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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