As climate change threatens more grid disruptions, businesses and nonprofits are seeking backup systems that can provide power during outages.
This year Xcel Energy has been installing community resiliency systems with three microgrids at Minneapolis nonprofits that allow them to generate and store electricity. Now Xcel has asked regulators for permission to own and operate microgrids on behalf of commercial customers and nonprofits who the utility says will not install them now because of their cost and complexity.
“Commercial and industrial customers are also increasingly considering resiliency options to meet both their reliability and power quality needs, often while also meeting sustainability objectives,” Xcel said in a filing before the Public Utilities Commission.
The proposal, which aims for 15 projects by 2028, has drawn criticism from Minnesota Solar Energy Industries Association and a leading solar installer, All Energy Solar. They say Xcel could use information unavailable to others to market the program and use its monopoly status to outcompete other companies. In addition, they say Xcel could have an unfair advantage when connecting client resiliency systems to the grid because the utility operates the interconnection process.
Energy services companies currently provide many of the same microgrid capabilities as Xcel’s proposed program, but with guaranteed energy savings built into the contracts. In addition, more solar installers are considering adding resiliency services as battery storage options become more affordable and common and client interest grows.
Xcel argues its entry into the market offers a way for clients to pay for the systems over a number of years and have them operated by the utility on their behalf. The company said many clients need reliability and have sustainability goals that resiliency systems can help achieve. Xcel said as it gains expertise in microgrid technology, the cost and complexity of the systems can be reduced.
How it works
Resiliency systems with microgrids are considered a key technology for a clean energy transition. By connecting solar energy with backup battery storage, microgrids allow buildings to create, consume, store and share electricity. During grid outages, they can continue operations — an essential asset for hospitals, law enforcement agencies, data centers and other organizations — providing a clean alternative to generators typically powered by diesel fuel.
Under the program, Xcel would plan, install and own the microgrids, assessing clients for the cost over several years. Xcel said a similar program approved last year by the Wisconsin Public Service Commission attracted healthcare, wastewater, municipal water and industrial facilities.
After a successful microgrid pilot in 2017 in its Colorado territory, Xcel is now involved in building six community resiliency facilities there. The utility also said the resiliency projects would be done by third-party vendors, potentially creating clean energy jobs.
In Minnesota, microgrids operate at a wilderness center in Ely operated by explorer and climate activist Will Steger, a microgrid research center at the University of St. Thomas, and Open Access Technology, Inc.’s suburban office center. Other projects in the state are in the process of becoming microgrids but may be missing one element or another.
Massoud Amin, an advisor for Quanta Technology and a University of Minnesota professor, said the next evolution for microgrids beyond public institutions such as universities is to private companies that need backup power during grid failure. “You’re seeing more new, customer-focused energy business models on the business side,” he said.
Minneapolis-based Target, one of the nation’s largest retailers, wrote a letter supporting Xcel’s proposal, with a handful of caveats. Nick Paidosh, Target’s lead energy and sustainability program manager, said Winter Storm Uri and public safety power shutdowns had impacted its operations.
Target’s pledge to be carbon neutral by 2040 requires “resilience solutions” that the program could provide. The retailer also suggested the program could allow it to use stores as resiliency hubs in under-resourced neighborhoods.
In describing the financial arrangement with clients, Xcel said it would install and own the resiliency systems for 10, 15, or 20 years, depending on the contract. In addition, customers will pay a monthly service charge and an operations and management fee.
Depending on a client’s needs, the elements of the resiliency system could include solar panels, battery storage, fossil fuel backup generation and technology that optimizes the equipment. Xcel said clients could benefit financially by allowing their systems to be used as a grid resource during times of high demand.
Support and criticism
While the Public Utilities Commission has not taken a position on Xcel’s proposal, commissioner Joe Sullivan has expressed support for microgrids’ role in a more sophisticated grid. Earlier this year, he supported Xcel’s Resilient Minneapolis project that places microgrids at three nonprofit sites. Such initiatives will help utilities, vendors and regulators comprehend the potential impact of the technology.
“The Minneapolis project is giving Xcel opportunities to get more experience and understanding how they are going to work and how microgrids can fit within the macro grid,” he said.
John Farrell, who directs the Energy Democracy Initiative for the Institute for Local Self Reliance, said if Xcel’s contention that cost and complexity are barriers to microgrids, then regulators should improve market conditions. Xcel should only be allowed to sell resiliency services “on a level playing field” where it could not use private market data without sharing it with other third-party microgrid providers, he said.
Logan O’Grady, executive director of the solar industries association, said his members also had questions about Xcel’s proposal to have a preferred vendor list of companies installing the resiliency systems. He said the company’s qualifications remain unclear and could create issues of favoritism.
The Department of Commerce, which represents ratepayers in regulatory cases, did not agree with some of the issues raised but suggested requiring additional reporting related to the interconnection queue and system performance. Xcel also filed other comments saying it would follow interconnection rules and said the program would grow the resiliency market for the industry.
The Public Utilities Commission has not indicated when a decision will be made.