The Minnesota Public Utilities Commission (PUC) approved Xcel Energy’s CapacityConnect Phase 2, authorizing the deployment of 50 MW to 200 MW of utility-owned battery storage. The Commission order requires Xcel to quantify the technical and financial benefits that distributed batteries provide to the grid.
While the PUC did not move forward with a behind-the-meter virtual power plant program, the ruling establishes a framework for future valuation of local clean energy resources. Xcel Energy must submit a comprehensive evaluation plan within 180 days. This plan will outline metrics for measuring cost savings and grid benefits. The utility is also required to develop specific benefit estimates for distributed energy resources by November 2027.
Industry groups, including the Solar Energy Industries Association (SEIA) and MnSEIA, have criticized the utility-owned model, noting that the $430 million program budget shifts financial risks to ratepayers rather than leveraging private capital from third-party developers.
The regulatory focus on storage follows a broader trend of renewable energy growth in the state. Minnesota ranks 20th nationally for solar capacity with 3,264 MW installed, enough to power 464,162 homes. According to SEIA, solar accounts for 5.93% of the state’s total electricity generation.
The state’s solar industry supports 4,793 jobs and includes 172 solar-related companies, of which 37 are manufacturer. Minnesota has seen a cumulative investment of $5.1 billion in the solar sector. SEIA projections indicate the state will add 3,297 MW of solar capacity over the next five years, ranking it 19th for growth during that period.
Advocates stated the PUC decision is a step toward grid modernization but noted that leaving VPP savings untapped prevents immediate customer bill reductions. The findings from the mandated study will be integrated into the utility’s Integrated Distribution Plan to guide future storage procurement and valuation.
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