This story by Allen Best appeared on BigPivots.com on January 20, 2025.
Xcel Energy has a problem in some of the mountain communities where it sells natural gas. It’s part of a much broader problem across Colorado.
The specific problem Xcel has to solve in a strip of communities from Leadville to Grand Lake is how to meet the needs of existing and new customers dependent on natural gas without spending money on assets that will be stranded.
Colorado, after all, has goals for achieving net-zero emissions in its economy by 2050. Installing natural gas pipelines into new homes that are expected to last for 70 years doesn’t fit into this 25-year timeline.
Xcel calls its proposed solution the Mountain Energy Project. The company doesn’t see one single solution to this conundrum. Rather, it sees several ideas that it places under the heading of hybrid.
In a filing with the Public Utilities Commission on January 16, the company says the single biggest solution it had hoped might work would be electricity replacing gas. It sells both gas and electric in these areas.
Electrification remains a major part of the plan, and it would require beefing up the electrical infrastructure: Four feeder upgrades at Leadville and one at Dillon, along with transformer and substation upgrades at Breckenridge. Some of this was needed anyway, but not the Breckenridge project. Total cost of these various projects comes in at $28 million.
Electrification is just one of what geeks who track Colorado’s big pivot in energy called NPAs, or non-pipeline alternatives.
Xcel says it is the largest portfolio of NPA solutions that it is aware of in the United States.
“The company approached the issue from multiple angles,” says Grace Jones, the company’s manager of gas strategic planning, in a PUC filing.
Under this hybrid approach, Xcel also sees a installing long-term modular liquified natural gas at Breckenridge and compressed natural gas at Keystone as alternatives to traditional gas infrastructure. It calculates the total cost at $155 million for the 33,500 customers. It is not clear, however, what the cost of installing natural gas infrastructure in a business-as-usual case would be.
Xcel estimates 150% fewer greenhouse gas emissions for this proposal compared to just installing more natural gas infrastructure.
The most immediate problem is that the number of customers in Eagle, Grand, Lake, and Summit counties grew 8% from 2019 through 2023. Xcel expects this 1.7% annual growth to continue until at least 2033.
But a related problem is — as demand for natural gas dwindles — insufficient pressure at the tail end of the natural gas system can prove inadequate to needs of some customers.
As this Mountain Energy project illustrates, the transition away from natural gas in Colorado won’t be solved easily. To comply with several state laws of the last few years, Xcel — with 1.5 million gas customers and 1.7 million electric customers, by far the most of any utility in Colorado — is trying to figure out how to comply with the state’s goals while still making money. In places where it provides both gas and electricity, that is far easier than in those places where it provides one or the other but not both.
One element is the law requiring gas utilities to gradually reduce their emissions through what is called clean-heat planning. Xcel was the first, although it is now being followed by Black Hills, Atmos, and Colorado Natural Gas.
Some programs, however, were specifically designed for Xcel. And this proposed solution, if provoked by a problem might be a solution in other parts of Colorado, says Robert Kenney, president of Xcel Energy Colorado.
“The main idea of a non-pipeline alternative portfolio is straightforward – instead of expanding and upgrading traditional natural gas pipeline systems, we will invest in alternative projects to avoid or defer investment in natural gas infrastructure, while fulfilling our obligation to serve new and existing customers as communities grow,” he said in a press release.
Kenney pointed to a number of other tools proposed in the Mountain Energy Project that will enhance reliability and affordability while supporting communities and customers’ desire for carbon-free energy.
In the announcement, Kenney went on to say that the Mountain Energy Project, if approved, “will provide valuable insight into how to effectively plan to achieve emissions reductions on the larger natural gas system serving our 1.5 million natural gas customers statewide.”.
Representatives of two environmental advocacy groups deeply grounded in Colorado’s energy transition expressed cautious support.
“We look forward to reviewing the project in detail and making the most of this opportunity,” said Mike Henchen, a principal at RMI.
Justin Brant, from the Southwest Energy Efficiency Project, also expressed guarded support pending an examination of all the details. “Non-pipeline alternative projects will be essential to meeting the state’s greenhouse gas emissions targets and reducing energy costs for Coloradans, while also improving public health and saving customers money,” he said.
Xcel expects a decision from the PUC by the end of 2025.
Allen Best publishes the e-journal Big Pivots, which chronicles the energy transition in Colorado and beyond.