POWER January 2017 - 39

INDUSTRY REVIEW & PREVIEW
Steven H. Mills,
Energy Supply
VP, Operations,
Xcel Energy Inc.
Xcel Energy
is an investorowned
energy
company serving
3.5 million
electricity customers in eight states
with owned capacity of approximately
17,400 MW.
Fleet profile: Coal (43%), gas (23%),
nuclear (11%), solar/hydro/biomass
(6%), wind (17 %)
power play a vital role in our future as we
reduce emissions. As part of our renewable
energy strategy, we have plans to grow our
wind portfolio by 1,500 MW in the Upper
Midwest, and we are proposing to own
at least half of this new wind generation.
In Colorado, we're adding 600 MW of new
wind at Rush Creek, which will be one of the
largest and most cost-effective wind farms in
the state.
We're locking in low-cost wind energy
and taking advantage of federal tax credits
to get our customers the best price possible.
As a result of our strategy, we're on track to
reduce carbon emissions by 30% in the next
four years, and we expect renewables to make
up more than 30% of our energy mix in 2020.
McCullough: Certainly, future carbon
regulation of some form has to be an element
of our generation strategy. We account for that
by including a proxy carbon tax in all of our
option analysis. Customers may be the primary
driver, however. More of them desire, and
some even require, renewable energy.
Salati: We consider multiple factors in
our growth investment decisions, but the economic
viability of the plant or business on a
standalone basis is primary. We also consider
the impact an asset change will have on helping
us build a clean, unbreakable, and affordable
grid. We were the first company to put
a lithium-ion battery on the U.S. electricity
grid and are now the world leader in gridscale
battery energy storage, with 432 MW
in operation, construction, or late-stage development.
We
have over 8 GW in our renewable
portfolio and are continuing to expand our
renewable development efforts because
sustainability is integral to our strategy and
because it makes economic sense due to declining
renewable costs. Through strategic
portfolio management, upgrades, and retirements,
we have already reduced our global
carbon emissions by 17% from 2012 to 2015.
January 2017 | POWER
We will continue to advance energy solutions
that improve environmental performance in
our markets.
In 2015, the U.S. Department of Energy
predicted hydro development
would have a new renaissance, in part,
as a way to help nations meet their Paris
Agreement emissions reduction goals.
How important is hydro-especially new
small-scale capacity additions-in your
operating territory or regional market?
Alkema: Hydro generation is part of
SRP's legacy, and we see it as extremely
important going into the future. The use of
some of our hydro facilities for energy storage
has been extremely valuable for our energy
management and operations. However,
new small-scale hydro is not currently in our
integrated resource plan.
Mills: While small-scale hydro continues
to play a role in providing our customers'
power, it is not a focus of future resource
plans. Today's regulatory environment and
the economies of scale for operations and
maintenance are generally not attractive for a
regulated company like ours. The price point
compared to true renewables makes developing
small hydro prohibitive for us today.
Xcel Energy does have a project underway to
upgrade a pumped-storage hydro facility in
Colorado. Originally built in the 1960s, the
Cabin Creek Hydro plant provides valuable
backup power for our system.
McCullough: Hydro has potential, but
represents a high capital cost and long installation
time. That introduces a level of risk
to the equation that will make it difficult to
justify hydro development relative to other
renewable options.
Salati: Renewables, including hydro,
make up 23% of our portfolio, with our hydros
primarily located in Panama, Colombia,
and Brazil. We consider hydro viable where
the resources are available, particularly as we
continue to focus on less-carbon-intensive
technologies. In some of these countries,
hydro power plants, specifically reservoir
hydro, may play an important regulating role
in supporting the absorption of more solar
and wind by the grid, as will batteries. In fact,
particularly in our U.S. operating market, we
see batteries as having a much bigger role
than hydro in terms of environmental impact.
Adding batteries to the grid takes less time
to site, permit, and build while occupying a
much smaller footprint and using fewer natural
resources.
Many generating companies are reconfiguring
their businesses in both obvious
and subtle ways to adapt to new
market realities. Is your company's business
model changing-why or why not?
Alkema: Yes, the business model is
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changing with the market. Obviously, our
generation resource portfolio is changing as
we make the adjustments in order to comply
with existing regulation. We continue to look
for ways to optimize costs and have adjusted
how we perform or contract maintenance and
consequently the benefits of a roving maintenance
crew are being tested as well. Also,
we have recently formed a division that is
focusing on grid modernization. Within that
new group we are ensuring that we are able
to maximize the benefits of future distributed
generation and energy storage within our distribution
system.
Mills: Xcel Energy is addressing the traditional
regulatory rate-making process by
seeking multi-year rate plans that will increase
price stability for customers. The
plans establish a mutually beneficial cost
structure that allows the company to manage
expenses and investments in a prescribed approach
while minimizing the repetitive ratecase
filings that are used to " catch up " due
to regulatory lag created by a historical-year
rate-case process. This also allows the company
to manage to the approved rate plan,
control cost impacts to customers, and provide
stability to our shareholders.
McCullough: We are becoming more
customer-focused. We named a chief customer
officer in June and will be pursuing a
number of " customer experience " objectives
in the near future. We also are rebalancing
our company's resource portfolio to provide
new, cleaner energy and technology options
for our customers.
Salati: AES has a history of innovation.
This began with our founding as one of the
first U.S. independent power producers. We
have always considered customers' evolving
needs and the full energy value chain in our
business model.
AES has helped the Dominican Republic
reduce its dependence on expensive and lessenvironmentally
sustainable heavy fuel oil
by introducing the country's first liquefied
natural gas terminal in 2003, and we now
have a second terminal under construction
in Panama coming online in 2019. In the last
two years, our distributed energy business
has partnered with corporate and industrial
customers to meet their renewable energy
targets with solar energy, and our energy storage
business has partnered with utilities to
stabilize the grid, tap into existing capacity,
avoid expensive transmission and distribution
buildout, and better integrate renewables
with our Advancion Energy Storage product.
Additionally, our utilities, in Brazil and El
Salvador, have partnered with customers to
improve their operations through recently
launched energy efficiency consulting services.
We have and will continue to innovate
39
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POWER January 2017

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