How Does a Utility Turn a Net-Zero Vision into Reality? That’s What They’re Arguing About in Minnesota

In the national debate over the role of natural gas power in the energy transition, some of the key players are digging in for a battle in Minnesota.

The state is the home of Xcel Energy, the first large U.S. utility to commit to reaching net-zero emissions, and now Minnesota regulators are considering a plan from Xcel that spells out some details of how it might get there.

A lot is riding on this case. Xcel, like utilities in other states, wants to continue using natural gas power plants as a way to maintain a reliable grid during the transition to cleaner power sources. Meanwhile, environmental groups last week issued alternative plans that say utilities can save money and cut emissions more quickly by investing more heavily in wind, solar and battery storage.

“The longer that we continue to rely on coal and natural gas, the longer we’re paying too much for power,” said Annie Levenson-Falk, executive director of the Citizens Utility Board of Minnesota, one of the groups that submitted an alternative to Xcel’s plan.

The participants in the case are also raising deeper, wonkier questions about the usefulness of the forecasts and models that companies use and the difficulty of making long-term plans. One of the big challenges is planning for the more frequent occurrence of extreme weather events, like the cold snap this week in Texas and some of the Midwest that led to rolling blackouts when power plants powered by natural gas, wind and other sources were not able to function.

The issues in Minnesota are similar to those in states like North Carolina, where Duke Energy also has a net-zero plan and wants to build new natural gas plants.

And the results in Minnesota could help to establish the baseline for how other regulators deal with these complex issues, which is part of why the stakes are so high.

Xcel has credibility and influence on the topic of addressing climate change because the company was a trend-setter with its 2018 announcement that it would aim for net-zero emissions by 2050. Adding to the company’s influence within its industry, Xcel CEO Ben Fowke is now in a one-year term as chairman of the Edison Electric Institute, the major trade group for electric utilities, an organization that has said natural gas power plants will continue to be an essential part of the grid.

Xcel’s climate credentials are shaking up a state regulatory process in which utilities and environmental groups are used to being adversaries, said Gabriel Chan, a University of Minnesota public policy professor.

“For the longest time, climate and business have been in conflict,” he said.

Now, the utility and environmental groups are no longer arguing about whether to aim for net-zero, but about the pace of the transition and its specific steps.

Is Gas Really Necessary?

The debate is playing out in a case before the Minnesota Public Utilities Commission, where Xcel has a proposal for how to manage its power plants between now and 2034.

Xcel, which serves parts of eight states, issued its long-term proposal for Minnesota in 2019, but, because of various delays, other parties only started filing comments on the proposal last week. The commission is on track to hold hearings this spring or summer and issue a decision sometime this year.

Xcel is proposing to close all of its remaining coal-fired power plants, build a natural gas plant and expand wind and solar. Under the plan, the company would generate three-quarters of its electricity in Minnesota from carbon-free sources by 2034.

The most controversial part of the plan is that Xcel wants to build a natural gas plant on the site of the Sherburne County Generating Station, a coal-fired power plant that will be shutting down. The result would be a new 835-megawatt natural gas power plant with a decades-long lifespan, which environmental advocates say is incompatible with the idea of rapidly cutting emissions.

Xcel has said that it needs the new natural gas plant, along with existing gas plants that will continue to operate, to guarantee that the grid remains reliable during the transition to net-zero emissions. 

The gas industry and utility companies have spent years touting natural gas as a “bridge fuel.” Gas has lower emissions than coal, and gas-fired power plants can quickly ramp up and down, which means they are flexible working alongside resources like wind and solar.

But the “bridge fuel” message has run into the reality of a shifting market and rising urgency to address climate change. The costs of wind and solar power have fallen enough to compete with natural gas in much of the country. And researchers have put a spotlight on the public health and climate impacts of the entire process of producing and burning gas, undercutting the idea that gas is an environmentally friendly alternative to coal. 

Environmental groups have responded by stepping up their work against gas, opposing pipelines and power plants and trying to get local governments to ban the use of gas for heat or cooking in new construction.

The growing opposition to gas is putting utilities on the defensive, to the point that proposing to build a single gas plant, as Xcel is doing, has taken center stage in the discussion of a much larger plan.

Asked to comment about its plan and the alternatives, Xcel emailed a statement saying the plan “continues our industry-leading progress” on addressing climate change, and will “provide reliable and affordable electricity for our customers.”

The Alternatives

More than a dozen environmental and consumer groups are active in the case, some working in coalitions and some on their own. This packed house of environmental interests has released three separate alternatives to Xcel’s plan.

