The Denver-Xcel Energy Memorandum of Understanding: A New Model for City-Utility Cooperation


Kevin Graham, Xcel Energy.
A unique microgrid pilot project is underway at Panasonic’s North American headquarters near Denver International Airport. Combined with photovoltaic arrays on the building’s roof and canopies at the nearby transit parking structure, this Younicos battery array can power the microgrid for at least 24 hours on even the cloudiest days.

Xcel Energy—Colorado and the City and County of Denver have entered into an innovative partnership model to achieve their ambitious goals for carbon-emission reduction and clean energy generation. The Energy Future Collaboration seeks to align the efforts of the City and the energy company to create a clean energy future that will benefit the city of Denver, its residents and businesses.

Denver has a long history of leadership on climate change. The City conducted its first greenhouse-gas inventory in 2005, has reported to the Carbon Disclosure Project (CDP) since 2012, released its first Climate Action Plan in 2007 (meeting its goals ahead of schedule) and published its first Climate Adaptation Plan in 2014. Denver was also one of the first cities to sign on to the Mayors’ Climate Protection Agreement of the U.S. Conference of Mayors, the ambitious Mayors’ National Climate Action Agenda and the Global Covenant of Mayors. Denver Mayor Michael B. Hancock reinforced that Denver remains committed to the target of the Paris Climate Agreement by signing the We Are Still In pledge. One day after Denver Mayor Hancock’s State of the City message in July 2018, he introduced Denver’s 80 x 50 Climate Action Plan. The plan is a detailed roadmap to reduce carbon emissions 80 percent by 2050 from a 2005 baseline.

Denver’s goal is to move city facilities to 100 percent renewable electricity by 2025. Its aspirational goal would reach the same target community-wide by 2030, while looking for ways to cut operating costs and bring climate programs to low-income families and other vulnerable communities.

“I know those are bold, aspirational goals, and I know cost and technology will determine how we get there,” Hancock said in his 2018 State of the City speech. “But we must act, and I’m grateful for our partnership with Xcel Energy, the nation’s leading utility when it comes to reducing emissions and building a path toward a clean energy future.”

In December 2018, the company announced the most ambitious clean-energy goals in the industry: to reduce carbon emissions 80 percent by 2030 from 2005 levels. Longer term, Xcel Energy’s vision is to serve all of its customers with zero-carbon electricity by 2050 —while keeping reliability, affordability and local economic benefits top of mind. While 2050 is decades away, Xcel Energy has put the stake in the ground now to allow the necessary lead time to develop the innovative technology, partnerships and supportive policy to help drive this vision forward.

As the largest electric provider in Colorado, Xcel Energy demonstrated the same vision in its “Colorado Energy Plan.” Approved by state regulators in 2018, the Colorado Energy Plan will boost renewables’ share of electric generation to 55 percent by 2026, and cut emissions 60 percent statewide. Sixteen stakeholder groups, including the City and County of Denver, signed onto the plan. It was endorsed by scores of others, including economic development groups, other municipalities, large customers, independent power producers, environmental and conservation agencies, consumer advocates and industry associations.

 
How Denver and Xcel Energy formed their New Collaboration and why it is Novel and Replicable
As the first step, Xcel Energy and the City and County of Denver signed a joint Memorandum of Understanding (MOU) in February 2018 to create a new “Energy Future Collaboration.” Along the way, Xcel Energy executives and City staff came to realize what a powerful tool they were creating, with benefits that extend far beyond city or even state borders and the potential to become a national model for collaboration. Investor-owned utilities serve more than 220 million Americans, mostly in urban areas. Globally, cities account for about 70 percent of greenhouse-gas emissions. When large energy providers and major cities work together, bigger regional and national progress can be made toward a climate solution.

How will this be done? Denver has focused its Climate Action Plan on three broad areas: decarbonized energy supply, energy-efficient buildings, and transportation. In the MOU, the City agreed to throw its weight behind Xcel Energy’s large-scale renewable projects, demand-side management efforts and customer choice programs. Denver agreed to advocate before the Colorado Public Utilities Commission and the state legislature on issues in which its interests align with the company’s, which often involve larger policies driving the state forward.

While the City and company don’t have identical targets in all areas, the mutual goal is to build a clean energy future. Xcel Energy seeks to enhance what the City is already doing to develop storage and microgrid solutions, establish a database of energy use for commercial and multifamily buildings in accordance with existing requirements, and enable electric vehicle adoption. None of these efforts start from zero. In Colorado, Xcel Energy’s fuel mix is already nearly 30 percent renewable, with specific resource plans to move to 55 percent in less than a decade via its Colorado Energy Plan.

By surveying Xcel Energy’s cities and towns, the company confirmed, about 18 months ago, that municipalities were looking for a stronger partner in their energy company. Cities and towns wanted to work with Xcel Energy to improve service levels, support local economic development and find ways to partner to achieve local energy-related goals. Communities want to grow sustainable economies by offering companies easy ways to do business in their cities and towns, and access to clean affordable energy. And, of course, rebates and expertise play a big role.

