Xcel Energy is proposing a first-of-a-kind approach to distributed capacity procurement, or DCP, and Minnesota is where it plans to test it.
Under a program dubbed Capacity*Connect, the Minneapolis-based utility would install up to 200 megawatts of battery storage “at strategic locations on the grid” between now and 2028, according to Xcel’s announcement this week. The proposed program is in collaboration with Sparkfund, a deployment services partner for utilities.
The theory behind DCP, as Sparkfund CEO Pier LaFarge outlined in an interview with Latitude Media earlier this year, is that the infrastructure that already exists in a utility’s territory is an untapped resource that could potentially host much-needed capacity. By placing utility-owned and operated distributed energy resources like solar arrays, batteries, and backup generators on local businesses and commercial and industrial sites, utilities like Xcel can improve overall grid health: preventing transformer overload, improving feeder health, and generally avoiding the need for costly upgrades.
“Utilities realized they had all these near-term needs — and that DERs were actually exactly the fastest, most affordable and reliable way to solve them,” LaFarge said. “They quietly were like, ‘if we just paid for these DERs, could you get them out there really fast and do it right?’”
DCP is particularly attractive to utilities that capture value across generation, transmission, and distribution, LaFarge on an episode of the Catalyst podcast earlier this year.
Crucially — especially in this moment of load growth and rising electricity rates — DERs can be deployed in a matter of months, rather than the three to five years required to build a new gas plant. DCP, assuming regulators get onboard, could be a cheaper and faster way to get more capacity online. As of January of this year, SparkFund was in talks with 15 DCP-curious utilities.
“It’s easier to build lots of small things quickly than it is to build a few really big things slowly,” LaFarge told Catalyst host Shayle Kann
Listen to Pier LaFarge’s whole interview on Catalyst:
The Capacity*Connect proposal would locate batteries at businesses, including nonprofits, that would receive direct payments for participating in the program. Each site would host between one and three megawatts of storage; a single megawatt system is roughly the size of a shipping container.
The locations for those new batteries — i.e. places where grid capacity is constrained — would be determined by Xcel’s integrated system planning process. Xcel and Sparkfund would plan to scale the program as power demand increases.
Now, Capacity*Connect is only at the proposal stage. But if it gets the approval of the Minnesota Public Utilities Commission, it would be a model for the real-world potential of DCP at the utility-scale, which Sparkfund has pushed since its founding in 2013.
And it also could get the utility about a third of the way toward its storage deployment goals; in February, the state’s PUC approved Xcel’s Upper Midwest Energy Plan, which calls for installing six gigawatts of energy storage by the end of 2030.