The plans share a reliance on solar power, including a big increase in rooftop solar on homes and businesses. And they do not include any new gas plants.

Here are the proposals:

• Sierra Club has a plan it calls “Clean Energy for All” that the organization says would cut emissions by 90 percent compared to 2005 levels by 2030—a more ambitious target than the 80 percent in Xcel’s plan—and save $2.2 billion by 2034, compared to Xcel’s plan. The proposal has the support of several other environmental groups, including the Institute for Local Self Reliance, the Environmental Law & Policy Center and Cooperative Energy Futures.
• The Citizens Utility Board has a plan it calls the “Consumers Plan” that the group says will save consumers $1 billion per year compared to Xcel’s, and would cut emissions by 86 percent compared to 2005 levels by 2030.
• A coalition of four other groups—Fresh Energy, the Clean Grid Alliance, the Union of Concerned Scientists and the Minnesota Center for Environmental Advocacy—has a plan called “A Clean Energy Future for Xcel.” The plan goes through several different scenarios, showing varying levels of cost savings for using solar, battery storage and other resources instead of building a new natural gas plant.

The fact that there are three alternative plans reflects differences among the groups. For example, the coalition that includes Fresh Energy is made up of most of the groups that signed onto a settlement with Xcel in a separate case in 2019. At that time, the signatories said they would not oppose Xcel buying an existing natural gas plant in Mankato, Minnesota, in exchange for Xcel agreeing to close some coal-fired power plants earlier than previously planned, and expanding its investments in solar. (Sierra Club also signed onto the settlement, but is not part of that coalition in the current case.)

Other environmental groups opposed the settlement, including many of the others in the current case, like the Citizens Utility Board and the Institute for Local Self Reliance.

While environmental groups are not unified behind a single alternative plan, their proposals are similar enough that they may help to reinforce and confirm their main points.

“I’m glad we have this wide range of views in our community and yet can collaborate,” said John Farrell, co-director of the Institute for Local Self Reliance, a nonprofit with a Minneapolis office that works to help communities gain greater control over their local economy. “It makes the commission’s job challenging because there are a lot of perspectives, but I think it makes the outcomes better.”

At the same time, regulators will be considering more viewpoints than just Xcel’s and those of environmental groups. The docket includes testimony from many other parties, including local governments with concerns about losing power plants, and industrial businesses that say Xcel should be more cautious about prematurely closing coal-fired plants.

A Question of Modeling

While environmental groups are the ones signing their names to the alternative plans, the plans themselves are mostly the work of energy modeling firms, the hired hands that play a big role in shaping the debate over how different energy resources will work in the grid of the near future.

The Citizens Utility Board’s plan is by Vibrant Clean Energy of Boulder, Colorado, which is led by Chris Clack. The company is well-known for developing new ways to account for how renewable energy will work in the grid, including the ramifications of having high levels of customer-owned power sources like rooftop solar. 

“The models the utilities are using are outdated,” Clack said. “People have developed better models, larger-scale models, more detailed models.”

The main problem with the models that utilities use is that they work best when assessing the need for large, centralized power plants, he said. But the models are less effective when making calculations about how the grid would deal with many smaller systems, like solar arrays that are less than 50 megawatts.

Xcel’s proposal is based on a model built with EnCompass, a software platform sold by Anchor Power Solutions of Georgia, that is used by many types of clients, including large utility companies and government agencies.

The makers of the software designed it to be able to make complex calculations about how renewable energy and battery storage works on the grid. Those are some of the attributes that made Xcel, along with Minnesota’s other investor-owned utilities, select EnCompass in a competitive bidding process.

Norm Richardson, founder and president of Anchor Power Solutions, said that much of the criticism in Minnesota is not about the software itself, but about the choices Xcel made in which options to explore.

He said EnCompass can do modeling of the grid down to a granular level, but it’s not always useful to do those types of calculations for a system as large as Xcel’s and for a proposal that will run for years.

Over the next few months, regulators will review thousands of pages of testimony, much of it highly technical arguments about modeling. But they don’t need to select one perspective and base their entire decision on it. They can take aspects of all the filings and forecasts.

On the central question of whether Xcel should build a new natural gas plant, however, there isn’t much room for compromise. Either the plant gets built or it doesn’t.

A previous version of this article incorrectly identified Xcel Energy’s plan for a new natural gas power plant. The plant would be built on the site of the Sherburne County Generating Station, a coal-fired power plant that is shutting down.