Xcel Energy unveils $45 billion capital plan as data center pipeline nears 9 GW

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Diving certificate:

• Xcel Energy plans to invest $45 billion in new generation, transmission and other projects over the next five years, President and CEO Bob Frenzel said Thursday during the company's third-quarter earnings call.

• The company has received 8,900 MW of requests from data center companies, but economic growth represents only 22% of total five-year spending, according to the company's earnings presentation.

• Xcel expects to secure only 25% of the projects in its data center pipeline over the next five years, leaving room for further growth that could continue into the next decade, Frenzel said.

Insight into the dive:

The surge in loads across the country suggests that utilities will need to move much faster than in the past, Frenzel told investors Thursday.

“What you're seeing … is obviously a lot of demand across the country,” he said. “And we know that many people’s incoming requests are being double counted as these large loads are looking for transmission and generation services. But it highlights another need, which is that we as a country, we as an industry, need to accelerate our ability to develop both transmission and generation to serve the load that we believe is coming.”

For Xcel, that acceleration will take the form of a $45 billion plan over the next five years focused on four key areas: clean energy, customer electrification, load growth and reliability, Frenzel said. According to the company's presentation, 63% of the total funding will be used for the modernization of transmission and distribution networks. Renewable energy and new generation projects receive 11% and 10%, respectively.

While deals with fast-growing technology companies like Meta, QTS and Microsoft grab headlines, data centers account for only half of the company's projected revenue growth over the next few years, according to Brian Van Abel, Xcel's executive vice president and chief financial officer. The company has also seen significant growth from the electrification of oil and gas production in the Permian Basin and from the increasing adoption of electric vehicles and other consumer products in Colorado, he said.

But this growth is only part of the company's investment plan, according to Thursday's presentation. Transmission and distribution stability improvements will account for 29% of planned investments, while zero-carbon generation and generation reliability will account for 14% and 6%, respectively. Rising wildfire costs will eat up 11% of the plan, with Van Able noting that the company's insurance premiums have tripled this year.

Van Abel said Xcel is pursuing a pipeline of potential investments in addition to the $45 billion plan announced Thursday, which could add up to another $10 billion – a number he said is “conservative and could be significantly higher.” . The capital investment plan does not include the 4.2-GW Upper Midwest energy plan announced earlier this month, a Southwestern Public Service Co. new-generation resource plan of 4 to 10 GW, or Xcel's resource plan for up to 14 GW filed in company filings according to mid-October in Colorado.

The increasing development, Frenzel said, shows lower per-unit electricity costs for most customers, although he noted the need to ensure contracts are signed with large customers such as data centers be carried out in such a way that the prices for other customers do not increase.

“If the country … has customers with high load factors, such as those whose electric vehicles are charging at night with other high-intensity energy loads, I think that's an opportunity for us to mitigate cost increases across the country as we transition both.” “Our transmission – and generation footprint for the next generation,” he said. “It’s an opportunity that we need to seize very quickly – in partnership with a lot of people and some new people at the table – but I’m excited about it all.”