Credit: Paulo Valdivieso / Creative Commons

The utility has asked regulators to approve a power purchase agreement with an unnamed customer in central Minnesota.

Power generated by a 150-megawatt wind farm in South Dakota could be used to offset electricity consumption of a commercial and industrial customer of Xcel Energy that plans to build a facility in central Minnesota.

A regulatory filing submitted by the utility Thursday did not specify the customer’s name but suggested the power purchase agreement was a “first step in procuring the incremental renewable energy” for the unnamed entity. The power will be purchased from Dakota Range Wind III in northeast South Dakota.

The project was developed by Apex Clean Energy of Charlottesville, Virginia, and sold to a company called ENGIE IR Holdings. It sits next to the 300-megawatt Dakota Wind I and II project, which Xcel Energy bought in 2017. Dakota Wind I and II are expected to generate enough electricity to power 233,000 homes.  

Power purchase agreements between utilities and large companies are becoming more common throughout the country but are much rarer on Minnesota. In other states Apex has power purchase and power management agreements for wind projects with Steelcase, Ikea, the U.S. Army and other clients. ENGIE has agreements with many institutions and companies around the world, among them Boston University, a Mexican steel firm, and an airport.

Clean Grid Alliance Executive Director Beth Soholt called the filing “a big deal” for Xcel and the central Minnesota community of Becker, where the unnamed power customer is located. It is the first major PPA in Minnesota, she said, and a harbinger of things to come.

“A lot of utilities are working behind the scenes to make their system attractive to data centers, distribution centers and large energy users,” Soholt said.

The filing said the commercial customer will be constructing a building in Becker at the utility’s Sherco site. Xcel plans to close two coal-based plants at Sherco in 2023 and 2026 and replace them with a combined cycle natural gas plant expected to open in 2027. A third Sherco unit will retire in 2040.

The power purchase agreement will positively impact Xcel ratepayers even if the commercial customers does not need all the electricity generated or the renewable energy credits produced by the project, Xcel contends. Excess energy could be incorporated into the company’s green tariff program, which allows companies, government and ratepayers to support clean energy.

Xcel said in the filing it “could use that electricity and associated RECs to further achieve its clean energy and carbon reduction goals, including through the popular Renewable*Connect Pilot program.”

Frank is an independent journalist and consultant based in St. Paul and a longtime contributor to Midwest Energy News. His articles have appeared in more than 50 publications, including Minnesota Monthly, Wired, the Los Angeles Times, the Minneapolis Star Tribune, Minnesota Technology, Finance & Commerce and others. Frank has also been a Humphrey policy fellow at the University of Minnesota, a Fulbright journalism teacher in Pakistan and Albania, and a program director of the World Press Institute at Macalester College. Frank covers the state of Minnesota.