This CEE-hosted event provided a technical overview of the resource modeling behind Minnesota’s first-ever alternative resource plan. Presentation given by: Kevin Reuther- Minnesota Center for Environmental Advocacy, Anna Sommer- Sommer Energy LLC, Michelle Rosier- Sierra Club MN North Star Chapter
CCXG global forum, April 2024, Watcharin Boonyarit
Clean Energy Plan Stakeholder Workshop
1.
2. Workshop Agenda
Background & Clean Energy Plan Overview
Kevin Reuther | MN Center for Environmental Advocacy
MISO Context & Carbon Emissions Adjustments
Anna Sommer | Sommer Energy LLC
-- Q&A | Intermission --
Modeling Assumptions & Details
Anna Sommer | Sommer Energy LLC
-- Brief Small-Group Discussions --
Alignment With Local & State Policy Goals
Michelle Rosier | Sierra Club, MN North Star Chapter
-- Primary Q&A --
3. Pg. 3
Clean Energy Organizations
With Technical Assistance by:
Anna Sommer and Peter Lanzalotta
5. Pg. 5
Background on Process
• Integrated Resource Plans
• Filed every 2 years
• 15-year plan. 2015 – 2030
6. Pg. 6
Background on Process
• Integrated Resource Plans
• Filed every 2 years
• 15-year plan. 2015 – 2030
• Timeline
• Xcel filed in January 2015; update in March 2015
• Other parties comment July 2, 2015
• Reply comments due October 2, 2015
7. Pg. 7
Background on Process
• Integrated Resource Plans
• Filed every 2 years
• 15-year plan. 2015 – 2030
• Timeline
• Xcel filed in January 2015; update in March 2015
• Other parties comment July 2, 2015
• Reply comments due October 2, 2015
• Clean Energy Plan Development Principles
• State environmental and energy policy
• System reliability
• Affordability
9. Pg. 9
Resource Plans Compared:
Clean Energy Plan Xcel Energy’s Preferred Plan
• Retire Sherco 1 in 2021 • Sherco 1 through 2030
• Retire Sherco 2 in 2024 • Sherco 2 through 2030
• 2,500 MW Wind • 2,500 MW Wind
• 1,700 MW Large Solar • 1,700 MW Large Solar
• 1.7% EE (2015-2021) • 1.5% EE (2015-2021)
• 1.5% EE (2022-2029) • 1.3% EE (2022-2029)
• 2,750 MW Peaking Nat. Gas • 1,750 MW Peaking Nat. Gas
12. Pg. 12
More Realistic Assumptions Make the
Clean Energy Plan Cheaper
• Coal Costs
• Xcel modeled coal costs lower than those paid in 2014
• Adjustment makes Clean Energy Plan $76 million cheaper
• Social Cost of Carbon
• Xcel modeled the Commission’s existing externality value
($4.00/ton) and the regulatory value ($21.50) after 2019
• Adjustment using federal SCC ($38.00/ton) makes the Clean
Energy Plan $396 million cheaper over the 15-year planning
period
• Externalities
• Xcel modeled values of $0.0 for SO2 and PM2.5
• Adjustments will make the Clean Energy Plan cheaper
13. Pg. 13
Dept. of Commerce Recommends
• File another IRP in 2017
• Convert Sherco 1 to gas in 2025 (assuming no
reliability issues)
Clean Energy Plan DOC Plan Xcel Preferred Plan
• Retire Sherco 1 in 2021 • Convert Sherco 1 in
2025 (to NG)
• Sherco 1 through 2030
• Retire Sherco 2 in 2024 • Sherco 2 through 2030 • Sherco 2 through 2030
• 2,500 MW Wind • 1,900 MW Wind • 2,500 MW Wind
• 1,700 MW Large Solar • 1,000 MW Large Solar • 1,700 MW Large Solar
• 1.7% EE (2015-2021) • 1.5% EE (2015-2021) • 1.5% EE (2015-2021)
• 1.5% EE (2022-2029) • 1.5% EE (2022-2029) • 1.3% EE (2022-2029)
• 2,750 MW Peaking NG • 1,750 MW Peaking NG
• 560 MW CC NG
• 1,750 MW Peaking NG
14. Pg. 14
5 Issues for Focused Discussion
1. GHG Emission Reductions
2. Energy Efficiency
3. Natural Gas
4. Coal Costs
5. Further Delaying a Decision
20. Pg. 20
Energy Efficiency in the Clean Energy Plan
• Starting point:
• Law requires utility to achieve all cost-effective EE
• Xcel’s plan assumes declining EE
• This is a common theme in utility IRPs over time
• Historical achievements don’t support assumption
• Efficiency prices are not justified
• Clean Energy Plan makes reasonable assumptions
about EE achievability over planning period
24. “Even so, Minnesota will not achieve the first milestone – the 15%
reduction in greenhouse gas emissions by 2015. We have work to do,
and I am committed to getting Minnesota back on track.”
