US utilities can cut costs by going all-in for renewables: Vestas boss

OPINION | Xcel Energy is showing what a utility can do when it innovates with clean energy, writes Chris Brown

The traditional view of utilities is that they are the turtles of the US economy — steady but cautious. That view is starting to become dated because clean energy is changing the utility business as we’ve known it.

Look no further than Xcel Energy’s annual shareholders meeting in Pueblo, Colorado, in May.

An audience member asked Xcel’s chief executive Ben Fowke, about utilities’ approach to competition, hinting that many utilities rely on their monopoly power to stymie energy competition in the marketplace, and fail to innovate as a result.

Fowke responded by pointing out the innovations that Xcel had already achieved to reduce rates and clean up their electricity supply, but his answer was best summarized by his words: “Never confuse customer loyalty with captivity.

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While utility critics can legitimately raise concerns about a lack of competition in grid infrastructure, those who have similar concern over power generation are missing the plot.

The relationship of major utilities to renewables has shifted dramatically in the last ten years. Many utility leaders and the successors they were grooming were cautious — even skeptical — about how much renewables could be affordably added, and what their addition to the grid would do for grid stability.

No more. Major players, many of them coal-burning, are buying large amounts of renewables. DTE, Southern Company, AEP are all-in. Texas, for example, has substantially increased grid stability while shifting 20% of demand to wind energy, and global data shows no loss of reliability as renewables reach record penetrations.

For Xcel, the company just topped its best-ever share price after cutting electricity rates by 9% over the past five years. It’s figured out how to be fuel-neutral, not raise prices on customers, and please politicians — all in the midst of a broad, rapid transition to wind and other renewables.

Xcel’s strategy — as one of the country’s leading investor-owned utilities — validates wind’s growing place in the fuel mix. As Fowke pointed out, wind’s costs have dropped 25% in three years, Xcel has invested $3.5bn in wind since 2005 and is spending another $3.7bn in the coming years. It is targeting 10GW of wind capacity by 2020 under their "steel for fuel" strategy ("steel" being a reference to wind and solar) — when their total eight-state generation was 17GW in 2017.

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Xcel’s track record of reducing customer’s rates while investing heavily in wind and solar is a triple win for Xcel, their customers and the world. They are going to achieve what looked impossible a decade ago: an 80% reduction in carbon pollution by 2030 and becoming 100% carbon free by 2050.

In Ben’s own words: "Vibrant, growing communities support our business growth, while reliable, affordable and increasingly clean energy powers these local economies. It's fitting that we're holding this meeting here in Pueblo, where the transition to a clean energy transition is well under way. The towers that support our giant wind turbines are made by Vestas right here in this community."

But beyond Xcel’s successes and plans for the future, the questions at the shareholders meeting really got me thinking about Xcel’s future and where utilities are headed.

As someone selling clean energy to utilities such as Xcel, I’m far from impartial. But the facts are the facts, and they show that the way in which power is being generated is becoming more diverse.

Some power is being generated by independent power producers, some is being built and owned by the utilities themselves, and more is being bought and sold across larger regions. There is competition among the power source options for utilities, and that is a very good thing.

A strong grid is one that brings the cleanest, least expensive power from wherever it is generated when it’s needed, not one constrained by a lack of competition.

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If you are concerned about global climate disruption, you should be wholly in favor of this shift by utilities from resenting renewables as a government-imposed, expensive advocacy project to embracing them as new power generation with the lowest cost. The competition happening within utilities for their power sources is a good thing for consumers and for the environment.

I want utilities to get as much of their power they are delivering to customers from renewables. And it’s happening because utility leaders like Ben Fowke are moving from a monopoly mindset to an entrepreneurial and competition approach, enabled by the sound business case for renewables.

Chris Brown is president of Vestas’ sales and service division in the US and Canada

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