An Xcel Energy utility plans to buy two wind projects in Minnesota totaling 120 MW from Allete subsidiaries, according to applications filed Monday at the Federal Energy Regulatory Commission.
When the Minnesota Public Utilities Commission approved the deal in mid-2021, the price for the two repowered wind farms was $210 million, according to a July 13 filing with the agency.
However, since then, the projects’ expected production levels have changed, as have supply chain issues and inflationary pressures, which led to Xcel agreeing to pay an additional $5.6 million to complete the deal, Xcel told the PUC.
“Given the current state of the [Midcontinent Independent System Operator] interconnection queue as well as overall inflation impacts and specific disruptions to the solar supply chain caused by the U.S. Department of Commerce’s ongoing antidumping investigation, we believe it is important to keep the Northern Wind and Rock Aetna projects on track to cost-effectively meet our approved resource needs,” the Minneapolis-based utility said.
Since February 2021, when Xcel sought initial approval for the transaction from the PUC, the cost of commodities used as inputs for a wind project, such as steel, copper and aluminum, have increased 20% to 30%, according to Xcel. Also, transportation fuel prices have surged 50%, which has increased costs related to transporting and producing components and concrete, the company told the PUC.
Improved production tax credit benefits will offset the projects’ increased cost, according to Xcel, which expects the projects will be operating by the end of the year. They are expected to produce 451,000 MWh a year.
Xcel and Allete, headquartered in Duluth, Minnesota, asked FERC to approve the transactions by Oct. 31, saying they meet the agency’s criteria for such deals.
The planned deal grew out of a July 2020 request for proposals to repower existing wind farms that Xcel owned or contracted with. The Northern Wind project is repowering the existing Chanarambie and Viking wind farms in Murray County while the Rock Aetna project is a new wind farm.
The RFP was in response to a May 2020 request by the PUC that utilities consider measures they could take to spur the economy during the COVID-19 pandemic.