26. Pg. 26
Models Used in IRPs
• Generally fall into two categories
• capacity expansion
• production costing
27. Pg. 27
Models Used in IRPs
• Generally fall into two categories
• capacity expansion
• production costing
• Capacity expansion models choose a portfolio of
resources to meet future need and perform simplified
dispatch
28. Pg. 28
Models Used in IRPs
• Generally fall into two categories
• capacity expansion
• production costing
• Capacity expansion models choose a portfolio of
resources to meet future need and perform simplified
dispatch
• Production costing models perform an 8760 hour
dispatch but take the portfolio of resources fed into it
by the modeler
46. Pg. 46
DSM Potential Study Overestimates EE Savings Costs
$-
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
2014 2015 2016 2017 2018 2019 2020
perkWh
2011 DSM Study - 50% Rebates 2011 DSM Study - 75% Rebates 2011 DSM Study - 100% Rebates
2014 DSM Study - 50% Rebates 2014 DSM Study - 75% Rebates 2014 DSM Study - 100% Rebates
47. Pg. 47
CEP Energy Savings are Within Reach
0
100
200
300
400
500
600
GWh
Clean Energy Plan "Stretch" Xcel's Preferred Historic
48. Pg. 48
Further energy savings are unlikely to come at Xcel’s
projected costs
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
perkWh
Clean Energy Plan "Stretch" Xcel's Preferred Historic
50. Pg. 50
More Savings and Lower Cost in Lighting
Commercial Sector Residential Sector
51. Pg. 51
More Savings and Lower Cost in Lighting
0
50
100
150
200
250
2014 2015 2016 2017 2018 2019 2020
Screw-in (60W equivalent) LED screw-in PAR LED flood fixture LED Troffer (2L4'T8)
54. Pg. 54
Alternative coal price forecast increases the cost of
Xcel’s plan compared to the CEP
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
000$
Clean Energy Plan Xcel's Preferred Plan
Clean Energy Plan PVSC Difference: -0.27%
55. Pg. 55
CTs are at least partially placeholders for
other resources
• Solar
• Storage
• Manitoba hydro
58. Pg. 58
“We’ve got to get off fossil fuels. The quicker the better.”
“When you can guarantee the price of delivering a kilowatt 20
years from today, because that's what you can do with solar
and wind, you have a competitive advantage because coal,
natural gas, they can't tell you want the cost to produce power
in six months will be.”
- David Mortenson, Mortenson Construction (2014)
- Former Xcel CEO Dick Kelly (2011)
“Coal is going away. It’s just a matter of time.”
- Xcel CEO Ben Fowke (2015)
The Time to Transition is Now.
59. Pg. 59
“ The question is: are we progressing fast enough? Are we
doing all we can to utilize other renewables, such as solar,
and also to make Minnesota the best place to locate these
new industries and their jobs?”
- Governor Mark Dayton (2013)
The Time to Transition is Now.
