One State’s Model of Collaborative Public-Private Planning
- Written by Judy M. Poferl
Minnesota’s Xcel Energy has worked closely with state regulators, legislators and planners to help achieve ambitious goals for renewables, energy efficiency and conservation, and emissions reductions. Impressive gains have been made, as scheduled, because of clear goals, a supportive regulatory framework and involvement of all important stakeholders.
Minnesota has positioned itself as a leader in energy and environmental innovations, while maintaining highly reliable energy service and affordable prices. Those considerable accomplishments are due in large part to a flexible and inclusive approach to meeting energy challenges that Xcel Energy calls the “Minnesota Model.” As the industry tackles issues such as increasing environmental regulations, aging utility infrastructure and grid modernization, the Minnesota Model offers a well-tested path forward.
At its core, the Minnesota Model includes three components: clear goals, a supportive regulatory framework, and stakeholder collaboration and alignment.
A good example of a clear goal leading to good results is Minnesota’s Renewable Energy Standard, which the state adopted in 2007 as part of that year’s Next Generation Energy Act. It requires energy companies to meet 25 percent of customer energy needs with renewable energy by 2025—and for Xcel Energy, 30 percent by 2020. The standard was set after considerable input and study to ensure it could be achieved both reliably and affordably, and it includes exit ramps in the event either attribute were threatened.
Subject to certain guidelines, utilities determine the most cost-effective resources to comply, subject to oversight by the Minnesota Public Utilities Commission. Taking advantage of the state’s considerable wind resources, Xcel Energy became increasingly skilled at forecasting wind energy availability and integrating wind into its system. As turbines became more efficient and costs dropped, wind became a cost-effective alternative to fossil fuels and a good hedge against volatile fuel prices.
Today, Xcel Energy is the leading provider of wind energy in the nation, having installed a total of 1,870 megawatts in Minnesota over a 20-year period. Minnesota ranks No. 4 nationally in terms of the percentage of electricity generated by wind power.
Another area in which great strides have been made, inspired by clear strategic objectives, has been energy efficiency and conservation. In no other area is a supportive regulatory framework more important. Via good oversight and a financial incentive that rewards superior performance, Minnesota has successfully made energy efficiency a core competency and business center for its utilities.
In 2007, the state set an aggressive annual goal of saving 1.5 percent of electric sales. While at that time it was unclear whether and how that goal would be met, Xcel Energy has now exceeded the goal for the last two years, achieving savings of 1.75 percent of energy sales in 2012. In today’s economy, helping customers manage bills and positioning businesses to be more competitive are critically important, and Minnesota’s effective energy efficiency programs have well served those objectives.
A driver of Minnesota’s success in energy policy has been its collaborative approach in setting goals and developing the supportive framework. Nowhere is this more evident than in a major emissions reduction project undertaken in the early to mid-2000s. Called the Metropolitan Emission Reduction Program, Xcel Energy obtained approval to spend $1 billion to repower two of its coal-fired plants with natural gas and install state-of-the-art emission control equipment on a third.
Through a collaborative process of legislative authorization, state agency review, customer and stakeholder input and local government and citizen advocacy, a comprehensive settlement was achieved that allowed the effort to go forward. The project, which was implemented over 2006-09, resulted in 90 percent reduction in most air emissions and a 40 percent reduction in carbon emissions at Xcel Energy plants.
In addition, the project increased energy security for the region by extending the lives of important facilities and adding 300 megawatts of generating capacity to the refurbished units. These plants are now well-positioned to provide service over the long term, having already addressed new Environmental Protection Agency requirements and providing additional fuel diversity via the addition of natural gas to the supply portfolio.
The Minnesota Model has proven itself in delivering good results because—at its core—it seeks to align vision and interests upfront. By achieving that alignment, the path forward is clear, achievable and sustainable.
As such, it provides a useful guide to tackling the new and emerging issues facing the industry. Meeting increasingly stringent environmental requirements, addressing changed customer demand, making the significant investments needed to refresh aging plants, poles and wires, and developing a robust grid poised to meet the energy needs and technologies of the future all require careful thought and planning. By engaging beyond traditional industry planning and engaging stakeholders in a constructive dialogue, we are much better prepared to face those issues in a constructive and sustainable manner.