Xcel Energy: Driving towards net zero with the power of digital

Xcel Energy started by developing a path forward and aspirational vision and, then worked backward to define a set of technology investments. McKinsey brought technical expertise and deep experience with the nuclear power sector to help guide the transformation. The work centered on three clear goals: cost savings through AI and automation; operational excellence and safety; and more efficient regulatory compliance through transparency, accelerating to meet its baseload energy needs with zero carbon electricity.

“What really got us excited were the benefits around operational excellence and safety. Being able to speed up decision-making for the plants, automate workflows, deploy digital tools at endpoints, and gather the right information really brought us a ton in terms of operational excellence and safety.”
– Tim Peterson, Chief Technology Officer, Xcel Energy

Instead of starting small, Xcel Energy took a bold approach by beginning with one of its most complex and highly regulated domains, nuclear power. The utility initiated its transformation with a foundational safety process, the Nuclear Corrective Action program, and discovered potential run rate improvements amounting to $15 million, which could be reinvested to accelerate carbon neutrality.

Xcel Energy also undertook a radical shift in its technology architecture by shifting from a system of “black boxes” that were built for specific tasks but hard to navigate and even harder to change, to a platform-centric approach, with small, reusable capabilities. During the first year, it successfully established a secure cloud platform on AWS GovCloud with the support of Cloud by McKinsey engineers and architects. This new platform not only integrated pipelines with the existing system but also incorporated a data lake, which would serve as a valuable resource for future digital tools and processes embedded with AI.

“Our approach is centered around prioritizing the operator as our customer. We aim to develop systems and apply AI logic that aligns with their actual workflows, rather than imposing our assumptions. This effective partnership between business systems and operators is the ultimate goal we strive for. The key is to ensure that the implementation is driven by the end-users themselves, leading to optimal outcomes.”
- Tim O’Connor, Chief Operations Officer, Xcel Energy

To support the user-centric way of doing business, McKinsey helped Xcel Energy set up a Digital Operations Factory to deliver user-empowering tools and analytics quickly, harness cross-functional talent, and work in agile ways to solve the most pressing needs. Notably, multiple workflow automation, custom mobile applications, and advanced analytics solutions were developed to streamline intensive processes. This enabled Xcel Energy to progress on its goals for an advanced grid for clean energy and tools to support smart decisions for the use of renewable energy.

The transformation necessitated a combination of reskilling, hiring, and partnering to form a cross-functional team of over 200 people in under two years.  To ensure consistent standards and focus on impact, Xcel Energy built a chapter-based model. This model brought together communities of practice centered around product management, experience design, software, and data science.

Xcel Energy’s strategic approach of tackling the most challenging problems first and fostering innovation is proving successful. Within 9 months of launching the new cloud platform, the company expanded it to 3 additional business units. Xcel Energy continues to scale the platform to keep their plants cost competitive, advancing towards a zero-carbon baseload. As the years go by, Xcel Energy anticipates gaining widespread recognition as a pioneer in the utility industry, setting an example of how digital is a key ingredient in enabling the Energy Transition.