Minnesota utility regulators on Thursday approved Xcel Energy's plans for a massive solar farm in Baker, a project that would cost at least $575 million and dwarf the state's largest solar farm.
Utility regulators have praised the new solar farm for its environmental benefits and economic impact. The Minnesota Public Utilities Commission (PUC) voted unanimously to allow Minneapolis-based Xcel to recover project costs from ratepayers.
"I think this is a very important day for Minnesota," PUC President Cathy Sieben said at Thursday's board meeting.
The project is supported by clean energy groups, local governments and trade unions. Xcel will help replace lost electricity and property taxes between 2023 and the late 2030s, when Sherco's three main coal-fired plants in Baker begin closing.
Excel estimates that the project will create 900 construction union jobs.
“We are ready to begin work on the project,” Matt Harris, general counsel for Xcel, told PUC. "We will start accepting sign orders from tomorrow."
Sherco Solar will go live in late 2024 and 2025 and will employ 14 people, the company said.
Sherco Solar covers 3,497 acres in the Baker area and generates 460 megawatts of electricity when the sun rises, Excel said. Currently, Minnesota's largest solar farm is Xcel's 100-megawatt facility in Chicago County.
Xcel says Sherco Solar will be the largest solar facility in the Upper Midwest and one of the largest in the nation, dramatically increasing Minnesota's solar capacity to 1,357 megawatts by the end of 2021. Solar power currently supplies about 3% of Minnesota's electricity. .
Sherco Solar successfully offsets 300,000 tonnes of carbon emissions annually, Excel said. The project is designed to have minimal impact on agricultural land, which is a concern for solar projects.
But the cost of the project has been controversial, with the Minnesota Department of Commerce and the Attorney General's Office objecting to it this year. Both concluded that Xcel's bidding process was too costly for taxpayers.
This summer, the Commerce Department and Excel agreed to a "price cap" for solar power plants, which the Agricultural Bureau also approved.
The complex cost of capital is related to the price Xcel receives for solar farms other than Sherco Solar.
Xcel did not release a current estimate of its value, but said it would be higher than the initial estimate of $575 million.
In recent years, inflation and supply chain constraints have hit the solar sector like other industries. Since April 2021, prices for solar projects have risen 25%, including 8% in the second quarter of 2022 alone, according to Excel's July PUC filing.
However, Xcel reiterated on Thursday that the passage of major federal legislation in August that includes tax subsidies for renewable energy could reduce the project's final cost to taxpayers by 20-30%.
"The SCA transition took the pressure off," said Alan Gleckner, director of clean energy at Fresh Energy. Renewable energy advocacy group based in Paul.
Before the law was passed, Xcel estimated ratepayers would pay for Sherco's solar power for several years, with peak costs between 2026 and 2031 of $5.60 to $7.90 per year for the average residential customer. .
Excel will keep the updated project cost as a "trade secret" because disclosure would result in higher costs for solar projects currently being tendered. The Star Tribune this week publicly challenged the classification of Xcel's expenses as a trade secret. The PUC dismissed the challenge.
PUC told Xcel on Thursday that it should release the full cost of the project by mid-October.