61. Pg. 61
Driving Forces: Ongoing Pollution Concerns
• Sherco may need to meet
new costly air pollution
controls starting in 2018
• Updated external pollution
costs will emphasize the
unnecessary environmental
and health costs of
continued Sherco operation
(possibly complete in 2016)
62. Pg. 62
Driving Forces: Economic Opportunities
• Minnesota: No fossil fuel production; Has strong
renewable & energy efficiency sector
• Grid reliability with 40%+ renewables (for large users)
• Renewables & efficiency are least cost options
63. Pg. 63
Driving Forces: Utility Sector
• Aging infrastructure, emerging technologies, & large
capital investments
• Renewable disruption in the utility sector
• Clean Power Plan and a price on carbon
• Changing utility business model
“Innovate at the speed of
customer value”
64. Pg. 64
Preparing for a Transition
Workers
• Transition plan (retirement, relocation, training/placement)
Community Tax Base
• Diversification of tax base, economic development
Customer Values
• Affordable rates, clean energy, saving energy, reliability
Shareholder/Utility Profits
• Debt & cost recovery; Distributed generation threat
Health/Environment/Clean Energy Business
• Least cost pollution reduction, climate, health impacts, &
industry growth
66. Pg. 66
“We’ve got to get off fossil fuels. The quicker the better.”
“When you can guarantee the price of delivering a kilowatt 20 years from
today, because that's what you can do with solar and wind, you have a
competitive advantage because coal, natural gas, they can't tell you want
the cost to produce power in six months will be.”
- David Mortenson, Mortenson Construction (2014)
- Former Xcel CEO Dick Kelly (2011)
“Coal is going away. It’s just a matter of time.”
- Xcel CEO Ben Fowke (2015)
The Time to Transition is Now.
“ The question is: are we progressing fast enough? Are we doing all we
can to utilize other renewables, such as solar, and also to make
Minnesota the best place to locate these new industries and their jobs?”
- Governor Mark Dayton (2013)
Clean Energy Organizations.
Coalition doing work at the PUC.
Anna Sommer is our consultant who did most of the work on this docket.
Integrated Resource Plans
Filed every 2 years
15-year plan. 2015 – 2030
Timeline
Xcel filed in January 2015; update in March 2015
Other parties comment July 2, 2015
Reply comments due October 2, 2015
Principles
State environmental and energy policy
System reliability
Affordability
What you put in affects what you get out.
This is a year-by-year comparison of the price of the two plans.
One thing to understand about Xcel’s plan is that it is well intentioned, but we don’t think it will achieve what Xcel reports.
They say that they’ll drop GHG emissions 40% below 2005 levels by 2030. This would put them in line with state GHG goals.
The idea is that they can add so many renewables that the coal generation gets backed down, even though not retired. They sell this based on flexilibity.
Getting a bit into the weeds. There are 3 ways that we found they overstate the emission reductions:
Strategist pretends MISO doesn’t exist. So, when wind is added; coal is dropped on Xcel’s system. In fact, that’s not how the electricity system operates; we’re part of a regional system that is constantly dispatching source based on cost. The MRITs study found that additional renewables doesn’t affect coal geneartion in MN.
There’s a calculation that Xcel did w/ something called “dump energy” (they used a higher GHG intensity ration than is appropriate for their system) that resulted in it looking like they’d reduce more.
They ran the model with “markets off.” In other words the model assumes that Xcel buys not electricity from the market. In the last four years, they’ve bought more then they’ve sold. This has the effect of increasing the GHG b/c the market has a higher intensity than Xcel.
Xcel assumed 1.5% and then only 1.3% after first 5 years.
Goal is 1.5%
We assumed 1.7% and then 1.5%
This is justified based on historic achievement.
We also adjusted the cost they attributed to EE.
.
Mirroring formatting above here. Again, not sure how much you want to go into it.
Option 1
Integrated Resource Plans
Filed every 2 years
15-year plan. 2015 – 2030
Timeline
Xcel filed in January 2015; update in March 2015
Other parties comment July 2, 2015
Reply comments due October 2, 2015
Principles
State environmental and energy policy
System reliability
Affordability
ANNA STARTS HERE
A capacity expansion model takes the resource choices given to it and determines which and how many form the lowest cost portfolio to meet projected demand. Then it does a simplified simulation of power plant operations also called “dispatch”. Strategist is a capacity expansion model and is the most frequently used model in Minnesota resource planning. In the case of Strategist, the most common simplification of dispatch is what’s called “typical week per month”, which means that one week is intended to represent a whole month. So whatever dynamics apply in that week are extrapolated to the month as a whole.
