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As Xcel Energy CEO departs, utility will keep fueling growth with clean energy

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As Xcel Energy CEO departs, utility will keep fueling growth with clean energy

Benjamin Fowke spent the past 10 years guiding Xcel Energy Inc. from a "middle of the road" Midwestern utility, as judged by investors, to an industry leader and trendsetter in the clean energy transition.

When Fowke retired Aug. 18, the outgoing CEO left the Minneapolis-headquartered company with a market cap of about $37 billion and a $23.5 billion base capital forecast for 2021 through 2025. Fowke will still serve as executive chairman of the company's board of directors during a transition period. Xcel Energy serves about 3.7 million electric customers and more than 2 million natural gas customers through four utility subsidiaries operating in eight states.

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"What we've been able to demonstrate, and good news is other people are following now, was that renewable energy done at scale with the right public policy can actually save customers money, improve the environment and offer a great investment opportunity for our company," Fowke said in an interview with S&P Global Market Intelligence. "In my tenure, I saw our stock go from kind of a middle of the road perspective from investors to now considered one of the premier utilities in the nation. Our [price-to-earnings] multiples and our stock price reflect that."

Xcel Energy's stock closed at $69.95 on Aug. 17 and was trading around $36 five years ago.

Fowke, who was appointed Xcel Energy's chairman, president and CEO in August 2011, said there are "probably three things" he sees as the proudest accomplishments during his tenure: "the clean energy transition; operational excellence, particularly in the performance of our nuclear fleet; and the commitment all of our employees have to community, which was evident in this last year-and-a-half through COVID, and all of the civil unrest [and] the issues we are grappling with as a nation around racial injustice."

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Xcel Energy CEO Benjamin Fowke retires Aug. 18.
Source: Xcel Energy Inc.

"But if I start with the environment, we have really led the way," Fowke said. "We've been a leading provider of renewables for our communities and customers, I think 12 out of 15 years. Renewable energy will be the largest source of energy for us by next year at about a third, and a couple more years after that, it will be about 50% of our energy mix, and by 2030, it will be about 67[%] of our energy that will come from renewables."

Xcel Energy in 2018 was the first utility in the U.S. to announce a 100% carbon-free electricity goal — by 2050 — with an 80% reduction in carbon emissions by 2030, based off 2005 levels.

Earlier this year, the company surpassed 10,000 MW of wind on its system, and it expects the 302-MW Dakota Range Wind I & II project in South Dakota online in the fourth quarter.

"You know, a lot of people talk about things. We actually are doing it," Fowke said.

The CEO noted Xcel Energy already has delivered a 50% reduction in carbon emissions and believes it can reach its 80% emission reduction target using existing technology.

"And I'm the first one to tell you and my regulators and stakeholders that beyond that, to get that last 20% of carbon off the grid, we are going to need new technologies," Fowke said. "We need to start today so these technologies will be available for us after 2030 and we can continue to make that progress."

On Aug. 16, NuScale Power LLC, a developer of advanced small modular nuclear technology, said it signed a memorandum of understanding with Xcel Energy to explore the feasibility of Xcel Energy operating NuScale facilities. A formal agreement has not yet been reached.

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Construction on Xcel Energy's 500-MW Cheyenne Ridge Wind Farm in Colorado was completed in August 2020. The wind farm is seen as an important part of the company's and outgoing CEO Benjamin Fowke's vision to provide carbon-free generation by 2050.
Source: Xcel Energy Inc.


Too ambitious?

Despite the company's aggressive pursuit of renewables, Fowke has joined the chorus of utility CEOs and industry observers skeptical of U.S. President Joe Biden's plan for the nation to produce 100% carbon-free electricity by 2035 and achieve economywide net-zero emissions by 2050.

"I just don't see that. I think it is going to take longer," Fowke said.

There are few utilities on track to meet Biden's emissions reduction goal, with many, led by Xcel Energy, focused on a 2050 target.

"Maybe it will be quicker than 2050 but I don't think it is going to be possible by 2035," Fowke said. "We also have to recognize to accomplish this we are going to need to really build out on the grid. We're going to need more transmission."

In February, the company's Colorado utility, known legally as Public Service Co. of Colorado, announced a $1.7 billion plan for 560 miles of 345-kV transmission lines to support an expansion of renewables.

Meanwhile, Fowke said it is important to set interim goals.

"We need to start moving away from coal today," the CEO said.

A coal-fired plant, the 2,238-MW Sherburne County (Sherco) plant in Minnesota, is the largest single generating unit in Xcel Energy's portfolio. The company aims to shut all of its coal resources in Minnesota by 2030 and in April announced plans to build a 460-MW solar plant at the Sherco site.

"We need to put as much renewables on the grid as the grid can handle, and there are limitations to what the big grid can handle," Fowke added. "Preserve that nuclear fleet. Yes, use natural gas. ... We don't want to see outages and reliability disruptions. It just can't happen. But we can do all this and start to electrify things like transport, which also can be done economically."

The company had also considered adding an 800-MW combined-cycle natural gas-fired plant at the Sherco site but, noting opposition to both the plant and necessary pipeline infrastructure, in June said it would instead plan for smaller new and repowered gas units across its Upper Midwest service territory.

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In an effort to advance Biden's goals, the U.S. Senate on Aug. 10 passed a $1 trillion bipartisan infrastructure bill that includes funding for grid investments and new cleaner energy generation technologies such as hydrogen and carbon capture. The legislation also provides billions of dollars in grid infrastructure funding and a $6 billion program to help preserve nuclear plants at risk of early closure.

"We've got to preserve nuclear energy in our country," Fowke said. "It's 50% of the nation's carbon-free mix, it's 20% of the energy mix. You lose our nuclear fleet; we're going to go two steps back before we can go forward."

Xcel Energy subsidiary Northern States Power Co. owns and operates the 646-MW Monticello and 1,092-MW Prairie Island nuclear plants in Minnesota. Both are currently licensed to operate to the early 2030s.

"When I became CEO, our nuclear fleet as judged by our peers was average and now it is considered the top fleet in the country," Fowke said.

Passing the torch

As Fowke steps back from the CEO role, he said the company will be left with a strong growth plan and strong leader.

"Our company has performed very well operationally, environmentally, financially, over the last decade and I think we're well-positioned with this management team to continue the good work that we're doing," Fowke said.

Current President and COO Robert Frenzel will take over as CEO.

"I think Bob Frenzel, the incoming CEO, is going to do a fantastic job. ... He has been a great strategic partner with me. We've got a great team."