Tuesday, January 13, 2015

Xcel’s Proactive Resource Plan: Moving Towards a Clean Energy Future

By Amelia Schlusser, Staff Attorney

On January 2, 2015, Xcel Energy submitted its 2016–2030 Upper Midwest Resource Plan to the Minnesota PUC. Xcel’s Preferred Plan aims to reduce the utility’s carbon emissions 40% below 2005 levels by 2030, primarily through increased deployment of renewable energy resources. The utility’s proposed renewable additions are impressive: the Preferred Plan would add approximately 1,800 MW of new wind resources by 2027, nearly 1,900 MW of utility-scale solar by 2030, and approximately 500 MW of distributed solar power by 2030. These additions would more than double the company’s current renewable energy portfolio.

Responding to a Changing Energy Landscape

Xcel’s Resource Plan represents a forward-looking response to fundamental changes in the electricity sector. The utility recognized that technological advancements, evolving public policies, and shifting customer preferences created both challenges and opportunities for utility resource planning. In response, Xcel chose to take a proactive approach and adapt to the evolving electricity sector of the 21st Century.

While the utility acknowledged that the form of future federal environmental regulations, most notably EPA’s proposed Clean Power Plan, were highly uncertain, the utility’s planning process followed a balanced approach to manage this uncertainty. Under this approach, Xcel’s Plan focused on investing in clean energy sources while maintaining the utility’s ability to comply with a range of potential environmental regulations.

Xcel also recognized that the needs and preferences of their customer base had shifted in recent years. Consumers expressed growing interest in managing and customizing their energy mixes, and increases in distributed generation forced the utility industry to adapt its business model. In response to these considerations and to existing federal and state energy policies, Xcel chose to dramatically expand its distributed solar program. The utility also predicted that energy technologies would continue to advance over the planning horizon, and that these advancements would create new opportunities for modernizing the electricity grid.

Finally, Xcel determined that due to planned retirements and contract expirations, it would lose significant baseload capacity over the planning horizon. The utility concluded that its Preferred Plan must include sufficient resource additions to meet consumer demand, reduce carbon emissions, and maintain flexibility and fuel diversity. Xcel determined that a mix of renewables and natural gas combined cycle units was the best option for replacing its retiring baseload energy and capacity.

Shifting Objectives Promote Renewable Energy

Xcel’s proactive planning approach was motivated in large part by the utility’s shifting planning objectives. According to Xcel’s Resource Plan, the utility’s traditional planning objective was “to identify the least-cost approach to provide reliable service and meet growing demand.” In the 2016–2030 Plan, however, Xcel began to move beyond this narrow focus and incorporate additional considerations into the planning process. To better position the company to respond to evolving future conditions, Xcel developed its Plan around a series of key considerations. These considerations included increasing the utility’s deployment of renewable resources to reduce emissions, maintain flexibility, and achieve policy objectives. While Xcel was already on track to meet its Renewable Energy Standard (RES) obligations, it concluded that additional renewable resources would help it minimize its reliance on natural gas and position itself to meet future greenhouse gas requirements.

Xcel’s Preferred Plan proposes to add approximately 4,200 MW of new renewable resources by 2030, while maintaining a reliable, flexible energy system. These resource additions would enable the utility to reduce its carbon dioxide emissions by 40% below 2005 levels. Furthermore, these renewable additions would reduce the utility’s need to invest in additional fossil fuel resources, and thus mitigate ratepayer exposure to risks associated with fuel price volatility and emissions regulations. And perhaps most significantly, Xcel estimated that it could implement the Preferred Plan at a reasonable cost to its customers.

Xcel’s Resource Plan is indicative of changing tides within the electric utility sector. Advancements in renewable energy technologies and increased demand for clean, sustainable energy supplies are driving public policy shifts around the country. Minnesota is at the forefront of these regulatory advancements; the state’s RPS mandates that utilities procure a minimum of 25% of their electricity from renewable sources by 2025, and Xcel is required to procure 31.5% of its electricity from renewables by 2020. In addition, Minnesota has set a goal of reducing carbon emissions 80% below 2005 levels by 2050. Rather than reject or challenge these policies, Xcel’s Preferred Plan meets these goals head-on. In doing so, the utility appears prepared to adapt to a wide variety of future scenarios, and the company’s customers will be the ultimate beneficiaries of Xcel’s proactive planning.

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