This could not have happened a moment too soon. We all should be thankful for little signs of progress—however small or late. First up we see the the thinking at Bloomberg's New Energy Finance. According to them, wind is already the low-cost option in England and Germany—and soon the rest of the world. Then we have a local article from the Minneapolis Tribune about the decision-making process concerning Xcel's big Sherco coal-burners. They intend to replace them in the 2020s.
Yes it is progress but I would be more impressed if they planned to do it starting five years ago. I mean, Xcel already has a large and well-run wind division. What they lack is a necessary sense of urgency. Yes, it is good to see cautious people operating something as important as electrical generation. But they seem to confuse caution with foot-dragging.
Solar and Wind Just Passed Another Big Turning PointIt has never made less sense to build fossil fuel power plants.
Tom Randall October 6, 2015
Wind power is now the cheapest electricity to produce in both Germany and the U.K., even without government subsidies, according to a new analysis by Bloomberg New Energy Finance (BNEF). It's the first time that threshold has been crossed by a G7 economy.1
But that's less interesting than what just happened in the U.S.
To appreciate what's going on there, you need to understand the capacity factor. That's the percentage of a power plant's maximum potential that's actually achieved over time.
Consider a solar project. The sun doesn't shine at night and, even during the day, varies in brightness with the weather and the seasons. So a project that can crank out 100 megawatt hours of electricity during the sunniest part of the day might produce just 20 percent of that when averaged out over a year. That gives it a 20 percent capacity factor.
One of the major strengths of fossil fuel power plants is that they can command very high and predictable capacity factors. The average U.S. natural gas plant, for example, might produce about 70 percent of its potential (falling short of 100 percent because of seasonal demand and maintenance). But that's what's changing, and it's a big deal.
For the first time, widespread adoption of renewables is effectively lowering the capacity factor for fossil fuels. That's because once a solar or wind project is built, the marginal cost of the electricity it produces is pretty much zero—free electricity—while coal and gas plants require more fuel for every new watt produced. If you're a power company with a choice, you choose the free stuff every time.
It’s a self-reinforcing cycle. As more renewables are installed, coal and natural gas plants are used less. As coal and gas are used less, the cost of using them to generate electricity goes up. As the cost of coal and gas power rises, more renewables will be installed.
Wind and solar have long made up a small fraction of U.S. electricity—about 5 percent in 2014. But production has been rising at an exponential rate, and those two energy sources are now big enough to influence when coal and natural gas plants are kept running, according to BNEF.2
There are two reasons this shift in capacity factors is important. First, it's yet another sign of the rising disruptive force of renewable energy in power markets. It's impossible to brush aside renewables in the U.S. in the same way it might have been just a few years ago. "Renewables are really becoming cost-competitive, and they're competing more directly with fossil fuels," said BNEF analyst Luke Mills. "We're seeing the utilization rate of fossil fuels wear away."
Second, the shift illustrates a serious new risk for power companies planning to invest in coal or natural-gas plants. Historically, a high capacity factor has been a fixed input in the cost calculation. But now anyone contemplating a billion-dollar power plant with an anticipated lifespan of decades must consider the possibility that as time goes on, the plant will be used less than when its doors first open.
Most of the decline in capacity factors is due to expensive "base-load plants that are being turned on less because of renewables," according to BNEF analyst Jacqueline Lilinshtein. Plants designed to come online only during the highest demand of the year, known as peaker plants, play a smaller role. In either case, the end result is that coal-fired and gas-fired electricity is becoming more expensive and the profits less predictable.
The opposite is true of wind and solar, as well as new battery systems that can be paired with renewables to replace some peaker plants. Wind power, including U.S. subsidies, became the cheapest electricity in the U.S. for the first time last year4, according to BNEF. Solar power is a bit further behind, but the costs are dropping rapidly, especially those associated with financing a new project.
The economic advantages of wind and solar over fossil fuels go beyond price.5 Still, it's remarkable that in every major region of the world, the lifetime cost of new coal and gas projects6 are rising considerably in the second half of 2015, according to BNEF. And in every major region the cost of renewables continues to fall. more
Xcel Energy plans more wind, solar power and less coal — and sooner — in MinnesotaCuts in coal, increased wind and solar planned.
By David Shaffer Star Tribune OCTOBER 2, 2015
Xcel Energy said Friday that it will accelerate cuts in its Minnesota-region greenhouse gas emissions by increasing wind and solar power investment in this decade and replacing two big coal-burning generators with a natural gas-fired unit in the mid-2020s in Becker, Minn.
The plan, submitted to state regulators who could approve or reject it, would mean a 60 percent cut in the electric utility’s Upper Midwest carbon-dioxide emissions by 2030, compared with 2005 levels. Until now, Xcel had aimed for a 40 percent greenhouse gas reduction over that period.
