Xcel’s $46 Billion Plan to go 50% Renewable Energy
According to calculations conducted by Center of the American Experiment, Xcel Energy’s preferred plan to reach 50 percent renewable in Minnesota by 2034 will cost upwards of $46 billion in additional expenses through 2050, which is the equivalent of $1,200 for every Xcel Energy customer every single year through 2050.
These calculations are based directly on Xcel’s resource plan, using the capacity additions, levelized cost of energy (LCOE) values, and power purchase agreements (PPA) that Xcel reported, as well as capital costs laid out in Energy Information Administration’s (EIA) assumptions to the annual energy outlook.
If this $46 billion cost is apportioned equally to each customer classes – residential, commercial, and industrial – Xcel residential households will be asked to pay as much as $300 more annually on electric bills through 2050. Additionally, commercial customer costs will increase by nearly $4,000 annually, and industrial users by more than $600,000.
However, historical rate increases are typically skewed heavily toward residential customers, leaving households with nearly 50 percent of total cost increases.
Continuing with this trend, residential households will see increases as high as $600 annually, while bringing additional expenses to commercial customers to around $3,000 annually and industrial customers to between $400,000 to $500,000.
No matter how it’s allocated, this enormous expenditure of $46 billion will force households, businesses, schools, hospitals, and more to make tough decisions in order to pay for the increase in electricity expenses, if they could afford them at all.
That will likely mean spending cuts and/or price increases that will raise the cost of living in almost every respect. There’s a reason why 7 out of the top 10 states with the highest electricity prices are also featured on the top 10 highest cost of living rankings. The price of electricity impacts everything.
Furthermore, if Xcel were to increase its renewable energy goal to 75, 90 or even 100 percent somewhere down the road – as has been suggested in the past – these additional costs will increase exponentially.
Xcel is currently in the process of drafting a new preferred plan set to debut in mid-May. It will be interesting to see if it makes any changes that will reduce this enormous cost it’s currently planning to unload onto future generations.
Energy Policies Were Once Based On Affordability
Those born today will be 30 years old by the time 2050 comes around. Xcel’s proposal, as it stands now, will burden them with up to an additional $300 annual premium on electricity bills in today’s value.
Fortunately for our sake, Minnesota leaders in charge of energy policy 30 years ago chose not to burden us with expensive electricity proposals like the ones Xcel is proposing.
Instead, thanks to the practice of maintaining existing generating resources that are inexpensive to keep running, such as coal, natural gas, hydro, and nuclear facilities, compared to building new power facilities like wind and solar, electricity rates in Minnesota decreased dramatically in today’s values from 1990 to about 2003.
As the graph above shows, electricity rates dropped by more than 21 percent in real dollars from 1990 to 2003 thanks to energy policies that focused on affordability.
From 2003 to 2018, however, the introduction of expensive renewable energy initiatives increased electricity rates by more than 28 percent, completely wiping clean the savings that Minnesota’s energy policies achieved through more than a decade.
Now Policies Are Driven By Renewable Energy Initiatives
The graph below maps Xcel’s electricity rates against the growth of renewable energy in Minnesota since 1999.
Notice how rates were decreasing up until Minnesota started investing heavily in renewable energy sources in 2005.
As you can see, as renewable energy levels increased from below 5 percent to nearly 25, Xcel’s electricity rates also rose by 32 percent.
The Closure Of Inexpensive Coal Facilities Didn’t Help
Additionally, electricity prices increased even more due to retiring coal facilities prematurely – meaning shutting them down before their anticipated retirement dates were scheduled and before Minnesota ratepayers could reap the benefits of completely amortized power facilities that were as cheap as they could ever be – and utilities like Xcel built new and expensive natural gas, wind, and solar facilities in their place.
For example, Minnesota had over ten coal facilities in 2001 generating inexpensive power for electricity customers around the state. Since then, at least five have been converted to natural gas or biomass facilities, at least two more have been retired completely, and Xcel is currently planning to retire Sherco Units 1 and 2 and build a natural gas facility in their place, as well as retire Allen S. King entirely.
These expensive policies have been showing up on electricity bills, as the graph below shows.
In inflation-adjusted values, Minnesotan’s are now paying over 25 percent more on electric bills for using the same amount of electricity.
Will Minnesota Reverse Course?
As utilities like Xcel continue to double down on building new renewable energy sources in the state, despite the growing evidence showing that renewable energy investments increase electricity rates, the cost of electricity in Minnesota will continue to soar accordingly.
And don’t just take my word for it.
As you can see in the graph below, Xcel is already proposing rate increases for the coming years that would continue its trend upward toward becoming one of the most expensive electricity providers in the country.
With Xcel now proposing a $46 billion plan that would increase electricity rates by up to nearly 30 percent through 2050 in today’s value, there’s no telling when these price increases will end.
In light of recent events, stemming in large part from COVID-19, is it the best policy to burden future generations in Minnesota with incredibly expensive electricity rates?
Most of us had no idea three months ago that COVID-19 would create the panic it has, forcing businesses to shutter and workers to go without pay. With that said, we are in no position to make decisions that will negatively impact Minnesotan’s financially 30 years from now.
Now more than ever before, Minnesota needs to refocus its energy policies back on affordability. Xcel’s preferred plan is anything but affordable.