The Sherco Clean Repowering: How One Community Turned a Coal Plant into a Hub for a New Clean Economy

This case study examines the transition of the Sherburne County Generating Station (Sherco) in Minnesota from a coal-fired power plant to a clean energy hub. It details how Xcel Energy, the Minnesota Public Utilities Commission (PUC), and local stakeholders utilized federal incentives from the Inflation Reduction Act (IRA) and the Bipartisan Infrastructure Law (BIL), along with a 'generator replacement' process to bypass interconnection queues, to replace coal capacity with solar and battery storage while supporting the local workforce and economy.

• The Sherburne County Generating Station (Sherco) is transitioning from a 2,400 MW coal facility to a clean energy hub. The replacement for Sherco 2 includes 710 MW of solar and a 10 MW/1,000 MWh iron-air battery system from Form Energy, both located on or near the existing site.
• Xcel Energy utilized a 'generator replacement' process to transfer interconnection rights from the retiring coal plant to new clean energy projects. This mechanism reduced the typical interconnection timeline from a median of five years to less than one year.
• Federal funding and tax incentives were critical to the project's financial viability. The IRA provided production tax credits (PTC) and investment tax credits (ITC), including a 10% bonus for projects in 'energy communities'. Additionally, the Form Energy battery project received a $35 million grant from the Department of Energy’s Office of Clean Energy Deployment (OCED) via the BIL and a $10 million private grant from Breakthrough Energy Catalyst.
• The transition was supported by Minnesota state policy, specifically Senate File 4, which mandates a 100 percent carbon-free electricity standard by 2040. This law requires the PUC to prioritize high-paying jobs, unionization, worker transition, and affordability for low-income ratepayers.
• To mitigate the economic impact on the city of Becker—where Sherco previously provided 77 percent of annual tax revenue—Xcel implemented a worker transition plan and economic development strategies. Xcel pledged no layoffs for Sherco employees, providing upskilling and reskilling to ensure transitions by the time Sherco 3 retires in 2030.
• The project emphasizes labor and diversity through the use of union construction, creating over 400 jobs and generating more than $350 million in local economic benefits. Xcel's 'Power Up' program specifically targets women, veterans, and people of color for energy-related construction roles.

APA

RMI (2024). The Sherco Clean Repowering: How One Community Turned a Coal Plant into a Hub for a New Clean Economy. https://rmi.org/resources/the-sherco-clean-repowering-how-one-community-turned-a-coal-plant-into-a-hub-for-a-new-clean-economy/

Chicago

RMI. The Sherco Clean Repowering: How One Community Turned a Coal Plant into a Hub for a New Clean Economy. 2024. https://rmi.org/resources/the-sherco-clean-repowering-how-one-community-turned-a-coal-plant-into-a-hub-for-a-new-clean-economy/.

Wikipedia

{{cite report |author=RMI |title=The Sherco Clean Repowering: How One Community Turned a Coal Plant into a Hub for a New Clean Economy |date=8 November 2024 |url=https://rmi.org/resources/the-sherco-clean-repowering-how-one-community-turned-a-coal-plant-into-a-hub-for-a-new-clean-economy/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2024sherco, author = {{RMI}}, title = {{The Sherco Clean Repowering: How One Community Turned a Coal Plant into a Hub for a New Clean Economy}}, institution = {RMI}, year = {2024}, month = nov, url = {https://rmi.org/resources/the-sherco-clean-repowering-how-one-community-turned-a-coal-plant-into-a-hub-for-a-new-clean-economy/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }