The Minnesota Public Utilities Commission (MPUC) approved a first-of-its-kind virtual power plant (VPP) program that will spur between 50 to 200 MW of new capacity, but renewable energy groups are criticizing the program’s approach.
MPUC passed Phase 2 of Capacity*Connect from Xcel Energy, a utility-owned storage program, on Thursday. Capacity*Connect will deploy battery energy storage systems in communities to make VPPs — networks of distributed energy sources connected to the grid, like batteries or solar array. Each storage project will be 1 to 3 MW in size. This phase of the program will end in 2028.
“Capacity*Connect represents a vital step toward modernizing the energy grid and meeting the growing electricity needs of our communities,” said Hwikwon Ham, MPUC commissioner, in a press release. “By leveraging innovative battery technology and virtual power plant models, we are not only ensuring a more reliable and resilient system for all Minnesotans, but also creating a more equitable energy future that delivers real value back to the communities.”
Renewable groups are taking issue with the move because this is the first instance in the United States of a utility exclusively owning its the capacity in a VPP program, and not relying on private investments from individual system owners.
“Xcel’s distributed storage program approved by the Minnesota Public Utilities Commission unfortunately bears little resemblance to other states’ storage programs that are proven to lower energy costs and increase grid reliability,” said Andrew Linhares, Midwest director of state affairs at SEIA, in a press statement. “Competitive markets for energy storage deployment ensure that ratepayers get the best, most affordable deal possible. The Capacity*Connect program takes the exact opposite approach – shifting the financial risk of projects to captive ratepayers who will be forced to pay for these projects regardless of performance.”
The groups expect that by not keeping the VPP program behind the meter, utility ratepayers will incur the cost of Capacity*Connect while Xcel reaps the profits of the program.
“Approving Xcel’s Capacity*Connect Phase 2 program marks positive progress in bringing more battery storage onto Minnesota’s energy grid, but Minnesota is still leaving meaningful energy bill savings on the table by not advancing a virtual power plant program that would help more customers maximize their energy resources,” said Will Kenworthy, Midwest regulatory director at Vote Solar. “Still, this decision lays important groundwork for the future. By requiring Xcel to define the grid value of all types of distributed energy resources, Minnesota is taking a key step toward fully recognizing the value of local clean energy like solar.”
