Opinion: Xcel’s Capacity*Connect Is a Step Forward, But Minnesota Needs a Competitive Storage Market

Photo Credit: Xcel Energy

Minnesota has taken an important step toward modernizing its electric grid with the approval of Xcel Energy’s Capacity*Connect battery storage program. The Minnesota Public Utilities Commission approved Xcel’s proposal to deploy up to 200 megawatts of distributed battery storage across its Minnesota service territory by 2028. Xcel has described the program as a way to place batteries at “strategic locations on the grid” and “maximize the efficiency of existing infrastructure.”

The timing is hard to miss. Minnesota is in the middle of another stretch of extreme heat, with air conditioners running continuously and electricity demand climbing. Moments like this make the need for a reliable grid very real. They also underscore why Minnesota should be moving quickly to deploy storage wherever it can provide the most value.

That is the promise of distributed storage. Batteries located closer to customers can relieve local grid constraints, support reliability, and make better use of the distribution system we already have. But the approval also raises an important question for Minnesota’s clean energy market: will independent developers have a meaningful role in building that system?

What Was Approved

Capacity*Connect is a utility-owned battery storage program. Rather than building one centralized battery project, Xcel will install and operate many smaller battery systems, generally expected to be in the 1 MW to 3 MW range, at commercial, industrial, institutional, and nonprofit host sites.

Xcel will dispatch the batteries during periods of high demand or when parts of the local distribution system are under stress. In concept, that is a very good use of storage. Distributed batteries can do much more than provide backup power. They can reduce pressure on substations and feeders, improve flexibility, and potentially create room for additional distributed generation.

Fresh Energy supported the Commission’s approval and described the program as a useful learning opportunity. As Fresh Energy put it, Capacity*Connect can help Xcel learn how to coordinate distributed energy resources “in a way that works for its customers.” Fresh Energy also noted that the program could “pave the way” for additional DER programs in the future.

That optimism is warranted. Minnesota needs more storage, and utilities should be planning for a more flexible distribution grid. But the ownership and market structure of this program deserve closer attention.

The Market Competitiveness Question

The issue is not whether Minnesota needs batteries. It does. The issue is whether utility-owned batteries will receive a different or easier pathway to grid access than projects developed by independent companies.

Third-party developers already face long interconnection timelines, uncertain study results, and limited hosting capacity. If a utility can identify the most valuable locations, reserve scarce grid capacity, own the assets, recover the costs from ratepayers, and move its own projects through a faster or different process, the market becomes tilted toward utility ownership.

Developer groups have raised that concern directly. MnSEIA warned that “giving control to just one partner” leaves out Minnesota’s experienced solar and storage developers. SEIA similarly argued that “competitive markets for energy storage deployment” are important to protecting ratepayers and delivering the best value.

This matters because Xcel has identified one of the program’s potential benefits as unlocking or making better use of distributed grid capacity. If Capacity*Connect relieves constraints and creates room for more distributed energy resources, that would be a meaningful win for Minnesota.

But that result should not be assumed. It should be measured.

The state should track whether the batteries actually create additional hosting capacity, whether that capacity becomes available to independent projects, and whether third-party developers are treated fairly in the interconnection process. Otherwise, the program risks allowing the utility to occupy the most valuable grid locations without meaningfully expanding the broader market.

Why This Matters Beyond Xcel

Other utilities are watching this model. If Capacity*Connect becomes a template for future distributed storage programs, the implications could extend well beyond Minnesota.

A utility-led model may get batteries built, but it can also limit private investment, reduce competition, and narrow the options available to customers. A competitive market would allow utilities, independent developers, customers, and aggregators to participate, with each bringing different capabilities and sources of capital.

Minnesota developers are ready to finance, site, build, and operate distributed batteries now. They should not be left on the sidelines while utilities reserve the best locations and rate-base the projects.

Minnesota does not need to choose between utility-led grid modernization and a strong independent market. It should expect both.

A Useful Contrast: Illinois

Illinois is taking a different approach. Under the Clean and Reliable Grid Affordability Act, Illinois established an initial target of 3,000 MW of energy storage capacity committed to commercial operation by the end of 2030. The Illinois Power Agency has also announced an initial 2026 procurement for 1,038 MW of standalone storage, divided between MISO Zone 4 and the PJM ComEd region.

The Illinois framework is not identical to Minnesota’s, and not all of that storage will be distributed or paired with community solar. But Illinois is creating a broader market through competitive procurements, storage incentives, and opportunities for private developers to finance, build, and own projects.

That difference is significant. Capacity*Connect is capped at 200 MW and centered on utility ownership. Illinois is moving toward a multi-gigawatt storage market that could support a much larger number of independently developed projects over the next several years.

Even if only a portion of Illinois’ 3,000 MW target becomes distributed storage, the scale could be substantial. For example, 1,000 MW of distributed batteries averaging 2 MW each would represent roughly 500 projects. That is an illustration, not a forecast, but it shows what becomes possible when a state creates a market rather than a single utility program.

Minnesota’s Opportunity

Capacity*Connect could become a useful step toward a more flexible and resilient grid. If it relieves distribution constraints, improves reliability, and helps Xcel learn how to operate distributed batteries at scale, Minnesota customers could benefit.

But the program should be judged by more than the number of batteries installed. Minnesota should ask whether it actually opens new grid capacity, whether interconnection rules are applied fairly, whether ratepayers receive good value, and whether independent developers have a real opportunity to compete.

This conversation is especially timely because utility commissioners and energy industry leaders from around the country will be in Minneapolis next week for the National Association of Regulatory Utility Commissioners’ Summer Policy Summit.

As they discuss reliability, affordability, and the future of the grid, we hope they will remain open to approaches that go beyond traditional utility ownership. Third-party developers can bring private capital, project-development expertise, customer relationships, and competitive discipline to the storage market.

Utilities have an essential role in planning and operating the grid. But they do not need to own every resource that supports it.

The heat bearing down on Minnesota is a reminder that grid reliability matters now, not someday. The NARUC summit is an opportunity for regulators and industry leaders to think broadly about how storage gets built and to make sure the market is open to everyone capable of helping.

Battery storage will be central to Minnesota’s clean energy future. The state should make room for utility innovation, but it should also create a fair and competitive path for third-party developers ready to invest and build.