Minnesota's first NGIA plans bring new electrification and efficiency opportunities
With the approval of Xcel Energy’s first Natural Gas Innovation Act (NGIA) plan, Minnesota took a significant step to a decarbonized future. The plan was discussed and modified throughout two days of hearings at the Public Utilities Commission, during which various stakeholders including CEE commented. Now, two of Minnesota’s major gas utilities, Xcel Energy and CenterPoint Energy, have finalized portfolios of pilots that will test innovative technologies and measures for decarbonizing their systems.
CO2 emissions from the consumption of natural gas in Minnesota increased by 32.6 percent between 2005 and 2022, according to a CEE analysis, and the fuel is deeply enmeshed in our residential, commercial, and industrial operations. By giving gas utilities the opportunity to invest in alternatives to natural gas, the NGIA planning process facilitates the transition to a cleaner energy system and Minnesota’s goal of net-zero emissions by 2050.
Alongside pilots exploring renewable natural gas (RNG), green hydrogen, and biochar, Xcel Energy’s plan includes key electrification and energy efficiency measures that will help decrease demand for natural gas. The innovative nature of NGIA allows gas utilities to test electrification and efficiency measures that are not yet ready for widespread deployment through Minnesota’s Energy Conservation and Optimization (ECO) programming. The following projects were included in Xcel Energy’s final NGIA plan.
- Prairie Island Weatherization and Electrification Pilot – This $1.97 million pilot project will support the Prairie Island Indian Community as it weatherizes and electrifies Tribal housing. With a focus on manufactured homes and a goal of serving roughly 72 homes, the pilot will have an immediate impact on the Tribal community while reducing energy demand and emissions. The pilot ties into Prairie Island Indian Community’s broader plans to achieve net-zero carbon emissions.
- Continuous Exterior Insulation (CEI) R&D Project – Drawing inspiration from CEE’s comments, Xcel Energy added a $1 million research project studying CEI, an advanced form of weatherization, to its proposed plan. Although not widely implemented due to a lack of awareness and high upfront costs, CEI is a powerful tool in the efficiency toolbox and can provide an additional 18 to 32 percent in heating load reductions beyond traditional weatherization. Xcel Energy’s project will train a cohort of residential contractors on how to install CEI and fund the cost of several installations. Despite the already robust efficiency programming in Minnesota offered through ECO programming, it is vital to continue exploring advanced weatherization techniques such as CEI.
- Low- and Moderate-Income Deep Energy Retrofit Pilot – After the Clean Energy Organizations, supported by CEE, called for additional efficiency and electrification pilots, the Commission approved a budget of up to $4.6 million for a Deep Energy Retrofit pilot focused on low- and moderate-income households in Xcel Energy’s service territory. While the details of the pilot are yet to be determined, one option could be weatherizing and electrifying hydronic heated homes (i.e., homes heated with a boiler and hot water), which are prevalent in key communities served by Xcel Energy but difficult to electrify.
- Commercial ASHP and Thermal Storage – The Commission allocated an additional $2 million for a Commercial ASHP and Thermal Storage pilot, which would replace commercial boilers and evaluate the extent to which heat pumps with thermal storage can address barriers to commercial electrification. NGIA provides an opportunity to explore thermal storage as it continues to be a costly investment and is not yet ready for deployment through ECO.
Other highlights of Xcel Energy’s plan include a Custom Projects for Large Customers pilot, which will provide analytical support for commercial customers seeking to strategically electrify, and a Community Ground Source Heat Pump (GSHP) pilot, which will fully electrify the space heating and cooling needs of a neighborhood using networked geothermal technology. The site selection process for the GSHP pilot will prioritize low-income and environmental justice communities.
CEE also applauds important electrification and efficiency pilots included in CenterPoint Energy’s NGIA plan, which preceded Xcel Energy’s plan and was approved by the Commission in July 2024.
- Deep Energy Retrofits with ASHPs – Deep energy retrofits are any combination of measures that can reduce a building’s design load to ten or fewer BTUs per hour per square foot under normal operating conditions. CenterPoint’s $13.6 million pilot will test the feasibility of reaching this design load goal across building types to better understand the possible applications of deep energy retrofits in Minnesota. The pilot aims to ensure that 40 percent of residential units included in the program are low-income or located in disadvantaged communities.
- Industrial Electrification Incentives – With a budget of roughly $500,000, CenterPoint’s Industrial Electrification pilot will support the installation of industrial heat pumps at three facilities. By tracking performance, CenterPoint will study whether heat pumps are a viable option for electrifying low to medium heat processes in the industrial sector.
- Commercial Hybrid Heating – This $7.1 million pilot will replace existing commercial HVAC units with systems using electric heat pumps and gas backups, with a focus on dual fuel rooftop units. CenterPoint will provide incentives equal to 40 percent of the system costs, up to $100,000.
Over the next five years, Xcel Energy and CenterPoint Energy will implement, monitor, and learn from their pilot portfolios. If efficiency and electrification measures included in NGIA pilots perform well, they could be incorporated into future ECO plans and made more widely available.
We need a diverse mix of solutions to decarbonize Minnesota’s natural gas sector. The NGIA process provides an essential stepping stone for nascent efficiency and electrification technologies that could play a vital role in this transition. Minnesota will also see the first rounds of gas Integrated Resource Plans (IRPs) in the coming years, a new process in the state that will complement the NGIA process and allow for more comprehensive planning for the gas system moving forward.