Minnesota approves Xcel’s Utility-Owned Battery Program

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.”

That is the promise of distributed storage: batteries located closer to customers can help relieve local grid constraints, support reliability, and make better use of the distribution system we already have. But the approval also raises a major question for Minnesota’s clean energy market: who gets to build and own the distributed energy resources needed for the grid of the future?

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.

The batteries will be dispatched by Xcel to support the grid during periods of high demand or localized system constraints. In concept, that is a very good use case for storage. Distributed batteries can be more than backup power; they can act as active grid resources that reduce stress on substations and feeders, improve flexibility, and potentially create room for more distributed generation.

Fresh Energy supported the Commission’s approval and framed 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 structure of this program deserves scrutiny.

The Market Competitiveness Question

The concern is not whether batteries are needed. They are. The concern is whether utility-owned batteries should receive a different 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 constrained locations, reserve scarce grid capacity, own the assets, recover costs from ratepayers, and move its own projects through a different or faster process, the market becomes structurally tilted toward utility ownership.

Developer groups have raised exactly that concern. 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 ensuring the best value.

This is especially important because Xcel has publicly identified one of the benefits of the program as unlocking or better utilizing distributed grid capacity. If Capacity*Connect truly expands hosting capacity and creates more room for distributed energy resources, that would be a meaningful win for Minnesota. But that outcome should be measured and verified. The state’s approval does not appear to turn that concept into a binding requirement that Xcel must open new capacity for third-party projects.

In other words, the key question is not just how many batteries Xcel installs. It is whether those batteries help expand the distributed energy market or simply allow the utility to occupy the most valuable grid locations itself.

Why This Matters Beyond Xcel

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

A utility-led model may deploy batteries quickly, but it can also limit private investment, reduce competition, and narrow the business models available to customers and developers. A more competitive model would allow utilities, developers, customers, and aggregators to participate in building the distributed storage market, each bringing different strengths.

That distinction matters. Minnesota should not have to choose between utility-led grid modernization and a competitive distributed energy market. The state can and 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 building a broader market structure through competitive procurements, storage incentives, and opportunities for private developers to finance, build, and own projects.

That difference is significant. Minnesota’s Capacity*Connect program 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 ultimately 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 illustrative figure, not a forecast, but it shows the size of the opportunity 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, resilient grid. If the program 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 evaluated with a healthy degree of skepticism. The state should ask whether Capacity*Connect actually unlocks new distributed energy capacity, whether interconnection rules are applied fairly, whether ratepayers are receiving good value, and whether independent developers have a meaningful opportunity to compete.

Battery storage will be central to Minnesota’s clean energy future. The question is whether that future will be built through an open, competitive market or primarily through utility-owned assets. For Minnesota to fully realize the benefits of distributed energy, it should make room for both utility innovation and robust third-party participation.