Minn. Judge: Solar beats natural gas for utility procurement

New Hampshire, USA -- In what is being called an unprecedented decision, solar energy went head-to-head with natural gas in a competitive evaluation for utility resource planning — and solar came out on top.

Minnesota's renewable portfolio standard (RPS) calls for 25 percent of generation by 2025 from renewable energy sources. For Xcel, the state's largest electric utility, the rules are more aggressive at 31.5 percent by 2020. Last spring the state added a solar carve-out of 1.5 percent from solar by 2020, equivalent to about 450 MW of new solar capacity. The Minnesota Public Utilities Commission (PUC) determined that Xcel Energy demonstrated need for 150 MW of new electricity generation by 2017 (and possibly 500 MW by 2019) and directed the Office of Administrative Hearings (ALJ) to look at several proposals to decide "the most reasonable and prudent strategy" to meet Xcel's needs. Five proposals were received and accepted:

• Xcel: three 215-MW natural-gas-fired, simple-cycle combustion turbine generators, two at its Black Dog facility in Burnsville, MN and two others at its Red River Valley facility in Hankinson, ND;

• Calpine: a 345-MW combined cycle gas plant at its Mankato Energy Center, adding 290-MW of intermediate combined-cycle capacity and 55-MW of peaking capacity;

• Geronimo Energy: 100-MW (AC) distributed solar capacity intermittent resource, spread across approximately 20 sites;

• Great River Energy (GRE): proposed sale of capacity credits;

• Invenergy: a 179-MW combustion turbine peaking facility at Cannon Falls and two 179-MW combustion turbines near Hampton, MN

Geronimo's proposed Aurora solar project encompasses roughly 20 different commercial-sized sites (2-10 MW) adding up to 100 MW, sized to offset roughly 20 percent of the existing load at each respective substation. Construction would begin in 2015 and all of the sites would be online by the end of 2016 to serve Xcel's capacity needs in 2017 (and to qualify for expiring investment tax credits). Two different pricing proposals were submitted under a 20-year PPA structure: one with a fixed monthly payment per kilowatt (kW) for capacity and an energy payment for all energy generated, and another as an energy-only payment bundling everything into a single dollars/MWh price. The total cost of Aurora is projected at $250 million.

Using computer models, the ALJ's administrative law judge Eric Lipman compared each proposal against each other, gauging cost savings, fuel consumption, pollutants emitted, and other factors, and then added a number of contingencies for mandated CO2 reductions, market pricing fluctuations for each energy source, and both short- and long-term demand projections — as well as the mandated RPS and solar carve-out. Lipman also added criteria to be "compatible with protecting the natural and socioeconomic environments, including human health." He also narrowed the scope to a short-term window, since Xcel could face a capacity deficit of 93 MW in 2017, and as much as 307 MW by 2019; calculations for demand beyond 2019 should revisited later, he said. (Here's the full PDF from the state's PUC.)

Thus, Lipman decreed that in the short-term "the greatest value to Minnesota and Xcel's ratepayers is drawn from selecting Geronimo's solar energy proposal" and possibly adding GRE's capacity credits. Geronimo's proposal, he declared, "when properly analyzed under either a LCOE or strategist modeling, is the lowest cost resource proposed," plus it represents the lowest risk against policy compliances.

Lipman himself noted the importance of this decision, calling it "an important turning point in Minnesota's energy resource planning process." For twenty-odd years the state has had policies supporting renewable energy sources, yet "nonrenewable energy sources always won the head-to-head cost comparisons. Not anymore." This time, he noted, "Geronimo entered this bidding process as the sole renewable technology and beat competing offerors on total life-cycle costs."

Responding to the ruling, Xcel issued a statement saying it appreciates the work of the ALJ toward resource acquisitions but it "disagree[s] with some of the findings and recommendation," and the company pledged to file a complete response once exceptions are filed with the commission, expected later this month. The PUC's final ruling should come a month or two after that.

http://www.renewableenergyworld.com/rea/news/article/2014/01/minn-judge-solar-beats-natural-gas-for-utility-procurement