Xcel Energy Proposes 200 MW Battery Network for Minnesota Grid
- Energy Storage Grid Services & Demand Response News Utility-Scale BESS
Marin Holt
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- 5 minutes read
- Xcel filed Capacity*Connect proposal October 3, 2025 under MN PUC Docket 25-378 for 50-200 MW distributed batteries by 2028
- Budget ranges from $152M for 50 MW minimum to $430M for full 200 MW deployment, equating to $2,150-$3,040/kW installed
- Over 65% of program revenue derives from MISO bulk system capacity (resource adequacy) credits
- Initial 3-5 MW deployment in 2025-2026, scaling to full 200 MW by 2028 with 1-3 MW front-of-meter units at C&I host sites
- MN PUC hearing scheduled March 26, 2026 with Department of Commerce recommending approval limited to initial learning phase
Xcel Energy has proposed a first-of-its-kind distributed battery storage program that would deploy up to 200 MW of utility-owned storage at commercial and industrial sites across Minnesota by 2028. The Capacity*Connect program, developed in partnership with Sparkfund, would aggregate small-scale batteries at local businesses into a virtual power plant providing grid services to the MISO market. The Minnesota Public Utilities Commission is reviewing the proposal with a budget ranging from $152 million for 50 MW to $430 million for the full 200 MW deployment.
How the Program Works
Under Capacity*Connect, Xcel Energy would install 1 to 3 MW battery systems at local businesses, commercial or industrial sites, and nonprofit organizations across its Minnesota service territory. Each unit is roughly the size of a shipping container. The batteries charge during periods of low-cost energy and dispatch stored power to serve all customers during peak demand, operating as a networked front-of-the-meter virtual power plant.
Host sites receive direct payments for participating, with the program specifically targeting environmental justice communities to broaden access to clean energy benefits. Xcel maintains ownership and operational control of the batteries, integrating them into system operations for grid balancing and capacity services.
Part of a Larger Storage Strategy
Capacity*Connect represents one-third of the 600 MW of energy storage called for in Xcel Energy’s recently approved Upper Midwest Energy Plan. The utility is also building the Midwest’s largest standalone battery energy storage site at the Sherco Energy Hub in central Minnesota. Together, these investments position Minnesota as a testing ground for distributed capacity models that blend utility-scale ambitions with localized grid services.
Critical Perspective
Xcel Energy proposes 200 MW of distributed battery storage by 2028. This program mirrors Tesla’s 2021 proposal for 100 MW of distributed storage in Australia, which faced significant delays. California’s AB 2514 mandated utility storage procurement, resulting in billions in costs with mixed performance outcomes. Will this program truly lower costs for ratepayers or simply expand utility control?
Why It Matters
The proposal has drawn scrutiny from solar industry groups and independent power producers who argue utility ownership should be permitted only when competitive alternatives cannot meet system needs at lower cost. Critics note that Xcel’s track record with dispatching distributed resources raises questions about operational performance. The outcome of this proceeding could set a national precedent for how utilities deploy distributed storage for grid services versus allowing third-party aggregators to fill the same role.
