Dear Mr. Wolf,
After personally
attending 3 out of 4 stakeholder meetings Xcel Energy graciously offered in
February, April and June related to their 2016-2030 IRP, I am pleased to offer
my commentary which I have broken up into 4 sections.
THE CONTEXT AND
SIGNIFICANCE ON SHERCO
In accordance with the
IPCC figures, we must achieve at least 80% reductions in CO2 emissions by 2050,
economy wide. This has been the State of Minnesota’s goal since it passed into
law in 2007 with the Next Generation Energy Act. The only realistic way to
achieve this goal is to (at the very least) start planning right now to the
transition away from carbon intensive coal as an energy resource for
electricity. The Xcel-owned Sherco coal plant is not only Minnesota’s largest
CO2 emitter, but is also the 21st most carbon intensive power plant in the
country according to an Environment Minnesota report. However, Xcel Energy’s
preferred plan at this time is to not even create a timetable to retire Sherco
before 2030. We have to recognize that the core business model of most electric
utilities in general is to squeeze as many customer dollars as possible for as
long as possible from sunk investments into huge central-station power
facilities. Knowing this, Xcel is likely afraid that retiring Sherco 1 & 2
sooner than later would mean stranded assets and they probably have plans to
keep Sherco as a bargaining chip if the case of carbon regulations adding
additional pressure.
While it was inspiring
to read headlines about Xcel’s big clean energy promises, making a long-term
commitment to retain or continue to invest in these largescale power plants is
fundamentally incompatible with a future grid dominated by renewable wind and
solar on a technical level. Since renewable wind and solar energy are variable
in supply, while super-hot coal and nuclear plants produce a static electrical
output that Xcel can’t change without risking expensive repairs, we need to
phase out these static power plants just for a significantly high penetration
of renewable energy to be feasible. From my own observation, Xcel
representatives enjoy telling the public about the big plans in their IRP for
dramatic increases in solar and wind energy at an affordable cost. Xcel has
admitted that their wind power keeps their prices stabilized downward.
The danger is a likely
scenario that Xcel will force its customers to pay for expensive upgrades to
outdated power plants at the same time as paying for an emerging renewable
technology grid system. The manner in which Xcel handled their 114% cost overruns
on their Monticello nuclear plan makes it pretty clear that they will try to
put their customers rather than their shareholders on the hook to pay off the
sunken investment in the old energy system that is redundant and incompatible
with a new, clean, renewable system. In that scenario, astroturf front groups
who do marketing for the fossil fuel industry will try to blame the resulting
rate hikes on a big lie that renewable energy is not cost competitive rather
than the real reason of Xcel forcing its customers to pay for 2 redundant and
incompatible systems at the same time... even though renewable energy is quite
affordable in comparison to the hundreds of millions in Monticello cost
overruns. From my own observation, Xcel’s CEO sounds much more amenable to
phasing out central station coal plants than nuclear plants, admittingly due to
the expectation of future carbon rules but also because of the sheer hundreds
of millions recently sunk into their Monticello Nuclear plant. That is why it
is more productive to focus on Sherco for this IPR.
SHERCO- THE IMPORTANT
COMMENTARY FOR THE COMMISSION TO READ
I am aware the
commission has been receiving a great deal of personal stories and well-known
facts about the health & climate hazards coal fired power plants present as
well as well-reasoned economic commentary on how investing in coal creates far
fewer local jobs than investing the same amount into renewables. However what I
think the Public Utilities Commission will find most convincing is pointing out
specific observation within Xcel’s analysis on Sherco in their supplementary
IRP:
• 1: On pages 14-17
Xcel’s March 16th submission on their IPR, they rank several scenarios side by
side for retiring Sherco. However they do not clearly identify how much
renewable energy is included in the estimations of those scenarios. Meanwhile,
there is an extensive table of renewable energy runs in the index of the
report. But for some reason these runs are not correlated with the conclusions
they come up with for the Sherco scenarios in the main section of the report.
Regardless of Xcel’s intent on organizing the data in this way, that lack of
correlation makes it confusing and less than user- friendly for anyone reading
the IRP or curious to learn how Xcel’s conclusions were drawn.
• 2: Even within the
extensive appendix of renewable energy modeling, the runs make little sense.
For instance, Xcel’s numbers for the cost of replacing Sherco with 75% wind,
solar, and demand-side management (DSM) are higher than their costs of replacing
Sherco with just 75% wind and solar with no DSM at all. How could DSM possibly
not be cheaper than adding renewable generating capacity?
