Xcel Energy to reach 80% emissions reduction by 2030, building out renewables

Xcel Energy is on track to achieve 80% carbon emission reductions by 2030 after adding four wind farms, accelerating its transition away from coal, and working on a 560-mile transmission expansion to connect more renewables, officials said Jan. 27 during the 2021 year-end earnings call.

The utility reported 2021 GAAP and ongoing earnings of $1.60 billion, or $2.96/share, down from $1.47 billion, or $2.79/share in the same period in 2020.

The 2021 financial results represent the 17th consecutive year of meeting or exceeding our earnings guidance, President, CEO and Chairman Robert Frenzel said during the call.

"We had another very successful year, continuing to execute on our strategy while delivering strong financial and operational performance," Frenzel said.

Earnings reflect higher electric and natural gas revenues, which were partially offset by increases in electric fuel and purchased power, costs of natural gas sold and transported, additional depreciation, and lower allowance for funds used during construction, said Brian Van Abel, executive vice president and CFO.

Carbon emission reduction

"We continue to lead the country in carbon reduction," Frenzel said. "In 2021, our estimated carbon emissions were approximately 50% below 2005 levels, and we remain on track to achieve 80% carbon reduction by 2030."

The utility's nuclear fleet remains the top-performing fleet in the country with a capacity factor of more than 92% last year, Frenzel said. Four wind farms totaling 800 MW were completed, with plans to be coal-free by the end of 2034. When it comes to gas generation, the utility committed to reducing greenhouse gas emissions by 25% by 2030 and be net-zero by 2050.

Proposed Minnesota and Colorado resource plans will add nearly 10 GW of renewables and reach 85% carbon reduction by 2030, Frenzel said. In December, a settlement was reached in the utility's Colorado Resource Plan that will accelerate the retirement of the Comanche-3 coal unit to 2034 and advance the Pawnee plant conversion to natural gas to 2026, while adding approximately 4 GW of renewables and reducing carbon by 87% by 2030.

"Our capital investment plan is not dependent on changes in federal policy," Frenzel said. "However, the energy provisions that were included in the Build Back Better legislation would provide substantial customer benefits and help enable the clean energy transition."

While that legislation has stalled, there is discussion that a more-modest version could potentially move forward this year, Frenzel said about advocating for new and extended tax credits for wind, solar, hydrogen, storage, nuclear, and transmission.

Transmission expansion

A settlement was reached in its $1.7 billion Pathway transmission project in Colorado that will provide 560 miles of double-circuit 345-kV lines to enable 5.5 GW of new renewables. Frenzel noted that Xcel Energy will ultimately increase the project's price tag since the settlement includes "a potential for a 90-mile-line extension with an additional investment of $250 million to enable access to some of the richest wind resources in the region."

Another piece that would drive costs upward, Frenzel said, is interconnecting all of the assets in the request for proposals.

"Those interconnections come with additional upgrades on the transmission system to enable voltage support and stability," Frenzel said. "We don't know exactly where that's going to happen until the final projects are picked, and we know they'll cost some money."

The utility expects decisions on both the Minnesota and the Colorado resource plans and the Pathway transmission project in the first quarter of the year, Frenzel said.

Colorado wildfires

The wildfires in Boulder County at the end of 2021 resulted in two deaths and damage to 1,200 buildings, Frenzel said, adding more than 100,000 electric customers experienced a sustained outage, and service was largely restored within 48 hours.

Xcel Energy wildfire protocols require the utility to shut off natural gas service to over 13,000 customers as a safety precaution, and then went door to door to manually relight pilot lights once it was safe.

"Officials continue to investigate the cause of the fire, but they confirmed there were no down power lines in the ignition area," Frenzel said.

Xcel Energy filed its Wildfire Mitigation Plan with the state in 2019 and continues to execute under that plan, Frenzel said.

"I'm sure there are always ways that we can learn from these tragedies and improve the risk for the customers for sure," Frenzel said. "The commission opened a proceeding and we're going to actively participate with them on exploring your exact question on things that are in the approved wildfire plan and things we might want to consider in the future. But that — we're early stages in that."