Minnesota regulators know that the electric distribution grid is reaching an inflection point driven by changing customer demands. Customers want more choice. They want more solar energy. More than ever, they want unlimited connectivity and for the power to never, ever go out.
The Minnesota Public Utilities Commission wants to meet that challenge head-on and has initiated a grid modernization proceeding. That proceeding, however, was started nearly a year ago. The most significant progress is a newly released staff report that lays further groundwork for the grid modernization initiative.
The staff report moves the ball forward just a little. It defines grid modernization, and based on feedback gleaned from many rounds of comments from stakeholders, it lays out some of the next steps that could be taken.
There is no clear timeline for those steps. The next step will likely be that the staff releases a more in-depth report that outlines what exactly should be in the distribution grid planning requirement. Of course, there will be some pilots.
Minnesota highlights some of the challenges that states encounter as they try to bring utility regulation into the 21st century. It’s all too easy to look at California, Hawaii and New York and declare that a new day is dawning in the construct between regulators and utilities.
But the regulatory process, even for more mundane proceedings, is notoriously slow. Small regulatory staffs and utilities entrenched in a way of doing business that hasn’t changed much in a century can have trouble moving quickly, even if they want to. Vertically integrated states like Minnesota cannot take on the same sort of transformation happening in deregulated states like New York.
There is also a chicken-and-egg problem. Tackling grid modernization efforts with a holistic approach can take a long time, and yet technology is moving quickly, and customers are asking for new solutions today.
The Minnesota PUC is essentially stuck in Phase 1 of its three-phase approach to grid modernization. Phase 1 just entails adopting a definition and outlining objectives. Phase 2 will prioritize action items, and Phase 3 will be a different proceeding that looks at a long-term vision, including potential changes to the utility business model. A docket for that long-term vision probably wouldn’t even be started for at least a few years.
Minnesota regulators claim they have time on their side when it comes to truly rethinking the utility business model. “Indeed, Minnesota, with vertically integrated utilities and relatively low penetrations of distributed generation, does not have the pressing needs of those other states,” the report says, referring to California, Hawaii and New York. “While distributed generation is increasing in the state and will take on more importance in the future, we have the luxury of time to consider and address these issues in a more measured and reasoned manner.”
Phase 2 is where the first concrete action would be taken, likely in the form of utilities being required to put together distribution grid plans that might look something like California’s distributed energy grid plans. If the proceeding continues to move forward at this pace, those plans wouldn’t be filed for probably two years. Even without changes to the business model for utilities, the distribution plans could come with requirements for sophisticated non-wires alternatives projects or other distribution planning that leverages technology at the grid edge.
The PUC staff suggests in the report that the plans would likely include roadmaps for smart inverters, better interconnection procedures, hosting capacity analyses, advanced metering infrastructure, volt/VAR optimization, third-party aggregation, time-varying rates and customer energy data access.
Some issues, such as updates to the interconnection process, will likely have to be teased out on their own, separate from any grid modernization proceeding. As is the case in many states, interconnection issues are holding up various distributed energy projects, such as Xcel’s community solar garden program.
Related to interconnection issues are hosting capacity analyses, which can help streamline the interconnection process. Many stakeholders called for hosting capacity analyses to be required by the commission as part of any distribution grid plan.
Despite the calls for holistic planning, there are already competing efforts. Minnesota’s legislature has called for Xcel Energy to file biennial grid modernization reports, the first of which was filed in October. There is also the 2025 Energy Action Plan, which involves grid modernization as one of the topics. The e21 Initiative is also trying to map out a transition to Minnesota’s regulatory model, but it is not happening from within the PUC, although some regulators are involved.
Xcel’s preliminary grid modernization report, as required by the legislature, outlines many potential technologies the utility could adopt, but asks for approval for two in particular: an advanced distribution management system (ADMS) and a solar-plus-batterystoragedemonstration project.
Xcel has urged the PUC to not tie the investment into an ADMS to the slow-moving grid modernization proceeding. “A rulemaking may take several years to complete, during which time there would be considerable uncertainty around the cost-recovery pathway, potentially impeding project progress,” the utility wrote in comments to the commission.
The ADMS will be the first test of how contentious the requirements for a distribution grid plan might be moving forward in Minnesota. Stakeholders are already filing comments asking for certain capabilities for the ADMS that will better enable distributed energy resources in the future.
Any future grid modernization efforts will ideally pull the requirements from the legislature and separate efforts of the PUC under one cohesive umbrella. As Minnesota took a leading role with its value-of-solar tariff, it could also be an example to other vertically integrated states if it can find a comprehensive and innovative path forward on regulatory reform.