Production costing models, which have not historically been used in Minnesota, try to simulate dispatch more granularly. They simulate power plant operations in every hour of every year. They have nothing to say about what makes up the portfolio of resources being simulated, rather the idea is to under how units will dispatch in the future.
When you simulate dispatch from the perspective of most MN utilities, you are simulating MISO dispatch. MISO is the wholesale market authority for a number of Midwestern and now Southern states shown here. MISO’s footprint is divided into zones and most of Minnesota falls into (Local Resource) Zone 1. MISO has two markets in which it dispatches power, the day-ahead and real-time markets with the former being where most dispatch takes place. At a very high level, this is how dispatch works. Every day utilities within the MISO footprint bid in their generators, MISO orders those generators according to their bids from lowest to highest cost, subject to any potential reliabiilty concerns and then says, for example, Generators A-C will run but not Generators D and E. Each generator has its own unique clearing price, known as the Locational Marginal Price (LMP). In Strategist, there is one price representing both the cost to purchase power from MISO and the price your generator will receive if it sells power. However, most of the modeling Xcel and the Department did turned the MISO market off completely. There is no way to buy or sell power.
Normally, MN utilities don’t allow any sales within their modeling so that the model doesn’t choose a new resource because of the wholesale market revenues it might provide. And you might turn off purchases to get a sense of whether the utility would be able to provide all its own power if it had to. But turning the market off has its downside too, it means that MISO is taken out of the equation completely and you assume that whatever dynamics are present in your utility’s system are indicative of MISO as a whole.
Xcel’s Preferred Plan shows declining CO2 emissions into the future. Those declines come largely from reduced generation by its coal-fired power plants.
Now, let’s look at MISO in the same way. You have nearly 180,000 MW of capacity, about 18 times more than Xcel. And average demand let’s say, is 70,000 MW. It was somewhere on the order of 55,000 GW in 2013 but then the peak demand increased about 30% at the end of 2013 with the addition of MISO-South. That puts us solidly in the coal portion of the stack. Now let’s add in, Xcel’s wind and solar.
dispatch stack gets pushed up, it might be hard to see but the right column increases just a little bit. but we’re still solidly in the coal portion of the stack. So in order for Xcel’s coal units to be backed down in reality, they would have to fall into this sweet spot right next to the blue line, so that when the dispatch stack is pushed up, it’s Xcel units and not the 70,000+ MW of other coal units in the MISO system that are dispatched less.
Xcel has quite a few power purchase agreements with gas plants, hydro plants, biomass plants and of course wind plants, this graph is showing just purchases from and sales into MISO.
It’s very difficult to say which power plants in MISO are supplying this electricity that Xcel is purchasing. As a proxy, Xcel uses the average emissions rate as did CEOs. There is a big difference between the average rate of emissions among Xcel’s owned and contracted units compared to MISO’s average. Xcel has a lower rate of emissions. So not only is Xcel buying more CO2 than it is selling simply because it is purchasing more MWh than it is selling. But those purchases also come with more CO2 per mWh than does the electricity that Xcel is selling. I can’t use Xcel’s actual emissions rate so the emissions rate underlying the purple and orange lines are rough estimates.
The lower range simply accounts for the additional generation from Xcel’s units under the assumption that they will continue to operate. The upper bound includes the CO2 from purchases from MISO.
And the purple line is DOC’s projection for their preferred plan. I’m still working through DOC’s modeling files, so I haven’t made any adjustments to this line for purchases from MISO. DOC modeled their preferred plan and its associated emissions without any purchases from MISO. But notice that while emissions fall in 2020 under Xcel’s projection they stay fairly stable under the DOC’s plan. The majority of that difference has to do with the smaller amount of renewables in DOC’s plan compared to Xcel’s. The coal units don’t back off nearly as much under DOC’s plan because of that. Again, this is because Strategist is displacing Xcel’s coal units in favor of those additional renewables because the only thing it can dispatch is those units that comprise Xcel’s system.
