'Steel for fuel': Xcel CEO Ben Fowke on his utility's move to a renewable-centric grid
By 2021, Xcel expects wind to be its single largest energy resource — and that means big changes to grid operations. Fowke sat down with Utility Dive to discuss what the transition entails
Even for veterans of the power sector, the pace of the energy transformation can astound.
“If I were talking to you 10 years ago, I don't think I'd be telling you that I think solar is competing with fossil,” said Ben Fowke, CEO of Xcel Energy. “I wouldn't tell you that wind is beating fossil. I am telling you that now.”
Fowke’s utility company serves more than 3 million electricity customers across eight states from Michigan to New Mexico. Last week, Minnesota regulators approved a portion of Xcel’s wind energy expansion in the upper Midwest — a total investment of 1.55 GW of wind that also includes Iowa and the Dakotas.
That plan is part of a larger Xcel initiative to add more than 3 GW of wind across its service areas in the coming years. Back in March, Fowke framed Xcel’s power mix evolution as a shift away from its traditional focus on coal-fired generation and toward wind, solar and natural gas.
“We already provide 6,700 MW [of wind],” Fowke told Utility Dive in an interview at the Energy Thought Summit in Austin, Texas. “This will be 3.4 GW ... and that's going to have us at 35% of our energy mix with wind.”
“[Wind] beats gas, even at today’s prices. I like to say we backed up the truck because the fuel of tomorrow was on sale today.”
Xcel Energy CEO
By 2021, the utility expects wind will be its largest energy source — not in terms of capacity, but actual generation.
“What's even more amazing is the prices,” Fowke said. “We're looking at [prices] in the low teens to low 20s [in dollars/MWh] — not starting prices, but levelized across the 25-year life of the project.”
“That beats gas, even at today’s prices,” he added. “I like to say we backed up the truck because the fuel of tomorrow was on sale today.”
Xcel calls it “steel for fuel” — swapping out fossil generation for fuel-free wind and solar. At today’s prices, “everybody benefits,” Fowke said. Consumers get lower-cost energy and Xcel can earn a rate of return for building wind projects. Xcel plans to own 1,150 MW of its latest 1,550 MW wind expansion.
“None of it would work if you didn't focus on the technologies that are adding value today,” Fowke said. "That's what's really important.”
Wind is Xcel’s current focus, as the production tax credit for the resource will phase out over the next few years. After that, the next resource to add value to Xcel’s grid will likely be another renewable — solar.
“We wanted to capture the production tax credits … Then I think you start to pivot to what's next,” Fowke said. “I think what's next will be taking advantage of the steady improvements of solar technology, particularly large universal solar. The tax credits will still be there in 2020, and perhaps it's an opportunity for us to lock in again tremendous prices for our customers as we continue to transition to this carbon-light world."
Those investments will help Xcel make good on its pledge to cut carbon emissions 60% by 2030, but getting there will require the transformation of the rest of its resource mix as well.
From baseload to flexible
To get to the point where wind can be a power grid’s largest energy source, “you need to make sure that your entire generation portfolio works in sequence with that,” Fowke said. That means Xcel plans to add more natural gas peaking plants, and “the baseload coal will probably be replaced with combined cycle [gas plants].”
“You keep hearing me say wind is fuel, and that's how we look at it. You still have to have the capacity to back it up,” Fowke said. “Everybody knows wind doesn't blow all the time. When it does blow, it's displacing natural gas or coal that you'd be using in your fossil plants. That's where we get the savings from.”
In addition to those physical assets, the utility expects to continue development of its renewable energy software and data analytics capabilities. By understanding how wind farms operate “at a micro level,” Fowke said Xcel has been able to save customers “tens of millions of dollars a year.”
“We think we've been far more efficient with harnessing the wind that's on our system, not being overly conservative, having to curtail it often,” he said.
The Xcel CEO expects the energy transition to continue regardless of the policy environment in Washington, D.C. President Trump's administration is in the process of rolling back a number of Obama-era environmental and energy regulations, including the Clean Power Plan, which governed carbon pollution from power plants.
"Steel for fuel would make sense with or without a Clean Power Plan."
Xcel Energy CEO
"I think what we're doing, it makes sense regardless of whatever federal overlays there,” he said. "Steel for fuel would make sense with or without a Clean Power Plan. In fact, we did it not to comply with the Clean Power Plan, but to drive the economics of the environmental benefits.”
Like other U.S. utilities, Fowke does not expect his companies to add new coal generation, but he said some companies could end up running old plants longer in the absence of carbon or other pollution regulations.
“The only thing you might see ... is if you were going to shut down a plant rather than put hundreds of millions of dollars into some pollution control equipment, you might run the old car a little bit longer,” he said. “The short answer is I could see it having some effect on the margins, but right now I still think that economics are driving what's happening in the industry.”
Toward deeper decarbonization
The energy transition hasn’t been all happy headlines for Xcel. Earlier this year, environmentalists and consumer advocates slammed the utility for its plan to repower the 1.3 GW Sherco coal generator with 786 MW of new gas-fired generation.
Xcel announced the retirement of the two Sherco units in its 2016 integrated resource plan, and regulators ordered a study on renewable energy alternatives to replacing the coal capacity with gas.
Then, in January, the legislature stepped in with a bill that would authorize Xcel to bypass the regulatory process and build the gas plant without approval from the Public Utilities Commission. Environmentalists howled, calling it a “power play” by Xcel, but Gov. Mark Dayton (D) signed the measure in February.
From Fowke’s perspective, the bill was not a utility ploy to circumvent its regulators, but rather an attempt by local legislators to ensure some power industry jobs at the Sherco site would be saved after the coal retirements.
“The commission didn't say no [to the gas plant], but they said, 'Let's study it some more.' They thought it was a decent idea,” Fowke said. “The local legislators wanted an answer quicker than that. We're supportive of that. The legislation was passed.”
Fowke stressed that he thinks about decarbonization “continuously,” including how to contribute to the electrification of transportation and industrial processes. Despite regulatory rollbacks, he expects Xcel will be able to do its part to uphold the goals of the Paris climate agreement, which roughly translate to an 80% economywide decarbonization by 2050 — but he also knows it will likely take more innovation.
“I think we can do it, but [with] the technologies today, to be 100% renewable, it doesn't work. That doesn't mean it won't be possible in the decades to come."
Xcel Energy CEO
“I already mentioned that I think we're going to have 60% less carbon emissions by 2030. I think to go from 2030 to 2050, we'll have to see additional technologies, the battery technologies that I'm talking about,” he said. "I'd like to see the next generation of nuclear fleet get going because in 2033, 2034, our nuclear plants are scheduled at this point to retire. That's a tremendous amount of carbon reduction that goes away unless we replace it with something else.”
At present, Fowke says Xcel continues to study the lowest-cost pathways to get to deep decarbonization.
“I think we can do it, but [with] the technologies today, to be 100% renewable, it doesn't work,” he said. “That doesn't mean it won't be possible in the decades to come. Combine that with nuclear — I know it's possible. That I know today.”
Correction: Ben Fowke's quote was updated to reflect that Xcel currently provides 6,700 MW of wind, not 8,000MW. The wind pricing quote was updated to reflect that he was referring to dollars per megawatt-hour, not cents per kilowatt-hour.
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