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Xcel Energy Confirms Data Center Growth Won’t Derail Minnesota’s Clean Energy Goals by 2040

Utility Executive Says Natural Gas Could Play Role as Data Centers Drive Power Demand

Minnesota’s largest utility, Xcel Energy, is confident that its ambitious 2040 clean energy target won’t be derailed by the rapid growth of data centers. However, as these power-hungry facilities expand, the state may face challenges in ensuring it can meet its clean energy commitments. Xcel’s leadership has acknowledged that, while they are committed to transitioning to 100% clean electricity, some natural gas plants might need to stick around a bit longer than initially planned.

Ryan Long, president of Xcel Energy’s division serving Minnesota and the Dakotas, expressed this sentiment in a recent conference hosted by the Minnesota Public Utilities Commission (PUC). According to Long, even without the rise of data centers, some natural gas contracts might need to be extended into the 2030s. The introduction of data centers only heightens the likelihood of that need.

“We’re looking at keeping some of those gas plants around longer, maybe through the next decade,” Long said. “Data centers could speed that process up a little.”

Xcel Energy Minnesota data center growth

This assessment comes amid a broader conversation about the increasing demand for electricity driven by artificial intelligence and other technological advancements. Data centers have been growing at an unprecedented rate, and many, including major players like Meta, Microsoft, and Amazon, are building near retiring coal plants in Minnesota. This trend is raising questions about whether the state’s clean energy goals—mandating 100% clean electricity by 2040—can keep pace with the new electricity demands.

Data Centers and Their Growing Impact on Power Demand

Minnesota is witnessing a surge in data center projects, including a massive $700 million facility from Meta in suburban Rosemount. Microsoft and Amazon have also been acquiring land near Xcel’s soon-to-be-decommissioned Sherco coal plant in central Minnesota. These companies are seeking to tap into the state’s clean energy grid while meeting their immense power needs. However, Xcel and other utilities are closely monitoring how this rapid expansion will affect grid stability and the ability to maintain clean energy standards.

Joe Sullivan, a commissioner with the Minnesota PUC, has emphasized the importance of ensuring that Minnesota’s grid can meet the demand without compromising the state’s clean energy objectives. “We need to make sure we can serve these companies, and do so with clean energy,” Sullivan stated.

The issue has sparked an ongoing debate among utility planners, regulators, and environmentalists. The rise of data centers, many of which are designed to support data-heavy technologies like AI, could push Minnesota’s grid to its limits. The challenge? Meeting both the energy demands of these companies and the state’s legal mandate to reach 100% clean electricity by 2040.

The Economic Case for Data Centers

Despite the concerns surrounding energy consumption, there’s another side to the story. Data centers could actually help boost the local economy and support Xcel Energy’s clean energy transition in other ways. Long, for example, sees the potential for a 100-megawatt data center to generate as much as $64 million in annual revenue. This could help offset rate increases for customers or even help fund the development of additional clean energy infrastructure.

Xcel is targeting a lofty goal of attracting 1.3 gigawatts of data center demand by 2032, and the utility remains confident that it can manage that growth without jeopardizing progress toward its 2040 clean energy target. “The demand from data centers won’t change our commitment to closing all coal plants by 2040,” Long said. “But it could impact the timeline for natural gas plants.”

This perspective is shared by other utilities. Julie Pierce, vice president of strategy and planning for Minnesota Power, emphasized that her company has experience in serving large-scale customers, such as the mining operations in the state’s northeastern region. She believes utilities can rise to the challenge of powering data centers while meeting the state’s clean energy goals.

Solutions and Strategies for Clean Energy Growth

The conversation is not all about risk; many stakeholders believe that data centers, if properly managed, could be a boon for clean energy development. In fact, some argue that data centers could even become grid assets that aid in the transition to carbon-free electricity. At the Minnesota PUC conference, Xcel’s Long noted that the utility is actively exploring renewable generation, battery storage, and grid-enhancing technologies to help balance demand with cleaner energy supply. But there are hurdles, especially in the form of rising costs and supply chain disruptions that have slowed the deployment of these solutions.

Zachary Ruzycki, director of resource planning at Great River Energy, highlighted that much of the demand for data centers in Minnesota is due to the state’s commitment to clean energy. Many large data center operators, including those like Meta, Microsoft, and Amazon, have made corporate pledges to run their facilities on 100% carbon-free electricity. This aligns with Minnesota’s broader energy goals, but challenges remain.

On the other hand, some industry experts have expressed concerns about whether utilities can keep up with the massive energy demands from these centers. Pete Wyckoff, deputy commissioner for energy at the Minnesota Department of Commerce, voiced skepticism about utilities’ ability to deliver both clean power and the scale of electricity that data centers require in a timely manner.

“To meet the unchecked demand from data centers, we’re going to need to invest in more transmission, virtual power plants, and other demand response solutions,” Wyckoff said. These technologies, he argues, can be deployed faster and at a lower cost than building new transmission lines and large-scale clean energy infrastructure.

Balancing Innovation and Sustainability

Aaron Tinjum, director of regulatory affairs for the Data Center Coalition, which represents major tech companies, offered a different perspective. Tinjum believes that data centers are more than just power consumers. They also contribute to smarter energy use by supporting technologies like smart meters and demand response systems that can optimize electricity consumption. In fact, he noted, data centers have been a driving force behind corporate clean energy procurement, with data centers accounting for half of all U.S. corporate clean energy purchases, according to a report by S&P Global Commodity Insights.

However, environmental advocates caution that while companies like Meta may match their energy consumption with renewable energy purchases, the local impact on grid emissions could still be significant. In fact, there’s growing concern that the rise of data centers could contribute to increased fossil fuel consumption in local markets where they are built.

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