And here we did the same thing, adding in the CO2 from MISO purchases to create a range for the CEP plan.
A large part of how one measures Xcel’s compliance with the greenhouse gas goal has to do with your methodology. Xcel models its whole Upper Midwest system together, MN, the Dakotas, and WI are all simulated together in Strategist. So in those prior graphs we’re looking at CO2 produced for purposes of serving load in all four of those states. The majority of which is in MN, but out of state load is not an insignificant #. The Pollution Control Agency, the agency in charge of monitoring progress towards the GHG goal has a different methodology. Rather than looking at Xcel’s Upper Midwest system as a whole, PCA looks just at what happens in MN. PCA compares needs in the utility’s MN service territory to the generation produced by its own and contracted generation in MN. If a utility had to purchase power to meet in-state load, then PCA counts the CO2 emissions associated with purchases. But MN has enough MN based generation to meet its MN load and likely will into the future, so this graph ignores MISO purchases entirely. It also does not make any corrections to coal generation for reduced generation we talked about earlier. By as late as 2025, Xcel will be out of compliance with the goal. I should mention that both of these lines would move up if I put the CO2 emissions from non-fossil fuel generation into this graph. PCA only counts CO2 emissions from the fossil fuels.
Integrated Resource Plans
Filed every 2 years
15-year plan. 2015 – 2030
Timeline
Xcel filed in January 2015; update in March 2015
Other parties comment July 2, 2015
Reply comments due October 2, 2015
Principles
State environmental and energy policy
System reliability
Affordability
Xcel assumed 1.5% and then only 1.3% after first 5 years.
Goal is 1.5%
We assumed 1.7% and then 1.5%
This is justified based on historic achievement as well as some additional, significant measures that we think Xcel can take advantage of and I will talk about later.
Also a cost issue because Xcel’s projected costs of energy efficiency are much higher than it has experienced in the past. That leads to a conclusion that energy efficiency is declining in cost-effectiveness and that Xcel should do less EE.
Say what DSM stands for
Potential study is an assessment of utility’s ability to achieve EE savings in the future, broadly it looks at measures that are technically achievable (for example the technology exists today), looks at measures that are economic (below an estimated avoided cost), looks at measures that are achievable (for example, considers adoption rates of new technology)
Note what percent of rebates means
Note that current portfolio average is about 30% of incremental cost
At the same time, cost has come down, where once KEMA said paying 50% of rebates in 2014 would cost $.20 per kWh, KEMA now says it will be $.10. I think the major take away from all this is that the potential study is not particularly good at looking out more than a couple years. So relying on it for the period of time that Xcel is using is just not going to give you any real sense of savings or cost.
Chose a level of savings that does not exceed the savings Xcel has been able to achieve in the past 4 years. Note that even stretch is higher than Xcel’s preferred plan savings.
Four savings trajectories are plotted here. Historic savings since 2011 are in gray. The Savings in Xcel’s Preferred Plan are in black. The Clean Energy Plan savings are in green. And then there’s a dotted line representing something called “stretch”. Back in 2013, during the Lifecycle Management Study for Sherco, Xcel modeled an alternative scenario of savings that was above and beyond its base case savings. They called that the “Stretch” scenario as in it would be a stretch to achieve those savings. Note that “Stretch” is higher than Xcel’s proposal in this IRP. But as the gray line shows, those savings are actually below Xcel’s recent, historic savings. The DOC is not plotted here because to do so would be a little confusing. Their recommended level of savings would be the grey line until 2021, and then would be the black line after that. But they only modeled the black line or Xcel’s preferred level of savings.
Xcel has unrealistically high cost assumptions, CEP adjustments show that Xcel should maximize EE.
Much like the assumption in Xcel’s preferred plan, the Stretch level of savings had this radically increasing trajectory. On a per kWh basis, those savings have come at pretty stable cost, below the “stretch” scenario. We felt that prior experience was the best indicator of cost, but we also wanted to be conservative about it. So we assumed that EE costs would jump up over 40% from historic levels starting in 2016 and the jump up again in 2022 by another 25%. We felt that this would comfortably capture any potential increases that one might see from potentially increasing diffculty in achieving savings.
