Xcel Energy took a big step away from coal on Tuesday, announcing an agreement to retire two of its three coal-burning units at the Comanche Generating Station in Pueblo while adding substantially more wind, solar and natural gas generation to its electric portfolio.
Xcel Energy will request competitive bids before the end of the year for 1,000 megawatts of additional wind, 700 megawatts of solar and 700 megawatts of natural gas power generation sources.
Pending regulatory approval, and assuming those bids reduce costs, it will replace 660 megawatts of coal-generated power from Comanche Unit 1, built in 1973, and Comanche Unit 2, built in 1975. It will continue to operate the newer and cleaner coal-fired Unit 3, which came online in 2010 and has a capacity of 750 megawatts.
“It is really about the economics,” said David Eves, president for Xcel Energy in Colorado, of the retirements, which will take place before the end of 2022 and 2025.
The coal plant retirements and addition of cleaner energy sources should by themselves achieve half of the 26 percent reduction in carbon emissions levels that Gov. John Hickenlooper requested under an executive order in July by 2025, Eaves said.
Retiring the two coal plants, besides reducing emissions and electricity costs, also will free up capacity on the power grid to handle the new generation sources. As part of the transition, Xcel is seeking approval for a new switching station near Pueblo.
The coal burned in the two Comanche units comes from Wyoming’s Powder River Basin, which will limit the impact on West Slope mines. About 90 utility jobs at Comanche could be eliminated and local governments face a reduction in property taxes, Eaves said.
Future generation sources are expected to locate mostly in the south central part of the state, along with northeastern Colorado, including the possibility of switching one of the Comanche units to natural gas.
“We will be asking the (Colorado Public Utilities Commission) to approve a process that in the company’s estimation will lead to $2.5 billion of clean energy investments in rural Colorado,” said Eaves.
Xcel is seeking approval for the changes from the PUC under a stipulation to its 2016 Electric Resource Plan. The stipulation was hammered out among more than a dozen parties, including environmental groups, renewable energy supporters, consumer advocates and most importantly, the utility itself, which initially resisted.
In the end, the economics behind moving away from coal proved compelling, said Erin Overturf, chief energy counsel with Western Resource Advocates, an environmental group. The cost of alternatives has dropped significantly and is expected to continue to do so.
Tax credits that support the construction of wind and solar plants is also phasing out, leaving a limited window. Many independent power producers already have projects in the works. Xcel will be capped at owning up to 50 percent of the renewable generation sought and 75 percent of the natural gas generation, assuming it can bid lower than independent producers.
Because the new generation will be secured in a bidding process, it is possible that renewable and natural gas could come in higher than existing generation. If that were the case, Xcel Energy or the PUC could decide to let the Comanche units continue operating.
But Eaves expects that the addition of new generation will reduce costs for consumers, even as ratepayers absorb the cost of retiring the two Comanche units 10 years ahead of schedule.
Ratepayers will see a 2 percent surcharge they were paying as part of the state’s renewable energy mandate cut to 1 percent, most likely by 2021 or 2022.
Xcel Energy generates 46 percent of its electricity from coal, 25 percent from natural gas, 23 percent from wind and the remainder from solar and hydropower sources. It could see renewables claiming up to 55 percent by 2025 under the plan.
Xcel has already retired three oldest units at its Cherokee Plant in Denver and retains four others with 928 megawatts of capacity. One of those units, No. 4, is currently converting from coal to gas and the Valmont Plant in Boulder, at 227 megawatts, has discontinued burning coal.