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Most of us have little idea what the year 2034 is going to look like, but Xcel Energy is required by law to do some deep thinking about precisely that, and the result is available for us to scrutinize. There’s a lot to digest, so let’s get started.

I’m Dan Gearino, your guide to the clean energy economy. Send me news tips and questions to dan.gearino@insideclimatenews.org, and thanks for reading.

— Dan

Making Sense of Xcel’s Big Plan

How does an electricity utility phase out fossil fuels without a spike in customer rates, while also remaining profitable enough to satisfy shareholders?

This is the question that Xcel Energy is trying to answer with a proposal, filed last week, for its Upper Midwest power plants for 2020-2034.

Last year, Minneapolis-based Xcel, which has customers in eight states, became the first large utility in the United States to pledge to bring its carbon emissions to zero by 2050. The new plan, focusing mostly on its Minnesota plants, is an important step toward this goal.

The 139-page filing begins a process that will likely last about a year. Interested parties will issue comments and suggest changes, and then the Minnesota Public Utilities Commission will issue a ruling.

“We’re all on the same page about the goals,” said Joe Pereira, regulatory director for the Citizens Utility Board of Minnesota, a consumer advocacy group. “Folks have very different opinions about how we get there.”

His comments underscore just how uncertain this part of the process is for Xcel. The company needs a viable plan. And yet, we don’t know what a viable plan looks like because no U.S. utility — at least none as large as Xcel — has proposed such drastic changes in its mix of power plants.


Here are some of the proposal’s main points:

  • Shut down all coal units in Minnesota by 2030, 10 years earlier than previously planned.
     
  • Extend the life of the Monticello Nuclear Generating Station in Minnesota so it would close in 2040, instead of 2030.
     
  • Add 4,000 megawatts of solar and wind power by 2034, with the precise mix to be determined. The locations could be anywhere in Xcel’s Upper Midwest territory.
     
  • Expand programs that reduce electricity demand throughout the Upper Midwest. This includes a big increase in “demand response,” a system that pays customers for sharply reducing their electricity use during times of extremely high demand.

If the plan stopped there, environmental groups and consumer advocates would be almost completely supportive. But there are two other provisions that make this plan controversial:

  • Xcel wants to move forward with an agreement to acquire Mankato Energy Center, a plant that runs on natural gas. And the company wants to convert part of its Sherburne County Generating Station, a coal-fired plant, to run on gas.
     
  • The company wants to add 1,700 megawatts of “firm load supporting resources” in the Upper Midwest, starting in 2031. That is utility-speak for power plants or other resources that run for short stretches, usually at times of high demand, to help maintain reliability. Xcel does not specify the technologies that would be used, but environmental groups have concerns that this may lead to the construction of even more natural gas plants.

Xcel had announced some of these proposals over the last few months, but some are new. Among those is the commitment to add 400 more megawatts of demand response across the Upper Midwest, which is the equivalent of a power plant that would no longer be needed.

Pereira is happy to see this. He told me that Xcel lags other major utilities in developing a robust program that entices large customers — such as factories — to shut down at times of high demand on the system.


“They haven’t been using these opportunities well at all,” he said.

He is one of many advocates who thinks that demand response, energy efficiency and the emergence of battery storage can displace the need for new gas plants.

This debate has importance beyond Minnesota as other utilities and other regulatory commissions are looking for hints about how to manage the transition to clean energy
.

(While we’re talking about Xcel, check out a story that ran this week on National Public Radio that prominently features the company and talks about the changes the power grid will need to make to accommodate the growth in wind and solar. Grace Hood, the reporter who did the story, does an admirable job conveying the essence of a complex issue.)

(Photo: Windtech)
 

Meanwhile, in Michigan and Indiana

While Minnesota regulators consider the Xcel plan, there are similar cases involving the largest utilities in Indiana and Michigan.

Duke Energy in Indiana and DTE in Michigan have made proposals to phase out fossil fuels and ramp up carbon-free technologies, but at a much slower pace than Xcel.

I asked Ben Inskeep, an Indiana-based clean energy analyst for EQ Research, to walk me through the differences between the plans.

