Power industry veteran taking the reins at Xcel talks infrastructure bill, climate change

Bob Frenzel's introduction to the power industry came aboard the U.S. aircraft carrier Dwight D. Eisenhower. A lieutenant in the Navy, he helped run the two nuclear reactors that powered the ship.

Starting Wednesday, he'll be at the helm of Xcel Energy's large fleet of power generators, from nuclear to wind, gas, coal and solar.

Frenzel takes the reins from Ben Fowke, who will retire as CEO but remain Minneapolis-based Xcel's executive chairman. Fowke's 10-year tenure was marked by aggressively moving into wind energy and setting a target of generating 100% clean energy by 2050 — including closing Xcel's Minnesota coal plants by 2030.

Frenzel, 51, has been working within the power industry for much of his career. The Atlanta native went to Georgia Tech on an ROTC scholarship, attending the Navy's nuclear power school. He served for nearly six years on active duty, and another eight years in the Navy Reserve.

After the Navy, Frenzel worked in consulting for a couple of years with Arthur Andersen before getting an MBA from the University of Chicago. Next came almost nine years as an investment banker at Goldman Sachs, advising clients in the energy sector, including Xcel.

Frenzel then worked at Texas-based utility company Energy Future Holdings before becoming chief financial officer of one its subsidiaries, Luminant. Xcel recruited him as its CFO in 2016 and promoted him to chief operating officer in March 2020.

The Star Tribune spoke to him recently about Xcel and the utility industry. The interview is edited for clarity and length.

Q: What is your strategy for Xcel — your vision?

A: I have been here for five years. I have been a partner with Ben in setting strategy for that entire time and it won't surprise you that we are completely aligned on the company's strategy. We are going to lead the clean-energy transition. We have been doing it for 15 years, and we are going to continue that trend and continue to keep our customers' bills low. Let's call this an evolution, not a transformation of the company.

Q: What are the most important aspects of the Biden infrastructure bill for Xcel and the utility industry?

A: We are going to transition our company to 80% carbon-free power by the end of the decade with existing technology. Everything in Washington, D.C., just enhances that. Extensions of production tax credits and investment tax credits for wind and solar will make our decarbonization plan less expensive. Any tailwinds that the federal government can give on transmission — there are cost breaks they are working on — will help. Building transmission lines will enable renewable power to get to where the people are. There is this challenge of bringing more renewables online because the transmission grid of today is struggling to handle the volume. One of the best things that is in the legislation as drafted is there is a lot of research and development dollars for the next generation of power generation — a tripling of the Department of Energy's R & D budget. We have been stalwart about saying it will take new technology to reach our goal of 100% clean energy by 2050.

Q: For Xcel and the utilities industry, what are the biggest threats of climate change, particularly regarding extreme weather?

A: Climate change affects everything we do. Think about our product: Maybe the most important aspect is reliability — that the lights and the heat come on when our customers need it and want it. We look at weather patterns, the increase in storms. Drought is a real consideration. We have an incredible drought out West right now, and we serve parts of Colorado, Texas and New Mexico. And then are tornadoes. So, undergrounding our transmission and distribution lines — when possible — and increasingly hardening our grid is really important.

Q: Another threat to the energy industry is cyberattacks. The Colonial Pipeline hack earlier this year shut down the largest U.S. gasoline pipeline, and its operator payed a nearly $5 million ransom. The nonprofit North American Electric Reliability Corp. put out a report earlier this year that 25% of U.S. utilities had their systems breached by the massive Solar Winds hack. What is Xcel doing to prevent any attacks?

A: Security in general is in the DNA of the company, but it started a long time ago. We were protecting our physical assets from violence. We put fences around them. We have something similar in the cybersecurity. We put perimeters around our IT and operational technology environments. And we practice and drill like heck to make sure we know that if we have vulnerabilities, we find them first and we fix them. We actually have people try to break into our systems so we can learn where those vulnerabilities are. We have invested heavily both in people and in systems, and that will continue.

Q: Electricity is a low-growth industry. Xcel has estimated that electric vehicles will make up 20% of vehicles in its service territories by 2030. How big of a boost would that give Xcel?

A: If we reach that 20% goal, that would lead to about a 0.6% annual growth rate on sales — over a decade that is probably an 8 to 9% increase. It's good sales, but very modest.

Q: Will Xcel set up electric charging stations or have some sort of role in the broader charging network?

A: We can play any manner of different roles. I think the most important is "grid make ready." If you are a public charging station owner, we have to build infrastructure to that location — just like you need to build an oil tank for a gas station. Also, we already have programs to enhance and enable EV charging at home, where most EV charging is done.

Q: The electric industry's low sales growth is primarily due to increasing energy conservation. That trend will continue, right?

A: Yes. We are probably the largest provider of energy-efficiency services in the state. We have customer growth of about 1%, but we have energy-efficiency growth at about 1%. And sometimes sales take a hit from the loss of a very large customer, like St. Paul's Ford plant and Gerdau steel mill. But then we get some bigger commercial additions like the Amazon warehouse in Fargo and the Google data center in Becker.

Q: Speaking of the $600 million Google project, which would be built on Xcel land in Becker. Will it actually be built?

A: I expect it to happen. Our forecast is for them to take their first traunch of power by 2023. When they build their data centers, they build them out in chunks. Power demand will step up over time. Could it be delayed? Sure. Could it be scaled back? Possibly. But we have worked with them for many years before we got to this point, so it's hard to see them put that much effort into something and then walk away from it.