Xcel Should Save Sherco 1 and 2, Skip the Wind
On October 2nd, Xcel Energy told a crowd of people about how they intend to grow their “carbon free” electricity generation portfolio by replacing coal-fired generation with more wind. This would happen as the monopoly utility closes three coal plants at Sherburne County (Sherco) Unit 1 and 2, in Becker, and the Allen S. King plant in Stillwater.
Xcel should save the coal and skip the wind, because Minnesota can’t afford more failed energy policies.
The graph below shows electricity bills have skyrocketed by nearly 60 percent since 2004, when the state had almost no wind in its generation portfolio. The graph clearly shows a strong correlation, which we would argue is causation, between increasing wind generation and increasing electric bills for Minnesota families and businesses.
The price of electricity has risen so high in Minnesota that the state no longer has bragging rights over having lower prices than the national average. As of 2006, Minnesota electricity prices were 20% lower than the national average. Now, our prices are 2% higher.
Instead of wasting more money on wind energy, Xcel Energy should keep coal-fired power plants like Sherco 1 and 2 and Allen S. King open as long as possible because these plants generate affordable, reliable electricity regardless of weather conditions.
American Experiment has obtained FERC Form 1 data from Federal Energy Regulations Commission (FERC), which keeps detailed records of the amount of electricity generated and the cost to generate that electricity for every major power plant in the country.
The graph below shows two things: 1) that generating electricity from Sherco is incredibly inexpensive, and 2) the cost of generating electricity from Sherco is lower when the plant runs at a higher capacity factor, i.e. when the plant is producing more electricity.
Notice that when Sherco w as operating at capacity factors above 65% before 2010, the cost per MWh of electricity never exceeded $25. Since 2011, however, Sherco has been hovering around 50% and below, resulting in a cost per MWh risin g near $35.
Our calculations show that if Sherco operat ed at 65% in 2016, even while calculating for higher fuel expenses, the price per MWh comes down to $29.56.
Power plants are able to generate electricity more affordably the more they generate because these plants have high fixed costs, such as mortgage payments on the cost of building the plants, plus interest, employee salaries, and taxes and fees. Variable costs, which consist of the fuel used at these plants, are not the only factors contributing to the overall cost of operating these plants in a given month.
As these plants generate more electricity, the cost of generating each unit of electricity falls. In order to have lower electricity prices, we should be using more coal, not less.