has had a long history of cost-effective demand-side energy efficiency achievements at a cost of between 2 and 3 cents per kilowatt-hour, by far the least expensive resource available to the utility. While Xcel Energy may be able to attain achievements above 1.5 percent in any particular year during the planning period, the commitment to maintain that level of achievement over the full fifteen years of the planning period is noteworthy and is good news for Xcel Energy customers. This level of demand-side efficiency is consistent with a forthcoming legislative proposal by the environmental advocacy coalition Clean Energy and Jobs Campaign, although the Clean Energy and Jobs Campaign proposal would add an increment of supply-side efficiency as well.
Wind: Add approximately 900 megawatts of wind to the utility’s current wind capacity of 1,800 megawatts, for a total of 2,700 megawatts by the end of the planning period
Xcel Energy’s proposal is to add 1,800 megawatts of wind by 2030. The power purchase agreements of 900 megawatts of wind power currently on the Xcel Energy system will expire over the planning period, resulting in a net addition of 900 megawatts by 2030. Beginning with the passage of the Prairie Island legislation in 1994, Xcel Energy has become the nation’s leader with regard to wind generation. When combined with the federal production tax credit, wind power is second only to demand-side efficiency as a least cost energy resource.
Solar: Add approximately 2,300 megawatts of solar capacity – 1,700 megawatts of utility-scale solar and 500 megawatts customer-sited solar
This amount of solar capacity would be roughly sufficient to meet Minnesota’s solar aspirational goal for utilities to get 10 percent of its electricity from solar resources by 2030, well beyond the solar standard of 1.5 percent by 2020 currently required of certain utilities. The vast majority of the solar capacity would be added in the later years of the planning period, when Xcel Energy expects solar to be cost-competitive with natural gas generation.
Natural Gas: Add 1,750 megawatts of natural gas peaking resources, to allow the utility to meet peak customer demand on the hottest days of the year
Coal: Operate the 1,500 megawatts of coal generation capacity of units 1 and 2 of the Sherburne County Generation Station at reduced levels through the planning period
A significant issue in this resource plan is the future of these two Sherco coal generation units. Many advocates would like to see these units retired early, while others would like the utility to operate these units long after the end of this planning period. Xcel Energy’s initial proposal would be to run the units at reduced levels through the planning period to allow the utility to achieve carbon dioxide emission reductions of 40 percent or more over 2005 levels by the end of the planning period. This level of carbon emission reductions would be significantly greater than expected by the state carbon emission reduction goals of 30 percent by 2030.
Nuclear: When combined with demand-side efficiency, wind, solar and limited coal operations, the significant nuclear generation on the Xcel Energy system allows the utility to obtain over 60 percent of its electricity from carbon-free resources by 2030.
As can be seen from the following table, the amount of nuclear power on the Xcel Energy system remains constant between 2005 and 2030. If Xcel Energy’s proposal were to be implemented, coal-fired electricity on the Xcel Energy system would drop from over 50 percent of the system’s electricity in 2005 to under 30 percent by 2030. Conversely, wind and solar generation would increase from 5 percent in 2005 to 33 percent by 2030.
The clean energy and diversity of Xcel Energy’s resource mix provides a hedge against fuel price volatility and future environmental regulation, at a cost of less than 2 percent over a resource mix without that diversity. Additionally, the 2030 mix of wind, solar, and small hydro at 35 percent of Xcel Energy’s annual generation is similar to another Clean Energy and Jobs Campaign legislative priority of increasing the Minnesota Renewable Energy Standard to 40 percent renewables by 2030. Given that the Clean Energy and Jobs Campaign proposal would allow for use of banked renewable energy credits for compliance, it appears that the Xcel Energy proposal would likely comply with a 40 percent Renewable Energy Standard.
For those interested in following these issues, please join us on January 27th at our free policy forum: The Future of Energy Regulation in Minnesota - Policy Opportunities and Innovations, where we will hear from Xcel Energy CEO Ben Fowke and a panel of state energy policy experts.
Image credit: Brookhaven National Labratory