These graphs show what’s called “achievable potential” by end use and by sector. We disagree with the absolute numbers, but I think the relative sizes of the different categories is informative. One of the reasons that Xcel thinks that EE will be harder to achieve and more costly is because of the relative weight of lighting savings in its portfolio. Lighting, in general, is one of the easier and cheaper end-uses to address through EE. Something called the Energy Independence and Security Act passed by Congress in 2007 has started to ratchet down the maximum amount of electricity that some types of light bulbs can consume. That has the effect of reducing the baseline against which those bulbs can be measured and therefore reducing the savings that Xcel can claim from its lighting EE programs. That doesn’t mean those savings aren’t happening elsewhere, it just means Xcel can’t say it was responsible for them. Even so, as these graphs so, lighting is still a significant part of Xcel’s potential savings as you can see here.
These graphs show what’s called “achievable potential” by end use and by sector. We disagree with the absolute numbers, but I think the relative sizes of the different categories is informative. One of the reasons that Xcel thinks that EE will be harder to achieve and more costly is because of the relative weight of lighting savings in its portfolio. Lighting, in general, is one of the easier and cheaper end-uses to address through EE. Something called the Energy Independence and Security Act passed by Congress in 2007 has started to ratchet down the maximum amount of electricity that some types of light bulbs can consume. That has the effect of reducing the baseline against which those bulbs can be measured and therefore reducing the savings that Xcel can claim from its lighting EE programs. That doesn’t mean those savings aren’t happening elsewhere, it just means Xcel can’t say it was responsible for them. Even so, as these graphs so, lighting is still a significant part of Xcel’s potential savings as you can see here.
Historically lighting has been largely about flourescent technology, now LEDs are in the mix. Here are a few LED bulb types that were examined in Xcel’s potential study. The potential study assumes this trajectory of cost. For example, a 2 lamp 4’ troffer would fall from over $200 in 2014 to about $125 in 2020. In reality, costs are much lower. The DOE assessed the cost of many LED bulbs in May 2014, which is actually out of date now given how quickly LED prices are falling. Using that DOE data we found that the cost today of all four of these bulbs is at or slightly below the estimated 2020 cost. Because a number of these end-use applications for LEDs were screened out due to their failing a test for cost-effectiveness, we think there is more savings at lower cost just in lighting measures.
Conservation Voltage Reduction is distinct from EE in that it is an infrastructure change, rather than something addressing end-use measures. The technology stablizes voltage at the distribution level so that electric appliances consume less energy. Xcel believes it can install the technology at a cost of $45 million with $6 million in O&M each year and save 5,200 GWh of electricity over 20 years. We assumed that those savings would materialize evenly over that 20 year period in this graph and added them to the “Stretch” scenario. This is a big boon to the potential areas of savings that Xcel can leverage.
I can’t show you the Sherco specific coal forecast, but here’s their generic forecast from this IRP.
When we compared the 2014 forecasted price to the actual price of fuel at Sherco in 2014, we found that the actual price was noticeably higher.
We used the actual as the start of an alternative forecast that used the same rates of growth.
So if coal was $2.25 per MMBtu in 2014 and it actually cost $2.50 then that would be the new starting point.
Use finger to illustrate the trajectory of coal prices.
CEP .27% cheaper just with this change in coal prices
Big tranche of CTs (2750 MW)
That’s because of a capacity need partially due to the retirement of many older CTs
Likely to be filled at least partially with other resources
Solar - For example, in its 2010 IRP, Xcel touted the fact that it had “added just over a megawatt of solar electricity production”3 and said that “we expect this amount to grow over the next decade to approximately 20 MW of solar photovoltaics.”4 Just five years later, it is now proposing to add 1,700 MW of solar in the next 16 years. In its 2010 IRP, Xcel said the reason for choosing 20 MW of solar was that “[a]bsent large gains in PV productivity and additional reductions in the cost of PV systems, solar PV will likely not be a cost effective generation resource in the Upper Midwest for some time.” Xcel went on to say that, “capacity factors for solar PV in the southwestern US can be about 20%. In Minnesota, capacity factors for solar PV are more likely to be in the 12 to 15% range.” I can’t tell you what capacity factor its solar facilities coming online in the next few years will have. Can I say they will be higher?
