Xcel Energy Reaches Settlement Agreement on $23.4M Microgrid Project in Colorado

Xcel Energy has reached a settlement agreement with consumer, regulatory, environmental and labor interests which, if approved by state regulators, allows the utility to move ahead with a $23.4 microgrid project.

Now before the Colorado Public Utilities Commission (Proceeding 19A-0225E), the settlement paves the way for seven microgrids that incorporate energy storage. 

The project, which will provide 6 MW/15 MWh of microgrid capacity, includes installations at a school, airport and other community sites. 

The settlement would allow Public Service Company of Colorado, an Xcel subsidiary, to seek cost recovery for the microgrids through rates charged to all customers. It also calls for the utility to create emergency response plans related to battery safety and meet construction and operations reporting requirements.

Western Resource Advocates (WRA), a non-profit conservation organization that signed onto the settlement, said it pushed for the reporting out of concern about potential emissions related to backup generators.

Charging batteries to reduce emissions

“Battery storage projects have great potential to reduce emissions, if they are powered by clean energy and dispatched at a time when emissions associated with electricity from the grid are relatively higher than usual,” said Aaron Kressig, WRA transportation electrification manager, in written testimony filed with the commission. 

“However, simply installing batteries does not necessarily ensure that these grid and environmental benefits are realized. How the battery is charged and how it is dispatched is critically important in determining the level of benefit it provides,” Kressig said.

WRA’s primary concern was that the utility would use fossil fuel backup generators to charge the batteries. The sites all incorporate solar energy, but three of the seven sites also have fossil fuel backup generators with a fourth considering a backup unit.

“However, the company clarified in discovery that ‘it is unlikely that any of the battery systems will be charged with diesel generation,’ Kressig said.

Kressig also noted that the utility plans to dispatch the batteries to reduce peak load on the grid, an activity that can decrease overall emissions by averting use of peaking plants.

“These peaking plants are typically fossil-fuel powered and cause the emissions intensity of electricity during peak periods to be higher than the emission intensity during other times,” Kressig said 

The WRA sees development of the microgrids as in the public interest. “Microgrids offer great potential to reduce the impact of power outages for the facilities they support,” he said. “This is particularly important for facilities where access to electricity is essential and/or the threat of power outages is higher than elsewhere.”

Utility must justify costs of microgrid project

The settlement also requires that the utility bears the burden to “provide robust testimony regarding expenditures” when it seeks cost recovery, said Jack Ihle, Xcel director of regulatory and strategic analysis, in written testimony filed with the commission. 

Not all jurisdictions allow utility rate recovery for microgrids. Opponents to cost recovery argue that the cost should not be spread among ratepayers because the microgrid serves ony a finite group. Others, like Illinois have approved cost recovery, citing the educational value of microgrid pilot projects that will help usher in the technology for other ratepayers.

Ihle argued that the Xcel projects will provide safety and reliability benefits for communities while expanding the integration and use of battery technology.

“As the current COVID-19 pandemic has reminded us, the concept of community resiliency is important and more relevant now than ever. And even in our eventual post-COVID-19 world, Coloradans will still have to navigate the risks posed by extreme weather events and other disruptions,” Ihle said.

He added the utility chose sites for the microgrids that “serve as the hubs that ensure communities’ access to basic necessities, such as security, food, shelter, water, and medical care. These hubs cannot function without a stable and secure power supply.”

Xcel Energy 7 proposed microgrids 

• Denver International Airport Automated Guideway Transit System, $5.5 million
• National Western Center, $5.5 million
• Denver Rescue Mission’s Lawrence Street Community Center, $1.4 million
• City of Arvada Center for the Arts and Humanities, $4.1 million
• Town of Nederland Community Center, $2.2 million
• Summit County Middle School, $2.5 million
• Alamosa Family Recreation Center $2.2 million

The microgrids emerged out of a community resilience solicitation that the utility issued in May 2019.

The solicitation netted 20 proposals from 13 communities across Xcel’s service territory. In selecting winners, the utility looked for applicants with emergency services that would benefit from microgrids. Finalists were scored based on a system that gave 50 points for project feasibility, 20 points for societal benefit and 30 points for grid benefits.

After choosing the communities, Xcel issued another solicitation in September for the microgrids’ batteries and related technology. The solicitation went out to 10 battery system integrators and five microgrid providers. From there, the utility began negotiations with Siemens and Fluence, a joint venture of Siemens and AES.

The microgrid projects have their roots in a law signed in June 2018 by Gov. Hickenlooper that allows electric utilities to develop up to 15 MW of energy storage.

Xcel plans to begin building the community microgrids in January 2021 and expects them to be completed within 18 months.

In addition to WRA and the utility, other parties that signed on to the settlement were Trial Staff of the Colorado Public Utilities Commission, the Colorado Office of Consumer Counsel, Rocky Mountain Environmental Labor Coalition and Colorado Building and Construction Trades Council, AFL-CIO. Hearings are scheduled for June 24 and 25 before the commission.

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