Xcel Energy’s proposal to potentially build two new natural gas peaking plants has become a key point of contention in the utility’s long-term resource plan currently before Minnesota utility regulators.
The two natural gas combustion turbine plants are part of Xcel’s integrated resource plan, a document utilities must submit every few years to the Minnesota Public Utilities Commission. The company’s plan also includes repowering two smaller existing plants in Wisconsin and Minnesota to serve as backup power. The vision would make the utility’s electricity carbon-free by 2050 but potentially add another 1,000 megawatts of fossil fuel-based power over the course of that transition.
Next week, regulators begin hearing oral arguments on Xcel’s 2020-2034 plan. It is among the most highly anticipated long-range utility plans in recent history in Minnesota, garnering more than 9,000 comments from customers, businesses, nonprofits, civic leaders, tribes, environmentalists, unions, and other entities. Xcel sponsored 13 workshops on the plan in addition to five held by the utilities commission.
The Citizens Utility Board of Minnesota, the Sierra Club, and a group of clean energy organizations — including Fresh Energy, a St. Paul policy advocacy nonprofit that also publishes the Energy News Network — all offered alternative plans created by consultants that offer different scenarios than those presented by Xcel. Their plans offer strategies that could eliminate or greatly reduce the need for the peaker plants by adding more wind, solar, and battery storage resources. Regulators will parse out the differences next week and during another meeting in February.
Xcel and other utilities use peaker plants when the electric grid sees high demand, particularly during the morning hours and evenings as people return home from work. Typically, peakers operate less than 15% of the time and in Minnesota often less than 5%.
The debate in Minnesota mirrors a national one over whether fossil fuel-powered peaking plants are necessary as the nation transitions to a cleaner grid. A new study by the National Renewable Energy Laboratory concluded that widespread deployment of energy storage could balance the grid and meet demand at all times. Most utilities, however, remain unconvinced that the technology or economics are ready to entirely phase out fossil fuel peaker plants.
Clean energy advocates disagree with Xcel’s proposal because the peakers would run on natural gas that will produce carbon emissions that, on an hourly basis, exceed that of a 24/7 baseload power plant. In addition, they believe that peakers may someday become unnecessary as energy storage options become less expensive and available for longer durations.
Xcel counters that storage has a vital role in a clean energy transition, but the technology’s limitations and cost prohibit its ability to replace peakers. To integrate more intermittent sources like wind and solar requires more backup power, not less, and storage does not function in the same way as peaker plants, Xcel said in a statement. The most widely available battery storage holds power just four hours — not long enough to sustain a 48-hour polar vortex or a spike of cold or hot days, Xcel said.
Nationally, utilities operate roughly 1,000 peaker plants. Research by the nonprofit Clean Energy Group, which advocates for closing peaker plants, shows Minnesota has 28 peakers. Clean energy advocates want them closed because they emit significant amounts of carbon and in some states are located in disadvantaged neighborhoods already beset by high levels of air pollution.
At the urging of clean energy activists, Xcel decided last year to scrap a plan to build a combined-cycle natural gas plant at its Sherburne County Generating Plant, known as Sherco, the site of its largest fossil fuel plant. Instead, the company has suggested the construction of a gas combustion turbine peaking plant in Lyon to pair with wind generation in western Minnesota, and another in Fargo, North Dakota, to fulfill a regulatory commitment. Together they would add as much as 800 MW of capacity.
Two other existing plants, one in Wisconsin and the other in Minnesota, also would be retrofitted for backup power, with all four plants having a total capacity of roughly 1,100 megawatts. The company changed its plan slightly last year by not asking approval for the Lyon or North Dakota peakers but instead asking the commission to make a finding that 800 MW of dispatchable power would more likely than not be needed in the 2027-29 period.
Xcel selected locations in Minnesota and Wisconsin based on close access to natural gas lines to avoid building extensions to the existing gas transmission system. The plants would be half the cost of the previously proposed Sherco gas plant. The company’s plan also calls for 2,600 MW of new wind energy combined with 3,100 MW of solar by 2034. Xcel wants to add 250 MW of energy storage by 2030-31.
“In addition, we’ve committed to evaluating technology in the out years of our plan for our firm dispatchable resource needs so more storage could certainly be added down the road,” Xcel said. “Storage can provide valuable services such as peak shaving or extending solar generation’s capabilities. However, storage doesn’t provide the reliability in extreme conditions that our natural gas plants would, and our analysis shows it is not yet economically competitive for our system.”
Xcel also argues that the peaker plants will provide “black start” capacity that would allow the utility to restart portions of the grid taken offline by weather or other events. Plant opponents say such rare occasions could be managed through storage rather than peaker plant-generated power.
Annie Levenson-Falk, executive director of Citizens Utility Board of Minnesota, said her group’s modeling shows Xcel does not need the plants for energy or additional capacity. Nor do utilities commonly build plants only to function as black-start resources since those occurrences are so uncommon.
“This would be a major fossil fuel investment with a serious risk of becoming stranded assets, and there’s no need to rush a quick approval when the proposal hasn’t been vetted,” she said.
Citizens Utility Board’s “Consumers Plan,” designed by consultant Vibrant Clean Energy, suggests the Public Utilities Commission study black-start capacity separately from the integrated resource plan and remove the need for peakers by investing in energy efficiency, distributed solar generation, battery storage, demand-side management initiatives, and other strategies.
Allen Gleckner, lead director for clean electricity at Fresh Energy, said adding more fossil fuel infrastructure runs counter to the state’s goal of decarbonizing energy in Minnesota. The proposed plants need not be approved now because the problem they aim to solve is more than a decade off and other solutions could emerge, he said.
“There’s certainly a viable opportunity to use storage and other technologies right now today to provide the same resources, attributes, benefits, and services as a peaking plant in certain areas,” Gleckner said. “It’s not a one-size-fits-all right kind of approach.”
Last October, Fresh Energy and several other clean energy groups released an analysis that showed the most economic and reliable path forward for Xcel would involve no fossil fuel plants. Instead, the groups suggested a combination of solar, wind, and much more battery storage than Xcel proposes would cost less than the two proposed peaking plants. Those investments would be in addition to what the company presents in its integrated resource plan.
Sierra Club senior campaign representative Jessica Tritsch said the organization also has presented to regulators a strategy that requires no new natural gas peaking plants. Xcel’s modeling never considered a plan without peakers, she said, even though the Sierra Club and the clean energy groups found them unnecessary for meeting future demands.
“We think in a climate crisis there’s no reason we need to be looking at a future with gas, but we have not seen plans that don’t include gas in them,” she said.
The Public Utilities Commission has Xcel’s integrated resource plan on its agenda for Jan. 25, Jan. 27, and Feb. 8.
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