Xcel Energy's Colorado Coal Generators: Retire, Repower, and Retrofit

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Xcel Energy Incorporated (NYSE:XEL) (Minneapolis, Minnesota) last week announced a three-point, $1.3 billion plan to meet a recently enacted Colorado environmental law: retire 903 megawatts (MW) of coal-fired generation capacity, repower 994 MW of coal-fired capacity to burn natural gas, and install emissions control at two coal-fired plants with a total generating capacity of 951 MW. The plan must be approved by the Colorado Public Utilities Commission.

Colorado's "Clean Air-Clean Jobs Act," enacted this year with Xcel Energy's support, required the utility to file a plan that would cut emissions of oxides of nitrogen by between 70% and 80% by 2017. The utility modeled more than 300 different scenarios to craft a plan that would meet the new state law. Xcel Energy said the proposed plan would cut oxides of nitrogen by 75% by the end of 2017 and 89% by the end of 2022.

By 2023, Xcel Energy's plan also would cut the affected plants' sulfur dioxide emissions by 84% and mercury emissions by 85% from 2008 emissions levels. The proposed changes also would make Xcel Energy meet the state's carbon dioxide reduction goal of 20% by 2020.

Under the proposal, filed last Friday with the Colorado Public Utilities Commission, Xcel Energy would retire the 186-MW Valmont Unit 5 by the end of 2017. The utility proposed retiring 717 MW of coal-fired generation at the Cherokee station by the end of 2022.

Xcel Energy also proposed repowering units at the Cherokee and Arapahoe power plants to burn natural gas. The repowerings would total 994 MW. Finally, the utility proposed installing emissions controls at about 951 MW of coal-fired generation at the Pawnee and Hayden power plants.

If approved by the Colorado PUC, the plan would call for $1.3 billion in capital outlays over the next 12 years, the utility said. Xcel Energy estimated that the proposed changes would increase electric rates by an average of about 1% annually for the next decade.

The proposal will result in savings of approximately $225 million when compared to the traditional approach of retrofitting all of these plants with emissions controls. If the federal government succeeds in placing a price on carbon dioxide emissions, Xcel Energy estimated that its plan could save up to $950 million, compared to the cost of installing environmental retrofits at all affected plants.

Dick Kelly, the chairman and chief executive of Xcel Energy, said: "Over the next several years, the U.S. Environmental Protection Agency will require the state of Colorado to comply with a series of regulatory mandates unprecedented in the history of the Clean Air Act. We believe our proposal is the best way to meet new environmental requirements in a manner that preserves reliability and minimizes customer costs."

Environmental activists in the city of Boulder welcomed the plan to close Valmont's coal-fired generator. They have long sought to close the generator as part of an overall plan to "decarbonize" the city's electricity supply. Boulder, located about 30 miles northwest of Denver, is a city of about 100,000 residents that is also home to the University of Colorado. Boulder city officials are considering steps to municipalize the city's electric system to help achieve carbon-reduction goals.

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