Xcel doubles down on plan to swap coal for clean power in Minnesota

This story was originally published by Canary Media.

Xcel Energy’s sprawling Sherco Energy Hub will be among the United States’ biggest solar farms when the last of its three approved phases powers up next year. Soon after, the central Minnesota site could also host one of the Midwest’s biggest battery clusters.

In a Halloween filing, Xcel asked the Minnesota Public Utilities Commission for permission to double its planned battery capacity at Sherco while adding a 200-megawatt fourth phase of solar there and deploying about 136 MW of batteries at a separate site southwest of Minneapolis.

The push to build even more clean energy was spurred by rising electricity demand and the looming phaseout of federal clean-energy tax credits under the Trump administration, which has worked to hamstring renewables while attempting to boost coal and gas generation.

Related: How Trump energy policy complicates a Minnesota utility’s path to clean power

If the commission approves Xcel’s proposal, Sherco would host 910 MW of solar and 600 MW of battery capacity by the end of the decade. At peak production, that would go a long way toward offsetting the output of what Xcel representatives have called the ​“backbone” of the company’s Upper Midwest generation fleet: the roughly 2,300-MW Sherco coal plant, which shut down its first unit in late 2023 and is set to fully retire in 2030.

George Damian, director of government affairs for Clean Energy Economy MN, said the proposal underscores the growing importance of batteries as the grid shifts away from fossil fuels. 

“As demand continues to rise, technologies like battery storage are becoming essential to maintaining reliability while integrating more carbon-free generation,” Damian said.

Xcel regional president Bria Shea agreed, saying in a statement that “[w]e’re making a significant investment in battery storage because we see it as a critical part of Minnesota’s energy future.”

The separate 136-MW Blue Lake project would replace retired fossil-fuel capacity, too, boosting output at what’s now a 332-MW gas peaker plant. Xcel retired Blue Lake’s aging oil-fired units earlier this year, leaving two newer gas units operating and freeing up more than 200 MW of grid interconnection capacity.

Minnesota requires its utilities to procure 100% clean power by 2040 and aims to decarbonize its entire economy by 2050, with ambitious targets for building and transport electrification. Meanwhile, developers have proposed at least a dozen large-scale data center projects around the state, including several in Xcel territory. In December, Xcel executive Ryan Long — then serving in Shea’s role — said the company could absorb 1.3 GW of data center capacity by 2032 without derailing its carbon-free power plan, though he added it may need to extend the life of some gas plants to accommodate the load increase.

In the filing, Xcel said it wants to move quickly to expand its generation capacity while there’s still time to qualify for federal clean-energy tax incentives of 30% or more.

President Donald Trump’s One Big Beautiful Bill Act will sunset those incentives several years early, forcing most wind and solar projects to begin construction before July 4, 2026, to qualify for the full value. Energy storage projects qualify for the full credit value through 2033, but Xcel said uncertainty around new foreign-sourcing restrictions taking effect next year increases the urgency to deploy storage soon too.

Xcel says it expects to break ground on the Sherco and Blue Lake battery installations next year and power them up in 2027. It aims to commission the Sherco solar project by 2029.

Rather than contract with independent solar and battery installations in its territory, Xcel wants to build and own all three projects itself. In the filing, it said rules set by Minnesota’s grid operator require company ownership of new energy facilities reusing interconnection rights at retiring power plants. The same filing asks the commission to approve agreements to purchase power from several third-party solar and battery projects that will connect to the grid elsewhere.

John Farrell, the Minneapolis-based codirector of the Institute for Local Self-Reliance and a frequent critic of the monopoly-utility model, said the looming tax-credit cliff creates an unusual circumstance where the need to quickly develop more clean energy cuts against his preference for an open and competitive bidding process that could result in a better deal for electricity customers.

“I am more sympathetic than I would be normally because we are stuck in the regime we’ve got and there’s a lot of money on the table,” he said, referring to the tax credits whose rollback is expected to raise Minnesotans’ electricity bills in the coming years.

To incentivize faster clean-energy deployment ahead of the cliff created by Trump’s megalaw, the Minnesota Public Utilities Commission in August said it would allow projects that meet the deadline for federal tax incentives to also access extended eligibility for state renewable energy credits.

Xcel spokesperson Theo Keith said the utility has ​“already taken steps to ensure this portfolio of projects will qualify for federal tax credits before they expire.”

But with the North American Electric Reliability Corp. forecasting a ​“high risk” of capacity shortfalls on the Upper Midwest grid by 2028, there’s a chance that the U.S. Department of Energy issues an emergency order requiring one of the Sherco plant’s two remaining coal units to run past its planned retirement next year, said Allen Gleckner, chief policy officer for Minnesota-based Fresh Energy.

Related: States look to unleash wind and solar boom while tax credits still exist

The DOE has already done so for one retiring coal station in the Midwest, Michigan’s 1,420-MW J.H. Campbell plant. Its operator, Consumers Energy, says that order, which runs at least through Nov. 19 and which the DOE says it could extend for much longer, has already cost consumers at least $80 million. It’s unclear whether a similar order at Sherco would affect Xcel’s battery plans, but it would be disruptive to the utility either way, Gleckner said.

“The uncertainty that scenario contemplates is another reason why it would be a terrible idea,” Gleckner said.

Asked if Xcel had reason to expect a DOE emergency order at Sherco and whether that could interfere with its proposed clean-energy deployments there, Keith said only that Xcel is moving ahead with its plans to retire the coal units by 2030.

“We are in regular conversations about Minnesota’s energy future with various stakeholders, including federal, state, and local elected officials,” he said.

The post Xcel doubles down on plan to swap coal for clean power in Minnesota appeared first on MinnPost.