• 3: On page 14 of
Xcel’s March 16th submission on their IRP, they list possible scenarios for
replacing Sherco with new energy. They conclude that keeping Sherco going is
the least costly option according to their current assumptions. However, Xcel’s
model scenario for closing down one unit of Sherco in 2020 and another unit of
Sherco in 2023 was only 2% more expensive than keeping the whole facility
running beyond 2030. And to boot, even that 2% cost was derived using Xcel’s
rather odd assumptions on renewable energy. They actually assume that the costs
of wind energy will rise steadily, and costs of solar to stay constant which
flies in the face of recent trends where industry maturation is driving costs
down, especially for solar.
• 4: This goes to show
that an IRP is at its most vulnerable in how very dependent it is upon the
assumptions it uses to create a forecast such as future fuel costs (coal,
natural gas, etc.), development costs, financing and market conditions, and
policy regulations. In turn, Xcel’s preferred plan of not even setting a time
table to retire Sherco is based on an additional suspicious assumption. Keeping
the Sherco Power plant running through 2030 would be nowhere near the least
cost option if Xcel was not able externalize the costs of greenhouse gas
emissions onto the public. A big part of Xcel’s decision to not set a time
table to retire Sherco is because their carbon costs are modelled at only
$21.50 per ton, with alternatives scenarios plugged in for $9 and $34 per ton.
In fairness, these carbon prices are in line with current proposed regulations,
however many climate scientists have estimated the actual cost of carbon at
$200/ton or substantially higher. While clean energy organizations have
developed a Clean Energy alternative plan to Xcel's IRP using Xcel’s own data
and industry-standard modeling, a question still remains on whether it will
address change at the structural, systemic level. If that plan is adopted, will
Xcel still receive financial rewards for activity that adds carbon into the
atmosphere?
WHAT XCEL OVERLOOKS IN
ITS IRP
• 1: It is hard to
broadly dismiss Xcel's IRP as a whole because Xcel does not declare anything
that is provably false in the IRP report. What makes this IRP a lost
opportunity for something truely in the public interests lies within the
omissions that Xcel does not say. They make the mistake of overlooking the
extensive examples and comprehensive studies on how renewables are actually a
positive factor for energy reliability and predictability of cost. Similarly,
Xcel’s IRP downplays the potential for microgrids, distributed generation and
energy efficiency.
• 2: Microgrids and
smart technologies can help us manage renewable energy loads more efficiently
and locally on a distributed energy network. However Xcel strangely defines the
scope of what can be considered in an IRP to be macro-level and hence not inclusive
of the micro-level smart technologies or micro¬grids. So they use this circular
definition as a way to justify continued reliance on large-scale centralized
power. Choosing not to talk about microgrids in the IPR has the effect of not
making that solution available for consideration. That circular reasoning is
wholly unfair because changes in structure on a micro level has undeniable
effect on the macro level.
• 3: This IRP does not
address distributed generation in a systematic way and as a result assumes a
disappointingly low adoption rate of community solar and other distributed
generation sources. However, MN State Law (Section 216B.2426) requires that any
relevant proceeding must consider opportunities for distributed energy
generation.
• 4: Xcel’s actions as
a business have shown a clear preference for trying to get renewables to fit
their familiar central station model over doing renewables as distributed
generation. The consequence of that preference is a conclusion in Xcel’s IRP
that adding close to 2,000 MW more natural gas generating capacity will be
needed to back up the large-scale renewables when the wind is not blowing or
when the sun is not shining along with a far less serious commitment to energy
storage. That conclusion is also a result of Xcel’s IRP downplaying or ignoring
the possibility of integrating micro¬grid or smart technologies that could help
us displace the need for deploying extra natural gas capacity.
• In an apparent
contradiction to the new natural gas capacity proposed in their IPR, Xcel CEO
Ben Fowke publicly stated at the CEE Policy Forum on January 27th, 2015, that
we can displace coal with renewable capacity without a mad dash to natural gas:
“Coal is going to go away. It is just a matter of time and you are going to see
that in that plan that we start to wean off coal…I am delighted to tell you we
believe that by 2030 we can double the amount of renewables in our system to
35%... We also can reduce our coal output together with a renewable increase we
can be at 40% carbon reduction by 2030. We can do that and not do the dash to
gas…and be 63% carbon-free by 2030. But the best news of that is we can do that
at a reasonable cost… not going to be more than 3% more expensive than going
with more traditional resources.”