Two of the three coal burners at the Sherco power plant in Becker would be retired in 2023 and 2026 under the plan announced Friday. That plant, Xcel’s largest in the region, is also the state’s biggest emitter of greenhouse gases. The two units, built in the 1970s, would be replaced by a new power plant fueled by natural gas, which emits half the carbon dioxide of coal, Xcel said.
“This is really a business decision about what we think is right for the future,” said Chris Clark, president of Xcel’s Minnesota regional operations, in an interview. “For us the time to move is now. We think we benefit from certainty. It is the right time to focus on the future. I think it is what our customers want us to do.”
Environmental groups led by Fresh Energy, as well as the state Commerce Department had urged Xcel to consider earlier retirement of the Sherco units. Xcel had planned to keep them running, but at a lower pace, until 2030.
“It’s a great outcome for Minnesota,” said J. Drake Hamilton, Fresh Energy's science policy director, which advocates for cleaner energy. “These commitments directly follow the recommendations of climate scientists that we need to cut carbon emissions across our economy very much like what Xcel is proposing.”
Rep. Pat Garofalo, chairman of the Minnesota House energy and jobs committee, said the plan to replace the Sherco units will eliminate jobs and drive up electricity prices, which also hurts the economy.
“A lot of people are going to pay more,” said Garofalo, R-Farmington, who placed blame on federal policies like the Clean Power Plan and did not criticize Xcel. “A lot of people are going to be hurt. These policies have consequences.”
Xcel said the prospect of expensive pollution control upgrades to the decades-old Sherco units along with the 2030 carbon-reduction targets under the Clean Power Plan make it sensible to retire the coal burners earlier. The U.S. power sector, mainly because of coal burning, is the largest source of the nation’s greenhouse gas emissions.
Gov. Mark Dayton praised Xcel for its commitment to clean energy. “And I deeply appreciate the company’s continued commitment to the Becker community, where the construction of its proposed natural gas plant would create many good jobs,” he said.
Overall, jobs will disappear at the plant. Clark said Sherco’s 310 employees would decline to 150-160 after the two older coal units are replaced with a natural gas-burning power plant, which requires fewer workers.
The city of Becker relies on Xcel property taxes to cover more than half of its budget. Mayor Lefty Kleis said the plan for a new power generator is “some excellent news” for the tax base, but he wants to see details.
Although Xcel already intended to double its investments in wind and solar power by 2030, the utility’s revised plan now calls for speeding up that effort, with significant renewable power additions before 2020. Clark said solar and wind power costs have dropped significantly, and he wants the utility poised to seize opportunities if Congress extends the federal wind production tax credit.
Xcel, which operates in eight states and serves 1.4 million electric customers in Minnesota, has been the nation’s most windpower-reliant utility for 11 years. Today, Xcel gets 15 percent of electricity from wind, and 37 percent from coal in its Minnesota region that includes North Dakota and South Dakota. If this plan goes forward, Xcel expects 33 percent of its regional electricity to be generated by wind and solar in 2030, while 15 percent would still come from coal.
“The vision here is great, the challenge is to do it at a competitive price,” said Bill Blazar, senior vice president of the Minnesota Chamber of Commerce, which has argued before regulators that rising industrial power rates are making the state less able to compete.
Clark said the proposed investments are expected to raise customers’ rates by 2 to 3 percent, but offered no details on the dollar impact.
Nuclear power would remain a key carbon-free source, and the utility told regulators they need to look toward the 2030s, when its three Minnesota reactors’ licenses expire. At that point, the plants in Monticello and Red Wing will be 60 years old, and the question of further extending their licenses is sure to be complex and controversial.
The announcement was a revision to Xcel’s 15-year business plan released in January. Utilities are required to submit such documents to the state Public Utilities Commission. It has authority to approve or reject major investments by investor-owned utilities like Xcel, and likely will act on this proposal next year.
Xcel also said it wants by 2025 to build a natural gas-fired generating unit in North Dakota. Xcel further has committed to energy efficiency investments, including smart technologies that Clark said can help shift power usage to low-demand periods.
“I am really excited about what we are doing,” Clark said. “I think we are going to be industry leaders, but we are really doing this because we think it is the right thing for our customers. It provides certainty to our community and our employees about what our plan is. It lets us focus on the future.” more
Sherburne County Generating Station
Common name: Sherco
Owner: Xcel Energy.
Location: Becker, Minn., 45 miles northwest of the Twin Cities, on the Mississippi River.
Generating capacity: 2,222 megawatts, largest power plant in the state.
Unit 1: Online in 1976, would cease coal generation in 2026.
Unit 2: Online in 1977, would cease coal generation in 2023.
Unit 3: Online in 1987; co-owned by Southern Minnesota Municipal Power Agency. No retirement plans, likely to operate into the 2030s.
*1 megawatt is 1 million watts.