Xcel Energy is proposing to spend about $5 billion over the next five years to make sure the system that delivers power to homes and businesses can handle a growing demand for electric vehicles, rooftop solar and goals for moving from fossil fuels.
Xcel released its new distribution system plan this week. Along with steps to reduce the risk of wildfires, the plan is part of the utility’s overall blueprint for boosting the share of renewable resources feeding into the electric grid and cutting greenhouse gas emissions.
And the plan reflects a new state law that directs large electric utilities to upgrade their distribution systems to meet state goals of transitioning from fossil fuels to power the grid and electrifying transportation and buildings.
“I would say historically, we’ve made incremental investments in the distribution system to handle what’s happening right now,” said Robert Kenney, president of Xcel Energy-Colorado. “What we’re moving to is a proactive and forward-looking planning of our system, anticipating where we think the future’s going.”
Xcel Energy believes the future is about the escalating demand for electricity. The distribution plan, which if approved by regulators would cover 2025-29, would add approximately 3.1 gigawatts of new capacity, or enough to serve roughly a half million homes.
“This is a continuation of a lot of work that we’ve been doing to strengthen and harden our system and to enable the clean energy transition to support the state’s emission reduction goals while simultaneously building a system that gives our customers the choice to use air source heat pumps, rooftop solar, more distributed energy resources,” Kenney said.
Colorado’s largest electric utility is facing a higher growth in load than it has seen in decades, Xcel said in a document filed with the Colorado Public Utilities Commission. There are about 100,000 electric vehicles in Xcel’s service territory and the company expects the number to increase to more than 400,000 by 2029.
Xcel said the number of heat pumps being used on its system is in “the single-digit thousands,” but needs to expand to hundreds of thousands by 2030 to meet Colorado clean-energy goals. An air-source heat pump uses electricity to move heat from one place to another to heat or cool a building.
The utility’s distribution system proposal contemplates several new substations, feeder lines carrying power from substations to distribution points and 2,200 megawatts of new rooftop and community solar.
One megawatt can supply enough electricity for a few hundred to 1,000 homes, depending on the energy source and power consumption.
The distribution plan is being propelled by growing demand from existing customers, said Jack Ihle, regional vice president of regulatory planning and policy for Xcel in Colorado. Even without the construction of new energy-intensive data centers, “these loads that residential and commercial customers are driving are really pushing for a larger grid,” he said.
The overall price tag for the distribution plan would be roughly $7.5 billion and includes about $2 billion for measures to reduce the risk of wildfires on the system as the climate becomes warmer and drier. The proposal complements and is part of other plans, including a $45 billion capital investment proposal for Minneapolis-based Xcel’s eight-state territory.
Xcel officials in October said that about $22 billion of the proposed total would be spent in Colorado. The company projects that investments in various projects, such as the distribution system, would result in rate increases of about 2% to 2.5% a year for Colorado customers.
Energy demand in Colorado is anticipated to double in the next five years from a peak of approximately 7,200 megawatts to 14,000 megawatts, according to Xcel.