The power and gas markets look very different today from what we were anticipating three to four years ago. Gas has gone from seeming shortage to seeming abundance with recent spot prices falling...
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build out its renewable energy portfolio. To support that effort, Xcel is increasing its gas-fired generation capacity, in part, to provide backup support. Even though it’s adding more gas-fired generation, Xcel says adding more renewable energy to its portfolio will allow it ultimately to decrease the amount of gas it consumes going forward.
In 2007, natural gas represented 31 percent of the utility’s overall generation, with coal producing 49 percent, and renewable energy 9 percent. By 2020, the utility projects natural gas usage will be reduced to 17 percent of its output, with coal decreasing slightly to 46 percent, and renewable energy increasing to 24 percent. The largest increase in renewables is expected to be in wind energy, from 2,700 MW in 2007, to a projected 7,400 MW in 2020.
“We’ve been investing in natural gas generation for years. But we’re investing more in wind and solar and we expect that to eventually reduce our reliance on gas overall,” says Kurt Haeger, managing director of wholesale planning. “By 2020 our gas-fired capacity will have increased, but we expect the amount of energy we produce from gas to drop. We expect to increase the efficiency of our gas consumption while increasing our reliance on gas for peak-day capacity.”
In its Minnesota territory, the company recently re-powered two coal-fired plants with natural gas combined-cycle systems that will reduce emissions and increase output. Both projects fall under the Minnesota Metro Emissions Reduction Project (MERP), a program developed by the state legislature that allows the utility to pass through construction costs for projects that improve emissions in the Twin Cities.
First, Xcel re-powered the oldest power plant in its system, the coal-fired High Bridge generating plant in St. Paul. The original plant was built in 1911 and provided roughly 200 MW of electricity to the city and surrounding communities. The new plant, which went on-line in May, employs a combined-cycle system capable of producing up to 570 MW of energy.
Over in Minneapolis, the utility is replacing two coal-fired units at its Riverside Plant that produce a combined 400 MW with a gas-fired combined-cycle system that will deliver roughly 475 MW of electricity. That project is scheduled to be completed in 2009.
“Those projects began as a way to address a regional environmental issue, not a national issue,” Haeger says. “But from a strategic standpoint, they will help us meet our carbon-reduction effort in Minnesota.”
Indeed, Xcel’s corporate portfolio must comply with an assortment of environmental policies that differ by state. Minnesota, for example, is requiring that NSP-Minnesota’s portfolio include 30-percent renewable energy by 2020 and a 30-percent carbon reduction by 2025. Colorado, on the other hand, calls for 20-percent renewable energy and a goal of 20- percent carbon reduction by 2020. New Mexico requires 20-percent renewable energy, but only a 10-percent carbon reduction by 2020. Wisconsin calls for 10-percent (12-percent for NSP–WI) renewable energy by 2015. Texas requires 5-percent renewable energy by 2015.
As a result, there’s an assortment of gas-fired initiatives under the Xcel Energy umbrella. Southwest Public Service (SPS), which covers parts of