Storage – RFO out in CA for storage, plan to eventually add 1.3 GW of storage, initial tranche is 200 MW, and RFP already complete for storage to help with local capacity issues
Manitoba hydro – in negotiations with Xcel to renew contract after 2024, would reduce CT capacity needed by over 800 MW, but as DOC noted, the cost probably would need to be comparable or lower to make sense
Integrated Resource Plans
Filed every 2 years
15-year plan. 2015 – 2030
Timeline
Xcel filed in January 2015; update in March 2015
Other parties comment July 2, 2015
Reply comments due October 2, 2015
Principles
State environmental and energy policy
System reliability
Affordability
Another key difference between the three plans is the timing of a decision. While all parties agree that the end of Sherco’s useful life is approaching, the Clean Energy Plan is the only one that would lead to a clear timeline for that transition. The Department of Commerce proposal recommends a 2025 timeline for one unit, but that is superseded by the recommendation to wait until a 2017 resource plan. This recommendation is often explained with a reference that the timeline for ending coal operations at the boiler may be sooner, like 2020. The challenge with that lack of clarity is, in addition to the state and Xcel’s planning, the City of Becker and the workforce need time to plan. Occasionally, Xcel and the Department will reference 2030 as the end of operation for both units, but neither of their plans make that recommendation explicit.
Some of the common concerns raised for not making a decision include: 1) understanding the impact of the Clean Power Plan; 2) completing the MISO analysis of the impacts to the regional grid; and 3) XXXX. While I appreciate these concerns, I don’t think any of them are adequate for putting off a clear decision that will allow all parties to plan for the eventual transition. All the signals we’re seeing in the utility sector, with the science around pollution impacts and climate change, and the potential for greater integration of low cost renewables and efficiency make it clear this transition is necessary and imminent.
Another key difference between the three plans is the timing of a decision. While all parties agree that the end of Sherco’s useful life is approaching, the Clean Energy Plan is the only one that would lead to a clear timeline for that transition. The Department of Commerce proposal recommends a 2025 timeline for one unit, but that is superseded by the recommendation to wait until a 2017 resource plan. This recommendation is often explained with a reference that the timeline for ending coal operations at the boiler may be sooner, like 2020. The challenge with that lack of clarity is, in addition to the state and Xcel’s planning, the City of Becker and the workforce need time to plan. Occasionally, Xcel and the Department will reference 2030 as the end of operation for both units, but neither of their plans make that recommendation explicit.
Some of the common concerns raised for not making a decision include: 1) understanding the impact of the Clean Power Plan; 2) completing the MISO analysis of the impacts to the regional grid; and 3) XXXX. While I appreciate these concerns, I don’t think any of them are adequate for putting off a clear decision that will allow all parties to plan for the eventual transition. All the signals we’re seeing in the utility sector, with the science around pollution impacts and climate change, and the potential for greater integration of low cost renewables and efficiency make it clear this transition is necessary and imminent.
This is a graph from the Climate Solutions Economic Opportunities process that is looking at how to get Minnesota on track to meet its economy-wide climate goals. Minnesota’s Next Generation Energy Act of 2007 specifies targets for reducing state-wide greenhouse gas (GHG) emissions (relative to 2005 emission levels) by at least 15% by 2015 (which the state will not achieve), at least 30% by 2025 (only a decade away) and at least 80% by 2050. (MN Statute 216H.02, Subd. 1)
This slide shows the marginal cost to reduce an additional ton of carbon equivalent and the potential gain toward our statewide reducetions possible. ES-2 is retiring Sherco units 1 &2 in 2020 (and replacing with natural gas) – This graph suggests about a 5% economy-wide carbon reduction gain from replacing those boilers. Our Clean Energy Plan alternative to Xcel’s resource plan offers a path to almost double (42%) the % of carbon reductions Minnesota economy-wide since 2005 for virtually the same price.
