Xcel Energy CEO speaks on energy security

Bob Frenzel runs Xcel Energy, headquartered here in Minneapolis. Xcel is one of the country's largest energy providers, distributing electricity to 6.1 million electric and natural gas customers across eight states.

MPR’s senior economic contributor Chris Farrell spoke with Frenzel at a Tuesday luncheon event sponsored by the University of Minnesota's Carlson School of Management.

The biggest standout from the conversation was the sheer scale of investment going into data centers — the specialized facilities powering the rise of artificial intelligence. We're talking $600 billion in investment this year alone. Frenzel put that in perspective.

“That's real, physical factories — concrete, steel, wires, cables,” Frenzel said. “Last year, the entire electric utility industry spent $200 billion on transmission and distribution infrastructure. So just consider the size and scale of the investment getting made.”

Frenzel said if it's done right, your electric bill should actually come down. He pointed to the Google data center recently announced in Pine Island. Google will ultimately want 1,000 megawatts of capacity — that's 11 percent of the entire Upper Midwest load. However, the company will pay for the new generation themselves.

“These companies are hooking up to a transmission grid that already exists,” he said. “We don't need to build a new grid for them — so the price of transmission for everybody should come down. I do have to build new power plants, in this case four of them, to deliver the 1,900 megawatts of renewable energy they've committed to. But they're paying for all of that new generation themselves.”

Frenzel also said that Xcel is on track with its sustainability commitments, actually running ahead in the Upper Midwest. The company committed to being 80 percent carbon-reduced by 2030 and they are about two-thirds of the way toward that goal.

“We currently have about 10 gigawatts of wind, solar and storage under construction — roughly $20 billion worth — and another $20 billion approved and in development across our eight states,” Frenzel said.

Being a former nuclear engineer with the U.S. Navy, Frenzel is optimistic about the prospects for nuclear.

“If we're going to have a high energy-intensive business like data centers, we want a high-capacity, carbon-free solution like nuclear,” he said. “We operate almost two gigawatts of nuclear here in the Upper Midwest. Across the U.S., nuclear accounts for about 20 percent of our generation. If we want to be carbon-free and serve these massive loads, nuclear has to play a role.”

And the conflict in Iran has had less of an impact that you might think on Xcel’s business. Almost no global electricity comes from oil. A lot of electricity is made with natural gas, but the U.S. is relatively insulated there. However, there are still spillover effects that will impact Xcel.

“The bigger knock-on effect for us is interest rates,” Frenzel said. “We're going to spend $14 billion this year building infrastructure, and we need to raise debt and equity to do it. In a rising rate environment, that costs more — and over time, that trickles through to customers.”

Before the war, the consensus expectation was that the Federal Reserve would cut its benchmark interest rate. Now, with higher energy prices rippling through the economy, the Fed is likely to stay the course or even raise interest rates.

Click the audio player above to hear the full conversation