Xcel Energy (NYSE: XEL) has filed a study with the Minnesota Public Utilities Commission analyzing the future of Sherburne County (Sherco) coal-fired power plant in light of uncertainty regarding future environmental regulations.
The study, filed in response to a commission decision, examined the cost of investing in continuing to operate Sherco Units 1 and 2 -- including adding additional pollution control equipment -- or retiring the units and replacing their output with other types of generation.
“We believe the most prudent course is to leave options open until there is greater clarity and certainty on environmental regulations and the associated cost,” said Dave Sparby, president and CEO of Northern States Power Co.-Minnesota, an Xcel Energy company.
“To ensure timely action when additional information becomes available, we are also recommending that the commission establish firm triggers for reevaluation and future decision-making concerning the two units.”
Sherco Units 1 and 2 currently are in compliance with all environmental regulations and provide fuel diversity in NSP’s portfolio of energy resources. The study concluded that without carbon regulation, Units 1 and 2 will continue to be very economical sources of electricity and should continue to operate, even if the company needs to install controls for nitrogen oxides.
Xcel Energy began implementing plans about six years ago to improve Sherco’s efficiency and reduce emissions as part of a broad environmental strategy. The company is currently investing $50 million in improvements at Sherco Units 1 and 2 that will reduce the plant’s emissions of nitrogen oxides 44 percent and sulfur dioxide by 56 percent. The study evaluated the possibility of additional controls to comply with future requirements.
The study also determined, however, that if future climate regulation imposes significant costs on carbon dioxide emissions, retirement and replacement of the units with natural gas-fired generation would make the most sense for customers. Specifically, Xcel Energy recommends reanalysis when air quality regulations establish a need for substantial new investment or when a carbon regulation framework takes shape. Recently, President Obama announced a climate change initiative with details still to be worked out.
“We look forward to on-going discussions with all stakeholders on how we should address these and other issues in our resource planning,” Sparby said. “We’re proud that in Xcel Energy’s Upper Midwest service territory, we’re on track to reduce carbon emissions by 30 percent by 2020, from 2005 levels, and we’ve done so while maintaining rates below the national average.”