ES-1 is setting the next benchmark in our renewable energy standard. RCII-4 is a 2.5%/year energy savings goal. RCII-2 is Sustainable Buildings by 2030 (zero energy). This is to say we see energy savings continue to be some of the least cost options to reduce carbon and save energy. The City of Minneapolis and the Community Power campaign have initiatives to reduce carbon in the city and efficiency and renewables are high on the priority list because they’re the least cost, easiest ways to reduce carbon. This is where the challenge lies:
Xcel Energy has been a leader in carbon reductions in Minnesota, and that’s not only to be expected but necessary. The utility sector is one of the most carbon intensive sectors of our economy – though with increased renewables and coal transitions that is changing. So if we look at carbon reductions and say everyone needs to reduce across the board on the same timeline regardless of the costs to make those reductions or the amount of reductions possible, Minnesota’s utilities are on track to achieve the state goal. However, that’s not a useful way to approach carbon reductions. We should be doing the most, least carbon reductions as soon as we can – this is what will help the state and globe achieve carbon reduction goals - AND it means much deeper cuts in the electricity sector – likely 80% by 2030 is necessary.
I have heard several Xcel staff mention a core value of Xcel is to “innovate at the speed of customer value.” This can be a challenge in the storm of change occurring in the utility sector.
Xcel customers have seen rate increases in recent years due in large part to investments made to an aging system, and in this resource plan Xcel has flagged X additional investments. These mean rate increases for their customers, and without efficiency or self-generated renewables, bill increases too. Xcel needs to be responsible with its decisions. At a recent meeting, an Xcel staff said they want to maximize the use of existing investments
Even though Xcel is regulated in Minnesota it faces competition from its customers choosing to “go solar” or other distributed generation for all of their electricity.
In Minnesota, Xcel began to replace coal plants with the 2004 Metro Emissions Reduction Project – that started as a pick one of 3 proposals and Minnesota and Xcel ultimately decided to do all three – replacing 2 metro coal plants and stalling then best available controls at a third plant. This was seen as a bipartisan victory by then Governor Tim Pawlenty and Minneapolis Mayor RT Rybak. Xcel was able to recover the costs from that project on an accelerated timeline due to an incentive for early reductions created by the MN legislature.
In 2011, Washington state became the nation’s first coal-free zone with a historic agreement to retire the state’s last coal plant, Trans Alta, which is a similar size to Sherco Units 1&2. The Governor signed a bill with the support of the workers, utility company and environmentalists that outlined a plan everyone supported. Key to the agreement was addressing the needs of all parties. The agreement included: phased shutdown (1 boiler in 2020; 2nd in 2025); long term contracts for the power until shutdown (previously prohibited); $55 million economic development fund; worker transition time; and pollution controls in interim.
Another key difference between the three plans is the timing of a decision. While all parties agree that the end of Sherco’s useful life is approaching, the Clean Energy Plan is the only one that would lead to a clear timeline for that transition. The Department of Commerce proposal recommends a 2025 timeline for one unit, but that is superseded by the recommendation to wait until a 2017 resource plan. This recommendation is often explained with a reference that the timeline for ending coal operations at the boiler may be sooner, like 2020. The challenge with that lack of clarity is, in addition to the state and Xcel’s planning, the City of Becker and the workforce need time to plan. Occasionally, Xcel and the Department will reference 2030 as the end of operation for both units, but neither of their plans make that recommendation explicit.
Some of the common concerns raised for not making a decision include: 1) understanding the impact of the Clean Power Plan; 2) completing the MISO analysis of the impacts to the regional grid; and 3) XXXX. While I appreciate these concerns, I don’t think any of them are adequate for putting off a clear decision that will allow all parties to plan for the eventual transition. All the signals we’re seeing in the utility sector, with the science around pollution impacts and climate change, and the potential for greater integration of low cost renewables and efficiency make it clear this transition is necessary and imminent.