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Fresh Energy: A First Look at Xcel's $3B Clean Energy Proposal

Source: 
Targeted News Service (Press Releases)

ST. PAUL, Minnesota, July 24 -- Fresh Energy issued the following news release:

In June 2020, at the request of the Minnesota Public Utilities Commission and Department of Commerce, Xcel Energy filed a $3 billion plan aimed at playing a part in jumpstarting and sustaining Minnesota's economic recovery process by accelerating spending on clean energy investments. The goal of these investments is to spur job growth and economic recovery from the COVID-19 pandemic. Ultimately, Xcel's proposal seeks to add an estimated 5,000 new jobs in Minnesota, add more clean energy, lower bills for customers, and more.

Xcel's 60-page filing with the Public Utilities Commission (Docket No. 20-492) is jam-packed with proposed investments that target three key areas of: Resiliency Projects, Clean Energy Projects, and Projects to Keep Customer Bills Low. It's important to note that this request from the Public Utilities Commission and the filing itself is absolutely unprecedented and a strong good faith response by Xcel to a time of extraordinary economic hardship.

While 60 pages may seem like a lot, this proposal is only just the start of a complicated and far-reaching process. With the understanding that many details are yet to come, Fresh Energy policy staff dove into the proposal and have drawn some initial conclusions based upon what we know now and the understanding that the projects have positive outcomes for customers and an overall economic recovery. We will begin with the aspects of the proposal that we're celebrating, and take a closer look at what aspects could benefit from improvement.

What We're Celebrating

Accelerating Solar + Storage (Clean Energy Project)

Xcel's plan includes the announcement of a 460 MW solar project at the site of Xcel's Sherco coal plant. The solar project will help replace Sherco Unit 2, which is scheduled to retire in 2023, and will include a 10 MW battery storage project. This new project would accelerate Xcel's solar deployment and emissions reductions, while stimulating Minnesota's clean energy economy and bringing local tax revenue to a coal plant host community.

Wind Power (Projects to Keep Customer Bills Low)

Xcel is proposing to invest $1.2 billion to repower 800-1,000 MW of wind farms, essentially replacing older equipment to improve the efficiency, lifespan, and economics of the projects. This investment would reduce customer bills (by replacing cheap wind power with even-cheaper wind power thanks to equipment improvements over the last 10-15 years), add wind capacity to Xcel's system, and generate 800-1,000 construction jobs.

Fossil Fuel Equipment Removal/Remediation (Clean Energy Project)

Xcel's plan also includes accelerating work to remove equipment from 10 retired fossil fuel units, as well as asbestos abatement and early closure of a coal ash pond. Starting this work three years earlier than planned will not only accelerate those remediation jobs but improve environmental health conditions for workers and the communities who have hosted these plants for decades.

Non-Wires Alternative Pilot with City of Minneapolis (Resiliency Project)

Xcel is proposing to develop a non-wires alternative (NWA) pilot with an investment of $4-8 million in a planned development corridor within Minneapolis. NWAs use distributed energy resources and microgrids to replace traditional wires and poles. This preliminary project along the METRO Blue Line Extension (Bottineau) development corridor would use energy efficiency, beneficial electrification, and resources like solar and storage in nearby homes to avoid or defer traditional grid upgrades that would otherwise be needed to support the light rail line. The pilot will help Xcel and stakeholders learn more about how to design and execute a successful NWA, which will become a more important piece of distribution planning as Minnesota advances in grid modernization.

Conservation Improvement Program (CIP) Spending on Energy Efficiency Programs Serving Under-Resourced Households (Projects to Keep Customer Bills Low)

Xcel's proposal includes doubling its energy efficiency expenditures for under-resourced (also known as "low-income") customers. The increased funding would go toward increasing outreach capacity, broadening offerings, and more. Notably, electric CIP activities have a 18.5x return on investment so in this case the $6 million in spending Xcel included the proposal would amount to $111 million in net customer benefits. Fresh Energy and our partners have worked hard over the last several years to make the case for additional investments in this underserved area, and we are glad to see Xcel making this proposal to help lower energy burdens for the customers who need those savings the most.

New Solar Program for Under-Resourced Customers (Clean Energy Projects)

Xcel has proposed a new residential rooftop solar pilot program for under-resourced customers, which unlike its existing Income-Eligible Solar*Rewards program would not require customers to own the solar installation. Instead, Xcel would own the solar installation, and provide participants a monthly payment (Xcel has proposed a $30-per-month bill credit) as compensation for the use of their roof. Fresh Energy has been working to expand access to solar for several years, and we are encouraged to see this proposal from Xcel. Going forward, specific pilot design details will be critical, including the appropriate customer payment amount to make the pilot meaningful for participating customers, making the pilot accessible to a variety of housing types, and ensuring minimal impacts to non-participating customers.

