We need distributed solar and energy storage, not utility monopolies

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.

Xcel’s proposal defends the exclusion of independent project ownership by claiming this arrangement will enable the utility to find ​“the best locations on the grid.” Unmentioned in the proposal: the years Xcel has fought efforts by advocates to disclose such grid sweet-spot data to enable development of the state’s community solar program. Only recently have state regulators required Xcel to report enough data for independent developers to find those sweet spots. Xcel would be happy to jump the queue to access those low-cost development opportunities with a utility-owned program.

The proposal also comes against a backdrop of efforts by Xcel and other utilities to quash the same distributed energy resources they are now trying to co-opt. Influenced by utility lobbyists, Minnesota state law caps how much fair compensation customers can receive if they generate more than 120 percent of their own electricity use onsite, unnecessarily curtailing more local production and hampering project economies of scale. The state’s community solar program has narrowly survived several legislative murder attempts by its host utility, Xcel. A 2001 tariff to support more distributed energy project development sat idle for two decades due to utility neglect until recent legislation gave the utility a kick in its monopoly pants.

This isn’t the first time Xcel has proposed expanding its monopoly. Just last year, the utility asked regulators to approve a massive investment in utility-owned electric-vehicle-charging infrastructure. After widespread outcry about the potential cost — especially for the 10 to 20 percent of electric customers who don’t own a vehicle within the two largest cities Xcel serves — the Public Utility Commission narrowed the scope of the plans and the utility withdrew the proposal. Minnesota could have looked to California, where regulators put a moratorium on utility-owned charging stations after poor performance led to a bad experience for drivers.

There’s no question that Minnesota and U.S. customers at large would benefit from wider deployment of distributed solar and storage resources, if the opportunity were open to all. It’s wonderful to hear a major utility recognize, even belatedly, that distributed energy can deploy quickly to grid sweet spots to create substantial benefits for the grid and all customers. Every state should seize the opportunity to adopt open program rules that would enable anyone to make an investment in solar and storage to maximize the grid benefits. Yes, we should try to save American electricity consumers half a trillion dollars on the road to a clean grid, but not in a utility-owned vehicle.