Xcel wants to close 2 Sherco coal units, add gas plant

BECKER — Xcel Energy is proposing to retire the two oldest units at the Sherco coal-fired power plant by 2026 and replace them with a new natural gas plant on the same site.

The utility filed a plan with the state Public Utilities Commission on Friday outlining a different vision for the massive energy generator from what it proposed earlier this year.

Xcel wants to close Sherco 2 in 2023 and Sherco 1 in 2026 and build a combined-cycle gas generating unit on adjacent land, said Chris Clark, president of Xcel’s Upper Midwest operating region. Sherco’s larger, newer Unit 3, which has more modern pollution controls, would continue burning coal.

The plan also includes adding about 50 megawatts of solar energy at the Sherco site.

Clark said the comments outline “a bold vision of what we think our energy future should be,” including a transition away from coal toward more natural gas and renewable energy. Xcel’s plan would result in a reduction of carbon emissions by 60 percent from 2005 levels by 2030.

“We think we’ll be able to meet customers’ expectations that we have a cleaner energy mix as we move to the future, but we’ll be able to make that commitment while still serving our customers well and be able to do this at a reasonable cost,” Clark said.

Xcel also proposes to continue operating the state’s two nuclear plants in Monticello and Prairie Island, accelerate the addition of some wind and solar generation and add more natural gas in North Dakota to serve the growing demand there, Clark said.

The recommendation to close Sherco 1 and 2 is a victory for environmentalists, who have long targeted the state’s largest producer of carbon and other greenhouse gases. In its resource plan filed in January, Xcel said its preferred option was to continue operating the two units at a reduced rate at least until 2030.

Sherco is the largest power plant in the Upper Midwest. It produces 2,400 megawatts of electricity —enough to power more than 2 million homes — and burns up to three trainloads of coal per day.

Environmental and health groups cheered Friday’s announcement.

“Xcel Energy’s decision results in cleaner air and a healthier environment for Minnesotans,” Robert Moffitt, a spokesman for the American Lung Association in Minnesota, stated in a news release. “When faced with a difficult decision on how to plan for the future, they chose a path that is good for people and good for the planet.”

Clark said the change of plan was driven by several factors, including the Clean Power Plan announced by the Obama administration earlier this year, a sweeping effort to reduce pollution from power plants. Under the plan, Minnesota must cut carbon dioxide emissions by about 40 percent.

Xcel also did additional study of possible options for Sherco, as requested by environmental groups and the Public Utilities Commission, Clark said. Some groups also submitted their own recommendation in July for closing units 1 and 2 earlier.

However, “the real driving force was a desire to take a look at our fleet and where we’re going for the future,” he said.

“Given what we know that Sherco 1 and 2 will continue to be under environmental pressure, we thought there was a lot of benefit to the certainty of making the decision to set those dates, give ourselves a full 10 years to be able to transition our workforce, and also set ourselves up well as we come into the 2030s, where we’ll have a whole other series of important decisions to make,” Clark said.

The company plans to file more detailed information about the proposal in January. After a lot of public comment, Clark said, a decision by the Public Utilities Commission is likely to come sometime in 2016.

If the plan is approved, it would have a substantial impact on Becker and the surrounding community.

The coal plant employs 350 full-time workers and as many as 800 more during periodic outages. Xcel Energy pays three-fourths of Becker’s property taxes, about $4 million a year, which help keep the city’s tax rate the lowest in the county. The company also has given countless donations to Becker schools and other community organizations.

“It’s the economic engine for the whole area,” said Rep. Jim Newberger, R-Becker, in an interview with the Times earlier this week. “It’s not just a Becker issue. This is going to affect the surrounding communities in a very big way.”

Newberger helped arrange for the House Job Growth and Energy Affordability Policy and Finance Committee to meet in Becker last month on Sherco. The meeting drew more than 300 people.

For every worker at the plant, Newberger estimated there are three to five service industry jobs connected to it, including doctors, grocery store workers and gas station attendants. He said a significant job loss at Sherco would affect a 30-mile radius.

"We’re looking at just an enormous hit on Central Minnesota’s economy, one that we can’t absorb," Newberger said.

There would be a reduction in the number of employees needed to operate the remaining Sherco unit 3 and the new natural gas plant, Clark said. Gas plants don’t require as many workers as coal-fired units.

However, the proposal’s 10-year window would allow Xcel to work with unions and employees, take advantage of retirements and attrition and help employees find other jobs within the company, Clark said.

Steam from the Sherco plant is used by a neighboring business, Liberty Paper, which employs about 150 people. Xcel’s plan said a combined-cycle gas plant could continue to supply steam for Liberty.

Clark said he’s aware of the plant’s significant impact on Becker’s property taxes. But he said a new natural gas plant would be a significant asset that could actually generate more property taxes than what Sherco is paying now.

“These are substantial capital investments. We’re talking about hundreds of millions of dollars,” Clark said.

Clark said Xcel is committed to working with Becker and keeping the community updated on what’s happening.

“These are big decisions. There will be a lot of people interested in this,” he said. “We expect to engage in a lot of outreach, including with our communities, and come up and talk to people and try to share information.”

One Becker resident who has been watching the issue closely is Shelly Mattson, who owns Nix Bar & Grill, where Sherco workers often drop in for lunch or a drink after work.

Mattson, who has owned the restaurant for six years, said she isn’t sure what the city would do without Sherco, which has provided good jobs, kept the tax rate low and boosted the school system.

"We all want a cleaner environment. Nobody’s saying that we don’t," Mattson said. "But we can’t just shut down the coal plants and forget about the consequences. Because yes, the environment is important, but so is all of our livelihoods and our lives."

In a statement issued Friday, Gov. Mark Dayton said the proposal will be fully reviewed by state regulators and subject to “rigorous public comment and consideration.”

“I thank Xcel for their commitment to clean energy progress in Minnesota,” Dayton stated. “And I deeply appreciate the company’s continued commitment to the Becker community, where the construction of its proposed natural gas plant would create many good jobs.”

Follow Kirsti Marohn on Twitter @kirstimarohn or reach her by phone at 255-8746.