2023 Xcel Energy Compressed Air Incentives

Jan 11, 2022 by Derrick Taylor


Minnesota manufacturers can save thousands of dollars in energy bills by improving the efficiency of their compressed air systems. Thanks to energy incentive programs from Xcel Energy, optimizing your compressed air system may cost little or nothing. 


Xcel Energy offers several energy incentive and rebate programs for manufacturing customers in Minnesota. These programs pay for compressed air efficiency studies and provide rebates for Variable Speed Drive (VSD) compressors and other energy-saving upgrades to your compressed air system. 

Xcel Energy Incentive Programs for Compressed Air in Minnesota 

Xcel Energy, like many energy suppliers, provides incentives to help large energy users reduce their consumption. Why would your energy company want you to use less energy? For a couple of reasons. First, energy companies get incentives from the government to reduce their carbon footprint, which means reducing the amount of energy their customers consume. Second, energy companies want to reduce the overall load on the power grid. By helping their customers be more energy efficient, energy companies can forestall expensive infrastructure upgrades, reduce the risk of outages and better regulate supply and demand. 


Manufacturers and other large energy users provide the greatest opportunity for energy companies like Xcel to reduce the overall load on the power grid and avoid big swings in energy demand. For many manufacturers, the compressed air system represents a large share of their overall energy consumption. Inefficiencies in compressed air systems can add thousands of dollars to the average manufacturer’s energy bill and add to the strain on the power grid. 


That’s why Xcel Energy and other power companies target incentives and rebate programs specifically to compressed air users. For Xcel, these programs include: 

  • Compressed Air Studies 
  • Prescriptive Rebate Programs (including VSD upgrades)
  • Custom Efficiency Projects 


If you are an Xcel Energy customer, you have already paid for the energy incentive program as part of your electricity bill. You’ll find the program under the “Taxes and Fees” section of your energy bill. And since you’ve already paid for it, you might as well use it! 

Compressed Air Studies from Xcel Energy

The first step to improving the efficiency of your compressed air system is a compressed air study. Xcel provides funding for compressed air studies every five years for customers with compressed air systems of 10 HP or greater. 

Supply-Side Compressed Air Studies and Leak Detection 

Supply-side studies from Xcel Energy include: 

  • Leak detection studies
  • An efficiency study examining major system components and recommending efficiency improvements

With pre-approval, Xcel will cover 100% of the costs of a compressed air leak detection study (up to the limits below) when you repair 75% of the leaks identified in the study

The funding limits for supply-side studies are: 

  • 500 HP or more: $4,000 plus $20/HP up to $25,000
  •  200 HP-499 HP: $3,000 plus $20/HP
  • 50 HP-199 HP: $2,000 plus $20/HP
  • 10HP-49 HP: $250 plus $20/HP


For a leak detection study, the technician will use ultrasonic leak detection to find pinhole leaks that are too small to detect with human senses. Most manufacturers have multiple leaks throughout their compressed air system, which can add hundreds or thousands of dollars to their annual energy bill. 

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Supply-side studies may also include data logging and flow metering to measure compressor performance and efficiency. 


Aire Tip: Leaks in your compressed air system can add 30% or more to your compressed air energy bill. Read more about the cost of leaks in your compressed air system. 

Demand-Side Compressed Air Studies 

Xcel Energy will also cover up to 75% of the costs of a demand-side compressed air study, which looks at how compressed air is being used. In addition, manufacturers can earn bonus rebates of $0.03/kWh saved when they put the recommendations in place. Combining direct study funding and bonus rebates may cover 100% of the costs of the study. 

A demand-side study will look at all compressed air uses to determine optimal pressure and CFM requirements and look for opportunities to reduce air waste, minimize pressure drop across the system, and increase system efficiency. Demand-side studies may use data logging and flow metering to measure important indicators of compressed air demand. Data logging provides important information such as the average duty cycle, time spent loaded and unloaded, peak usage times and the variability in energy use over a shift, day or week. This information can be used to identify opportunities for energy savings, which could include lowering overall plant pressure, installing a smaller backup system for periods of low demand, or upgrading to a VSD air compressor. A demand-side study will also look for opportunities to reduce overall air usage. 

Compressed Air Rebate Programs from Xcel Energy 

In addition to compressed air studies, Xcel Energy offers rebate programs to offset the cost of upgrading compressed air equipment. These programs fall into two main categories: 

  • Prescriptive Rebate Programs: These programs offer a defined rebate for purchase of energy-saving upgrades for your compressed air systems, including VSD air compressors, zero-loss condensate drains, and more. 
  • Custom Efficiency Projects: This program provides rebates for other types of improvements based on the kilowatts (kW) of energy saved. 

Prescriptive Rebate Programs

Prescriptive rebates from Xcel Energy can help companies offset the cost of energy-saving improvements to their compressed air systems. In some cases, these rebates may cover the majority of the cost. When you fill out your paperwork, you can designate your compressed air vendor as the recipient of the rebate. Then, your vendor will bill you for only the cost of the equipment above and beyond what the rebate program covers. Prescriptive rebates can only be used to purchase new equipment. 


For 2023, Xcel Energy offers several prescriptive incentive programs for compressed air. 

New VSD Compressors (with factory-integrated VSD)


Zero-Loss Drains


Mist Eliminators


Cycling or VSD Refrigerated Dryers (75-2799 SCFM)


Dryer Purge Demand Controls for Heatless Desiccant Dryers (90-2499 SCFM)

$1,500/control set plus $1/CFM

Custom Efficiency Projects

Xcel Energy also provides rebates for custom efficiency projects outside the scope of the prescriptive rebate program. These projects are approved on a case-by-case basis based on the amount of energy saved. 


To get the most out of the program, it is important to start with a study. Rebates are calculated based on a combination of average kW saved and peak kW saved. 

  • With study: $500/system peak demand kilowatt (kW) of electricity saved, plus $200/non-peak demand kilowatt in excess of system peak demand kilowatts saved
  • Without study: $100/system peak demand kilowatt (kW) of electricity saved, plus $50/non-peak demand kilowatt in excess of system peak demand kilowatts saved


The best place to start is a compressed air study, which may include data logging and other methods, to identify the equipment that provides the greatest opportunity for energy savings. To qualify for custom rebates, manufacturers must complete the Xcel Energy Custom Efficiency Workbook and clearly document the proposed equipment or technology specifications for the project. You will work with your compressed air vendor during this process. The vendor must submit documentation to verify the energy savings. Once the project is approved and completed, the rebate will be paid in about 6 weeks directly to you or to an alternate rebate recipient. As with the compressed air studies, you can designate your compressed air vendor as the alternate rebate recipient, so you are only billed for the amount of the project that goes over and above what the rebate covers. 

Getting Started with Xcel Energy Incentives for Compressed Air Systems

Fluid-Aire makes it easy to qualify for incentive and rebate programs from Xcel. We are an authorized service provider for compressed air system energy incentives through Xcel Energy. We’ll even fill out the paperwork for you and provide all the required documentation. We can:

  • Conduct compressed air studies through the Xcel Energy program
  • Identify your greatest opportunities for energy savings and rebates
  • Fix leaks or install qualifying equipment and upgrades


Contact us to learn how we can help you improve the energy efficiency of your compressed air system. The sooner you get started, the sooner you can start saving money on your energy bill! 



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Get in Touch Today

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We are here to serve your compressed air system needs 24/7/365. Call or click today!

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