Xcel Energy Inc. (XEL) is seeking the approval of Minnesota regulators for closing down the last two coal-burning units (Units 3 and 4) at its Black Dog plant in Burnsville, Minnesota, to receive a “certificate of need” for the project.
The company plans to repower these coal-fired units by replacing them with natural gas-burning units. The Units 1 and 2 of the Black Dog plant have already been converted to natural gas combined-cycle operation in 2002.
Xcel Energy’s repowering plan hover around building a new combined-cycle facility on the Black Dog site, separate from the main building. This facility comprising of two combustion turbines, two heat recovery steam generators and a steam turbine generator will replace the plant’s present coal yard unit.
The turbines installed are expected to provide an extremely efficient electricity production process while the Combined-cycle technology offers additional 50% efficiency than the existing traditional steam plant.
The project will include a new substation and retain connectivity to the on-site 345 kilovolt transmission lines. A higher capacity natural gas line will also be installed to serve the facility.
The proposed Black Dog repowering project is estimated to raise the site’s capacity to about 700 megawatts of natural gas-fired generation compared to the current 253 megawatts of coal-fired generating capacity. The project will also provide flexibility in switching generation capacity as the demand for electricity changes or production from wind turbines fluctuates with wind speeds.
In addition, replacing the coal-burning units with natural gas-fired units will significantly reduce air emissions, including mercury, sulfur dioxide, nitrogen oxides, fine particulates and carbon dioxide.
Xcel Energy’s proposal stems from the utility’s goal to make strategic use of critical locations, expand generating capacity, maintain reasonable rates and reduce emissions to meet environmental requirements. The company plans to use the existing Black Dog plant site to repower it with state-of-the-art natural gas technology, as this is a the most cost-effective alternative.
This project presents a great opportunity for Xcel Energy to modernize its power supply taking advantage of Black Dog’s unique location and its infrastructure that has developed over time.
The Black Dog proposal requires review and approval by various state agencies, including the Minnesota Pollution Control Agency and Minnesota Public Utilities Commission. As a part of the certificate of need process, independent power suppliers will have the freedom to propose alternative developments.
On receipt of the approval of the Black Dog project, Xcel Energy plans to begin site preparation in 2012 and foundation construction in 2013. The cost for the new natural gas powered facility is expected to reach $600 million. The project is expected to come on line in 2016.
Xcel Energy’s Black Dog repowering project is similar to the company’s Minnesota Metro Emissions Reduction Project, which led to repowering of the High Bridge and Riverside plants from coal to natural gas and technology up gradation at the Allen S. King plant.
Minneapolis, Minnesota-based Xcel Energy is a major U.S. electricity and natural gas company, with operations in 8 Western and Midwestern states. Xcel Energy’s operating utilities are engaged in generation, purchase, transmission, distribution, and sale of electricity in the United States. These utilities generate electricity using coal, nuclear, hydro, wind, and solar energy.
Xcel Energy currently retains a Zacks #4 Rank (short-term Sell rating). The company fares better than its peer CenterPoint Energy Inc. (CNP), which has a Zacks #5 Rank (Strong Sell). However, we maintain our long-tern Neutral rating on Xcel Energy as we have faith in the company’s potential to raise EPS by 5%-7% over the long term.
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