These results supported a proactive path that Xcel Energy was already exploring, which resulted in the creation of a new, flexible framework—the Energy Future Collaboration model. Energy Future Collaborations are a vehicle for Xcel Energy to team up with its communities to advance energy-related goals within the larger context of the state’s regulatory model. The collaborations are documented through non-binding memoranda of understanding and can cover any energy-related topic.

Denver’s Energy Future Collaboration highlights its sustainability efforts, but also includes other focus areas, such as economic development. The City and company have a history of working together in that space. When Denver successfully recruited Panasonic’s North American headquarters in 2014, Xcel Energy played a key role in a unique microgrid pilot, along with the City, Panasonic and Denver International Airport. The result is Peña Station NEXT, the transit-oriented “smart city” now under construction at the site. Details are provided in another article in this issue.

A big part of the ongoing collaboration has to do with educating customers—not only about the best kind of light bulb to use, but about the energy business itself. Xcel Energy works within a highly regulated, technical industry that is nearly invisible to most of its customers. While energy is vital to everyday life and commerce, customers tend not to notice how well the system works unless service is interrupted or they receive a higher-than-usual bill. Without active communication from the utility side of the table, the voices of Xcel Energy and its peer companies are lacking in some sectors of the public, which can result in misconceptions and misunderstanding.

By working together, utilities and cities can overcome many hurdles to achieving high levels of carbon reductions at grid scale. Cities like Denver can engage and educate their communities and use their political, economic and environmental expertise to support bold and innovative utility strategies for advancing clean energy. In Colorado, Denver was a key partner in supporting Xcel Energy’s Rush Creek Wind Project and the Colorado Energy Plan.

By engaging all stakeholders in the community, Denver can help bolster support for rapid, large-scale transformation of the grid. The City’s role also extends to planning beneficial electrification efforts in buildings and transportation. In fact, as electrification accelerates, utilities and cities need to work even more closely together for effective grid planning and shaping the built environment in ways that support these goals.

Collaborating with municipalities allows Xcel Energy and other energy companies to step out from behind the curtain and explain why they do what they do. How does the regulatory process impact Xcel Energy’s work? How do utilities do resource planning and propose rates? What is the most effective way to balance the needs of customers, stakeholders and shareowners?
This prompts another question. How can investor-owned utilities like Xcel Energy help their customers—municipalities, businesses, building owners and citizens—navigate the increasingly complicated landscape of the energy business? For example, if Xcel Energy wants to encourage the shift to electric vehicles, it must first develop programs to help customers figure out the most cost-effective ways to make that shift. These can include pilot efforts to better help communities convert their city fleet of trucks and buses, or, through various programs, more information and sometimes incentives on electric vehicles.
 

Greg Hand, Xcel Energy
Sunflowers absorb solar energy at Xcel Energy’s Rush Creek Wind Project near Limon, Colo. The 300-turbine project, dedicated in September 2018, will deliver enough energy to power 325,000 Colorado homes. Projects such as Rush Creek advance the City and County of Denver’s renewable energy goals while boosting rural economies.

 

The key collaboration with Denver is also an opportunity to get on the same page across the region. So far in 2018, along with Denver, seven other municipalities have signed MOUs, including Alamosa, Breckenridge, Lakewood, Lone Tree, Louisville, Nederland and Westminster. Xcel Energy’s goal is to create Energy Future Collaborations in cities of various sizes, located across its large and geographically diverse Colorado territory, from the rural high plains to suburban cities and mountain resort towns, each with its own priorities for energy-related issues such as sustainability, economic development and quality of life for citizens. When they collaborate, cities and utilities increase the likelihood that the legislative and policy solutions they seek are achievable. The next step in the process is to develop specific work plans with each municipality that translate the big-picture vision of each Energy Future Collaboration into concrete and scalable steps.

In keeping with the pioneering spirit of the West, the State of Colorado and the City and County of Denver are singular places when it comes to protecting the natural environment that makes it such a pleasure to live and do business here. Colorado was one of the first states with a voter mandate for renewable energy standards; Denver’s 80 x 50 initiative in 2015 was followed in 2017 by then-Gov. John Hickenlooper’s executive order joining the U.S. Climate Alliance and committing the State to climate action. Xcel Energy chose Denver to host the December 2018 announcement of its 2050 zero-carbon initiative. The City and County of Denver and Xcel Energy—Colorado are proud to strengthen their commitment to an enhanced customer experience, affordable and reliable power and a clean energy future.

 
References

  1. City of Denver Climate Action Plan [online] (2005). https://www.denvergov.org/content/dam/denvergov/Portals/771/documents/EQ...
  2. City and County of Denver Climate Adaptation Plan [online] (2014). https://www.denvergov.org/content/dam/denvergov/Portals/771/documents/Cl...
  3. Denver 80×50 Climate Action Plan [online] (2018). https://www.denvergov.org/content/dam/denvergov/Portals/771/documents/EQ...
  4. Mayor Michael Hancock State of the City Speech [online] (2018). https://www.denvergov.org/content/denvergov/en/mayors-office/programs-in...
  5. Colorado Energy Plan Fall 2018 Update [online] (2018). https://www.xcelenergy.com/staticfiles/xe-responsive/Company/Rates%20&%2...
  6. Xcel Energy’s Carbon Reduction Announcement [online] (2018). https://www.xcelenergy.com/company/media_room/news_releases/xcel_energy_...