Answers in the wind
Xcel won’t go on the record with MNPUC about whether its renewable energy strategy is the least-cost option for its customers
Xcel Energy likes to boast about being the nation’s number-one provider of wind energy, but the company is much less forthcoming about how much this will cost or what risks it presents to its customers.
Xcel is, indeed, big on wind, with plans to go even bigger. The company recently announced it would add up to ten new wind farms to increase wind production by 1,500 megawatts (MW), or 60 percent.
The Minnesota Public Utilities Commission (MNPUC) approved a 15-year plan that will allow Xcel to add at least another 1,000 MW of wind by 2019. At the same time, the company gained approval to shut down two coal-fired generating plants in Becker by 2026 (see sidebar).
What about costs and risks?
The company won’t even go on the record with the MNPUC about whether its renewable energy strategy is truly the best option for its customers. A briefing prepared by MNPUC staff states that “it would be ideal … if Xcel could go on the record to confirm that its renewable investment strategy is, as it claims, least-cost and in the public interest for all states in which it serves.”
At issue is a Resource Treatment Framework (RTF), a document in which Xcel addresses jurisdictional cost allocation disputes among the states served by the company’s system. The MNPUC required Xcel to develop the RTF when the North Dakota Public Service Commission (NDPCS) recently pushed back against Xcel’s efforts to allocate the cost of its renewable strategy across its entire system, which includes parts of Minnesota, South Dakota, North Dakota, Wisconsin, and Michigan.
In 2015, the NDPCS denied Xcel’s efforts to recover costs for its Aurora solar project from North Dakota ratepayers, calling the project “imprudent.”
NDPSC Commissioner Brian Kalk explained at the time that he wanted to send a “strong message” to Xcel that “North Dakota remains committed to the bedrock ratemaking principles of need and least-cost planning.” NDPCS Commissioner Randy Christmann went even further, saying, “We need to do all we can to make sure that the state of Minnesota’s scheme to mandate very high-cost electricity is not paid for by North Dakotans who happen to receive service from Minnesota-based utilities.”
Clearly, the NDPCS isn’t buying Xcel’s claim that its renewable investment strategy is “cost-effective.” Adding 1,500 megawatts of wind and shutting down two coal plants could result in substantial rate increases for Xcel’s customers.
The MNPUC briefing paper makes clear that Xcel has not adequately assessed the full impact of adding that much wind. At times when electricity demand is low and the wind is blowing too much, the system needs to “curtail” wind to maintain balance. Shutting down wind farms in these circumstances is very costly, and adding more wind increases the risk of curtailment. Despite this risk, Xcel’s plan provides no detailed analysis on the possible rate impact.
Staff make one point that might give Xcel pause as it considers whether to bet so much on wind: Because the company’s wind proposal predated the MNPUC’s approval of the resource plan, “Xcel is clearly the ‘cost-causer’ in this case.” While Minnesota rate payers will need to pay their share of the cost, Xcel shareholders may very well get stuck with costs allocated to other states, as just happened with the Aurora solar project.
With shareholders now exposed to this risk, maybe Xcel will get more serious about measuring the true cost of its renewable energy strategy.