To Our Stakeholders:
For decades, the fundamental role of energy providers was simple: keep the lights on. But as energy has become more central to people’s lives, expectations are far greater. Today our customers and communities depend on us to do much more — especially when it comes to leading the transition to clean energy and confronting the risk of climate change.
At the end of 2018, we became the first energy provider in the country to announce plans to serve customers with 100% carbon-free electricity by 2050. The theme of this report — Destination 2050: Building the Future — describes our bold vision for a carbon-free future while delivering the reliability and affordability that our customers need and expect.
Clean energy matters to our stakeholders. It matters to us too. We’ve been at the forefront of the clean energy transition for the last 15 years. Since 2005, we’ve reduced carbon emissions from the electricity that serves our customers by 38%, and the confluence of changing customer preferences, declining prices of clean technologies and the latest climate reports have accelerated our plans.
On our way to Destination 2050, we established a new interim goal to reduce carbon emissions produced from electricity serving our customers by 80% in 2030. We believe we can reach this 2030 target by using existing technologies. Removing the last 20% of carbon from the grid will require advances in technology to develop carbon-free, always-on energy sources. But I’m optimistic and believe we can get there.
To reduce carbon as quickly as possible without impacting reliability and affordability, we expect to continue our Steel for Fuel strategy of building large-scale renewables that deliver both economic and environmental benefits. We currently have a dozen wind farms under development with more on the drawing board. We also expect to expand our use of large-scale solar farms that provide the best consumer value. By 2030, we project renewable sources will generate at least 60% of our electricity. In addition to these renewables that serve all customers, we support customers who want more now by providing options to subscribe for up to 100% renewable energy through unique programs like Renewable*Connect in Colorado, Minnesota and Wisconsin.
Meanwhile, we have plans to retire four coal units in the early to mid-2020s — two in Minnesota and two in Colorado. Altogether, we are retiring half of our coal-fueled generation by 2026 — and are evaluating the feasibility of additional early retirements. As our energy mix changes with more renewables and less coal, we will continue to use more carbon-friendly natural gas as a bridge that supplies the back-up capacity to help integrate more renewables. We also plan to operate our carbon-free nuclear plants through their licensing periods in the early 2030s.
The easiest way to reduce carbon is to never produce it in the first place. We offer more than 150 energy efficiency programs to help our customers reduce their bills. In fact, five of those programs recently were acknowledged among the best in the country by the American Council for an Energy-Efficient Economy.
Companies like Xcel Energy are uniquely positioned to leverage our carbon-reducing expertise to other sectors of the economy. We’re focusing our initial efforts on transportation, as we have several pilot projects under way to help make it easier for customers to purchase electric vehicles and produce 70% less carbon than gas-powered vehicles — and the results will get even better as we continue to transition away from fossil fuels. We have announced a $25 million investment in Minnesota to develop infrastructure needed to improve home charging and public charging capabilities and plan to expand these efforts soon to other states.
Just as EVs are beginning to gain traction, coal units are heading in the opposite direction. However, decisions to shut down a coal plant have significant ramifications to the employees who work there, along with the communities that benefit from the tax base.
Announcing plans years in advance is crucial to give these important stakeholders enough time to prepare for the change and provide economic development assistance where possible. A great example comes from Becker, Minnesota, where we announced the closure of two units at the Sherco Generating Plant. We have worked behind the scenes to provide economic development assistance to the local community through the construction of a natural gas-powered plant onsite, which will make up for lost generation, and to attract businesses. This includes Northern Metals Recycling, which is relocating from Minneapolis to Becker, and a large Google data center, pending approval.
As a local business, we’re mindful of local spending that helps drive local economies. Last year nearly 70% of our purchasing was with businesses located in our service territory and 12% of our purchasing was with businesses owned by women, minorities or veterans. In addition, some of the projects we invest in, such as transmission lines and wind farms, create hundreds of local construction jobs and significant tax base.
Of course, we are also building the future by working with communities to help them reach their clean energy goals. We have partnered with several communities through our Energy Future Collaborations and Partners in Energy programs to help them reach their clean energy and sustainability goals.
This is in addition to providing reliable and affordable energy that our customers expect. These, along with a strong commitment to public safety, are table stakes in our industry. Last year, we delivered electric reliability that remains in the industry’s top one-third, kept bills under the level of inflation and delivered our best-ever performance in gas emergency response. Another way we positively impact our communities is through our dollars and time. In 2018, the Xcel Energy Foundation and our employees donated more than $11 million and volunteered 90,000 hours with a focus on STEM education, economic sustainability, environmental stewardship and access to arts and culture.
To best serve our customers and solve tomorrow’s energy challenges, we continue to build and train our workforce for the future. We are one team comprised of 11,000 employees. We recently refreshed our corporate values to better align with how we approach our jobs each day. Through a bottom-up approach, employees embraced our four values — Safe, Committed, Connected and Trustworthy — and demonstrate them each day when they come into work.
Through our performance management, professional development and recognition programs, we align employee responsibilities with our three strategic priorities: Leading the Clean Energy Transition, Enhancing the Customer Experience and Keeping Bills Low.
Employee safety is a core value for our organization and is at the forefront of everything we do. Although we achieved first-quartile employee safety in 2018, we had a few significant injuries. As a result, we re-doubled our safety precautions and expanded our communications efforts.
We are committed to hiring and retaining a diverse workforce. Thirty-four percent of our new hires were female, which is just slightly below first-quartile performance. Our hiring of people of color slightly increased to 24%, but remains short of our goals. We began developing customized diversity plans in five business areas, and we expect to build on that program in 2019. We also set a record with 66 high school interns and were named Employer of the Year by St. Paul-based Right Track, a youth training program.
Powering homes and businesses, driving economic development, supporting our communities and protecting the environment are fundamental to how we do business. We embrace the trust our customers place in us and our responsibility to deliver solutions to improve their lives. As you read our Corporate Responsibility Report, you will learn more about our progress and plans for building the future and fulfilling our economic, environmental and community responsibilities.
Thanks for your partnership on this important journey.
Chairman, President and CEO
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