Expansion of Fleet Electric Vehicle (EV) Service Pilot (Clean Energy Projects)

Xcel has proposed growing its Fleet EV Service Pilot program. Considering no additional investment would need approval to implement this expansion, it is a great way to expand the benefits of EV fleets to public, commercial, and nonprofit organizations.

Acceleration of Xcel's Own Fleet Electrification (Clean Energy Projects)

With this proposal, Xcel is modeling the swift shift to electric we need for our transportation system within its own organization - we commend this action and encourage Xcel to move quickly on this action.

Purchase Rebates for Electric Private Light-Duty Vehicles and Transit Buses (Clean Energy Projects)

Comprising the bulk of Xcel's EV-specific proposed investment (up to $150 million of the entire $170 million), this is a very positive step because rebates are a proven policy tool for increasing transportation electrification, and one that is sorely needed in Minnesota to ensure a more equitable and speedy transition away from fossil-fuel dependent vehicles. However, we need more details to fully understand who will benefit and how ratepayers may be impacted. While requiring those who get rebates to participate in a managed charging program is a good start to ensuring climate benefits are recognized more fully, we also encourage Xcel to ensure that rebates for private EVs are designed for participation by under-resourced customers and can be used at point-of-purchase for used and new vehicles. Additionally, we'd encourage Xcel to ensure that priority for electric transit bus rebates are given to those buses operating on routes through under-resourced communities and/or those most impacted by air pollution.

Funding more fast-charging public charging in underserved areas. (Clean Energy Projects)

We are encouraged that Xcel recognizes the need for public charging in areas not currently being served by the private market. We encourage Xcel to provide more information on how rates for such charging stations will be designed to encourage off-peak use, how and if Xcel's proposed ownership may be transitioned to private ownership once the market expands, and how Xcel's investment will complement programs such as the Volkswagen settlement funds to expand access to electric vehicles and charging in underserved communities.

Opportunities for Improvement:

Gas Investments (Resiliency Project)

Xcel's proposal includes investing $9 million a gas expansion project in St. Cloud, Minnesota. The project would install approximately 5,400 feet of 8-inch high-pressure pipeline to increase capacity to serve customers. However, in our view any new investments in gas challenge the notion of a "Resiliency Project" because of the clear health and safety risks that gas poses to customers.

Electrification Programs and Projects Are Not Included (Fresh Energy recommended addition as "Resiliency Project")

As it currently stands, electrification programs and projects around residential and commercial space and water heating in existing and/or new construction buildings are absent from Xcel's proposal. These types of electrification investments would dovetail well with Xcel's distribution investments mentioned earlier in this blog post.

Distribution Investments (Resiliency Project)

Xcel has proposed investing $644 million in replacements and upgrades to their distribution system through the Incremental System Investment (ISI) initiative between now and 2025. These investments could increase system resilience and prepare the system for increased electrification as society transitions away from gas, as well as increased distributed energy resources like rooftop solar. This is a great goal and Fresh Energy is all for improving our grid for customers and clean energy resources. But there are some gaps in the current plan. On average, the proposed spending is ~600% higher than the 2019 budget for similar projects and Xcel has not yet demonstrated that this large increase is needed, nor that it will generate customer or societal benefits outweighing the costs. This is an essential analysis to complete before proceeding with a significant portfolio of infrastructure projects.

Interconnection (Fresh Energy recommended addition as "Clean Energy Project")

Investments in Xcel's distributed resources interconnection team would be a low-cost way to spur economic development through distributed energy markets. This is a great opportunity because these projects should be quicker to complete and generally create more jobs per MW (6x-11x more) than large grid-scale projects. Xcel has a long backlog of distributed solar projects waiting for approval to connect, and delays have created a bottleneck for Minnesota's solar market. A relatively small investment in their interconnection team could ensure engineering studies are completed on time, enabling local clean energy companies to hire up and accelerate these investments.

What's Next?

We can't stress enough how exciting it is to see a utility like Xcel Energy propose accelerating such broad-sweeping investments; leveraging its access to capital to invest in Minnesota, spurring jobs and economic stimulus. Of course, with the elements of the proposal including everything listed on this blog post, more information will be forthcoming to bring these from proposals to investment in the ground. We also commend other Minnesota utilities, Minnesota Power and Otter Tail Power for submitting their own solar proposals to the Public Utilities Commission.

With all utility proposals, we look forward to seeing the specifics on project timelines, implementation, and customer benefits outlined for all aspects of each proposal. The Public Utilities Commission is holding a planning meeting on July 29, 2020 to discuss utility proposals. Fresh Energy will be in attendance at the meeting and keeping a close eye on any and all developments. Stay tuned!

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