Xcel Energy Minnesota wants to run some of its coal under economic and seasonal dispatch instead of through self-scheduling practices, it told state regulators in December.
The utility submitted a filing with the Minnesota Public Utilities Commission (PUC) to begin offering its two remaining coal plants seasonally into the Midcontinent Independent System Operator (MISO), rather than self-committing the plants to the market, which leads to market distortions, according to research from the Sierra Club and the Union of Concerned Scientists (UCS). The move is part of an ongoing proceeding opened by state regulators in November, and several clean energy groups in the state have been pressing the utility to consider moving away from self-scheduling.
The measures are estimated to reduce customer costs by tens of millions of dollars and 5 million tons of carbon emissions annually by optimizing use of the plants. Minnesota's PUC was the first state commission in the country to open up a docket on this issue, according to UCS Senior Energy Analyst Joe Daniel, whose research implies the market distorting effects of self-scheduling are widespread across regional power markets.
Xcel's filing with state regulators shows clear environmental and economic benefits to seasonally dispatching its coal units, and those results would likely be magnified if utilities across the country did the same thing, according to Daniel.
"Extrapolate [Xcel's results] out to the US Coal fleet and we are talking about a double-digit reduction in US electric sector emissions overnight while simultaneously reducing energy costs to customers," he said in a Tweet Tuesday.
Based on preliminary results from Daniel's research, Xcel subsidiary Northern States Power Company is the third worst offender in the MISO region, in terms of potential cost savings from operating plants more effiiciently.
The company asked regulators to approve economic and seasonal dispatch of its 511 MW Allen S. King plant and Sherco Unit 2, which accounts for 682 MW of the facility's over 2.2 GW of capacity. Xcel will operate those facilities based on market signals rather than self-scheduling during non-peak seasons, unless the plant is needed for reliability. The Allen plant will begin these operations in March and the Sherco unit in September of this year.
"We expect seasonal operation of our coal units will reduce carbon emissions, save our customers money and we will continue to study how this type of operation affects the rest of our system to ensure reliability," Xcel told Utility Dive in an emailed statement.
Xcel will save anywhere from $8.5 million to $28.5 million annually on fuel costs for these units, based on the utility's modeling. Over the lifetime of the proposal, which would last until Sherco Unit 2's retirement in 2023 and the Allen Plant's retirement in 2037, the facilities would save $18.4 million in total operation and maintenance costs. King would also save over $27 million in capital costs over those nine years.
The utility's results "validate a lot of what has been raised by UCS and Sierra Club," Senior Director of Energy Markets and Regulatory Affairs at Fresh Energy Allen Gleckner told Utility Dive. "And then what we've been seeing in our work in advocacy is that this is a real opportunity, and I think these numbers in this proposal show that there's an opportunity for change."
Under self-committing practices, utilities run their units on a scheduled basis, which can distort market prices if the units production costs are higher than how much power is selling for that day.
In some cases, utilities self-schedule in order to avoid the high costs of powering up and shutting down units, which traditionally run as baseload. But low-cost solar, wind and natural gas mean that coal is less economic more often, which is causing utilities and regulators to take a harder look at resource scheduling, prodded by clean energy groups.
"The increasing levels of renewables on our system and across the MISO footprint are impacting the wholesale energy markets, and we expect those impacts to increase as more renewables are added," Xcel said in its filing."Wind and solar resources provide energy to the grid without fuel costs and have a dispatch cost of zero, or a negative price. … In response to the changing market dynamics … we are proposing to implement seasonal operations."
The Southwest Power Pool's independent market monitor is the only one to have run a full market evaluation, which found self-committing power was suppressing the market's clearing prices by about $2/MWh.
Sierra Club research examining the MISO market found self-scheduling practices suppressed market prices by about $7.70/MWh and without it coal generated power would be reduced 10%.
MISO's market monitor has not run a full analysis on the impacts of self-scheduling, but MISO itself has developed a multi-day operating margin forecast to help mitigate the issue and "guide more economic generation start and stop decisions," the grid operator told Utility Dive in October.
There is also a docket open to examine the issue with Minnesota's other two investor-owned utilities, Otter Tail Power and Minnesota Power. Those utilities will file an informational compliance filing in March.
"I think that there's a good opportunity for those other utilities to, if not do the exact same thing, to take a really hard look at some of these changes," said Gleckner.
This article has been updated to clarify MISO is the one developing its day-ahead market.