This August, Xcel Energy submitted a proposal to the Minnesota Public Utilities Commission asking permission to build nearly 800 megawatts of distributed solar and energy storage. That a large, investor-owned utility wants to “leverage fast-to-deploy, modular distributed energy resources” is exciting news. It’s also a cause for concern. Utility companies have used their grid monopoly to hinder climate progress and their competition for decades, and this utility-centric proposal should raise alarms about letting a problematic monopoly model expand in scope.
Distributed energy resources like community-based solar paired with battery storage provide clean energy quickly, at high value to the grid, and with the capability to support resilience in grid outages. More distributed energy means lower costs for everyone, as shown in a landmark 2020 study of strategies to clean the grid. The study concluded that American electric consumers could save half a trillion dollars if the clean grid includes a wide range of distributed energy resources.
Xcel’s proposal suggests operating solar and storage resources like a virtual power plant, in which widely distributed resources can act in concert to serve grid needs from energy to capacity to voltage regulation. The idea could work like it does for non-monopolized programs in California, Texas, or a handful of Northeast states, which allow customers to respond collectively to utility requests for grid support and to receive energy-bill reductions in return. Similar to capturing the benefits of distributed energy, operating grid resources for maximum grid benefit does not require monopoly ownership. In fact, local rather than utility ownership can widely distribute the wealth-building benefits of clean energy.
Unfortunately, Xcel wants to double down on its monopoly power, casting a pall over the promise of more local clean power. The utility intends to own the proposed distributed resources, giving it the ability to extract a gluttonous, virtually risk-free 9–10 percent rate of return for its shareholders from the capital it would invest. Recent studies from Carnegie Mellon University and the University of California, Berkeley suggest this excessive profit margin has unnecessarily raised electricity prices for consumers of investor-owned utilities, a finding reinforced by recent testimony of a former utility executive to the California Public Utilities Commission.