He is particularly disappointed in Duke’s
plan for Indiana, released last week, which would continue to use coal into the 2040s. He said Duke’s approach to planning is “an artifact” of an era when there were fewer viable alternatives to fossil fuels.

“It looks like a slow transition from coal to mostly natural gas with a little bit of solar and wind sprinkled in,” he said.

Duke says it will continue to operate the Edwardsport coal plant until 2045. (I should note here that this 618-megawatt plant is a saga unto itself. It opened in 2013 following more than a $1 billion in cost overruns that were due in part to a “coal gasification” system that uses coal to make natural gas and then burns the gas to make electricity.)

Duke says in the filing that it has not considered whether to close Edwardsport earlier than the end of its expected lifespan in 2045. It says the plant remains young and is a valuable asset for the company and its customers.

DTE, which filed its Michigan plan in March, would add almost no solar power between now and 2025 and would continue to rely heavily on natural gas through 2035.

Inskeep said the Duke and DTE plans are examples of a mindset that natural gas will remain an essential part of electricity generation for decades, a view he thinks is out of step with the need to rapidly reduce carbon emissions.

But he has optimism that the future looks much more like Xcel’s plan than Duke’s or DTE’s.


“What we’re going to continue to see with each iteration of these plans is a quicker and quicker move away from coal,” he said. This is largely because renewable energy and battery storage are getting less expensive.

And, it’s important to note that utilities file updates to their long-term plans every few years. Duke and DTE will have opportunities to change their plans in the mid-2020s.

In the meantime, he thinks the best thing that can happen is that Xcel succeeds with its plans, as do other utilities that are being proactive in cutting carbon.

(Photo: Edwardsport power plant, Duke Energy)
 

Clean Energy Investment Is Down This Year, Globally and in the U.S. Here’s Why.

Global spending on clean energy was down 14 percent, to $117.6 billion, in the first half of this year compared to the first half of 2018. That included a big decrease in China and smaller drops in the United States and Europe, according to a new report from BloombergNEF.

The big story, with reverberations around the world, was that China, the world’s leading clean energy market, has reduced its subsidies for solar power, switching to a new system that relies on auction-based bidding. The policy change is the main reason that the country’s clean energy investment was down 39 percent.

This affected the solar markets in other countries because it led to a glut of Chinese-made solar panels, and a reduction in panel prices. The low prices helped to counteract the effects of the Trump administration’s tariffs on imported panels.

Clean energy spending was down 6 percent in the first half of this year compared to the first half of 2018, to $23.6 billion, in the United States, and down 4 percent, to $22.2 billion, in Europe.

Here’s where things get complicated. An increase in spending is generally a good thing, indicating that clean energy is a growing priority and signaling the financial institutions and investors that this is an area worthy of their attention.

But one of the key dynamics in the expansion of clean energy technologies is that they are getting less expensive.

I mention this as a way of explaining what we can glean from the U.S. figures. Spending on wind power was essentially flat at $11.6 billion for the six-month period compared to the same period last year, while solar fell from $11.1 billion to $9.1 billion. (The full report is not available to the public, but a news release can be seen here.)

Angus McCrone, chief editor for BloombergNEF, told me that some of the decrease in solar spending was because of falling equipment prices, although he did not specify how much. If not for falling prices, the drop in spending would be a larger concern.

Going forward, I will be looking to see what happens to spending levels and solar panel prices as China completes its transition to an auction-based system for deciding which projects get state support.

BloombergNEF expects China's solar market to bounce back a bit in the second half of the year as the auction process leads to a rush of new projects. So what does this mean for solar panel demand, and prices, around the world?

Ethan Zindler, head of Americas research for BloombergNEF, says he doesn’t expect rising demand in China to have an immediate effect on pricing elsewhere. He also notes that prices are now so low that they are in the minority of the cost of solar system.

“Adding or subtracting a few pennies to the per-watt costs doesn't make or break the economics of most projects,” he said in an email.

The takeaway here is that dirt-cheap panel prices, a major driver of solar projects in the United States, are likely to continue.

(Photo: Zhejiang Daily/VCG via Getty Images)

 

Correction: In the June 28, 2019, Clean Economy Weekly, I gave the wrong home country for the energy company Ørsted. Ørsted is based in Denmark.

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