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Utility operator Xcel Energy Inc. (XEL - Analyst Report) filed a request with Minnesota state regulators for adding 150 megawatts (MW) of solar energy to its generation portfolio by the end of 2016. By capitalizing on the benefits of large-scale operations, management plans to keep the costs low for its customers.

Adding renewable power will allow Xcel Energy to meet the Renewable Portfolio Standard of Minnesota. The state requires Xcel Energy to source 31.5% of total generation from renewable sources by 2020.

Of the total renewables mandate, 24% of energy should be generated through wind, 1.5% to come from solar energy, another 1% optional from wind or solar and the remaining 5% to be met by other eligible renewable sources. Xcel Energy will require 300 MW of solar energy to meet the renewable energy standards.

Xcel Energy’s 150 MW solar projects will have an installation deadline of Dec 31, 2016. This will allow the company to benefit from the solar Investment Tax Credit (ITC) effective until December 31, 2016. This policy encourages investors in solar construction with multi-year tax incentives and reduces tax liability for individuals as well as corporates purchasing qualified solar technologies.

The company plans to fund a portion of this expansion by issuance of new public offerings and the rest through Xcel’s Renewable Development Fund. Along with this expansion, Xcel Energy has plans for additional large-scale solar acquisition by 2017 – 2018 for fulfilling Minnesota’s renewable standards for solar energy.

Zacks Rank

Xcel Energy currently holds a Zacks Rank #2 (Buy). Other utility stocks with a favorable Zacks Rank include Otter Tail Corp. (OTTR - Snapshot Report), Public Service Enterprise Group Inc. (PEG - Analyst Report) and American Electric Power Co., Inc. (AEP - Analyst Report). While Otter Tail and Public Service Enterprise sport a Zacks Rank #1 (Strong Buy), American Electric Power has a Zacks Rank #2 (Buy).

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