• 5: As far as energy
efficiency, Xcel’s IRP identifies a 0.4% per year increase in energy usage from
now through 2030. (Note: on a national basis, electricity use peaked in 2007
and has fallen about 6%). While substantially lower than projected growth rates
Xcel used in the past, actually projecting growth in energy use indicates Xcel
does not anticipate further innovations in efficiency and does not recognize
that any Rocky Mountain Institute-style deeper energy use reductions are
feasible.
PLEASE INCLUDE THE
MINNEAPOLIS CLEAN ENERGY PARTNERSHIP INTO THE IRP
Xcel’s IRP should
instead model energy efficiency as a resource and include creative to make
their energy efficiency programs relevant and accessible to renters,
multi-family building residents, and small businesses. The Minneapolis Clean
Energy Partnership, (the first of its kind in the nation) provides guidance on
such creative new energy efficiency strategies and innovative ways of financing
clean energy at the municipal level. Now that the Clean Energy Partnership
Board has adopted its work plan for 2015-2016, and it’s time for Xcel to
finalize a version of its 2016-2030 IRP that reflects the Minneapolis Clean
Energy Partnership and its significant changes to the utility’s business model.
Xcel by definition has already agreed to the Partnership’s 2015-2016 work plan.
As long as Xcel actually intends to do what they had already said they would
do, it is hard to see any honest reason for them to say no to including the
approved Partnership Work Plan into their IPR.
My understanding about
the IRP process is that Xcel selects the best approach by taking into account
all components which would significantly affect energy usage. Minneapolis is
13% of Xcel’s rate base in Minnesota and that is a bit too large to be
dismissed as too micro scale to include in an IRP allegedly focused on the
Macro scale. Nevertheless, I have heard one of Xcel’s Vice President’s recently
tell the Minneapolis Clean Energy Partnership board that the scope of the IRP
is too macro-scale and hence does not have the capacity to factor in
municipal-level energy data considered to be micro-scale. This is the same
circular reasoning previously mentioned similar to how Xcel considers
microgrids too “micro-scale” to get taken seriously in a macro-scale IRP
regardless of how application of the technologies can have a hugely positive
effect at the macro level. At the time Xcel’s Vice President was doing a
presentation to Partnership board on the most inspiring clean energy goals of
Xcel’s IPR while making no voluntary mention of the Partnership Work Plan the
very same board approved, until a Minneapolis City Council Member on the Board
posed the question.
Assuming they fully
intend to be honest energy partners with the City of Minneapolis and its energy
goals, the main argument which Xcel’s Vice President put forth either exposes a
fundamental circular rasoning flaw in the IRP process or the exposes need to
update some seriously outdated data systems. Here are some positive reasons why
the Partnership’s 2015-2016 work plan deserves to be included into Xcel’s IRP
to an extent greater than marginal recognition on the side.
1) The Minneapolis
Clean Energy partnership can change the game of what is possible for Xcel by
combining policy levers, community outreach and energy data. The Clean Energy
Partnership programs can raise participation in energy efficiency programs to
higher than historic levels by making them accessible and relevant to
low-income communities and groups from many cultural backgrounds that need them
the most. In addition, the Partnership promised in its work plan to identify
additional lending sources to finance energy efficiency and renewable energy
projects. These strategies will empower Xcel to increase the number of
residents and businesses participating in renewable and energy efficiency
programs enabling them to exceed conservation savings and renewable generation
currently projected.
2) Regardless of the
specifics of the Minneapolis Clean Energy Partnership, the city-utility partnership
model must be recognized as a possibility for expanding the core part of Xcel’s
business model. A city and an investor owned utility who serve it can have far
better tools for accomplishing our energy future, when they work together and
combine their strongest aspects as opposed to the previous status quo where the
city and its utility worked largely in isolation from each other. Energy
efficiency programs will be most effective in reaching renters and multifamily
building residents when the city can integrate its neighborhood engagement
systems and its regulatory authority over housing / businesses with the
utility’s programs, incentives, financing methods, and infrastructure.
Language describing
each of these Work Plan items is contained on pages 11-16 of the Minneapolis
Clean Energy Partnership 2015-2016 Work Plan as adopted at the May 29, 2015
Clean Energy Partnership Board Meeting (https://cleanenergypartnership.files.wordpress.com/2015/05/cep-15-16-final-work-plan-attachment-b.pdf).
This language should be incorporated in its entirety in the above captioned
document, as a separate chapter entitled “City/Utility Partnerships.”
Once again, thank you
so much for the opportunity to share and I hope my input is helpful in bringing
awareness to some key issues, Lee Samelson
