2024 Compressed Air Energy Incentives from Xcel Energy for Minnesota Manufacturers

Jan 19, 2024 by Derrick Taylor

Table of contents

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 less than you think. 

Compressed air energy incentive programs from Xcel Energy provide incentives for Variable Speed Drive (VSD) compressors, high-efficiency dryers, zero-loss drains and other energy-saving upgrades to your compressed air system. They also pay for compressed air efficiency studies and leak detection and repair. 

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 energy incentive programs specifically to compressed air users.

For Xcel, these programs include: 

  • Prescriptive and Custom Incentive Programs (including VSD upgrades);
  • Compressed Air Studies. 

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 Incentive Programs from Xcel Energy 

In addition to compressed air studies, Xcel Energy offers incentive programs to offset the cost of upgrading compressed air equipment.

These programs fall into two main categories: 

  • Prescriptive incentive programs: These programs offer a defined incentive for purchase of energy-saving upgrades for your compressed air systems, including VSD air compressors and dryers, zero-loss condensate drains, and more; 
  • Custom efficiency projects: This program provides incentives for other types of improvements based on the kilowatts (kW) of energy saved. 

Prescriptive Incentive Programs

Prescriptive incentives from Xcel Energy can help companies offset the cost of energy-saving improvements to their compressed air systems. In some cases, these incentives may cover the majority of the cost. When the paperwork is filled out, you can designate your compressed air vendor as the recipient of the incentive. Then, you are billed only the costs above and beyond what the incentive program covers. Prescriptive incentives can only be used to purchase new equipment.

For 2024, Xcel Energy offers several prescriptive incentive programs for compressed air.

New VSD Compressors (with Factory-Integrated VSD) $150/HP
Zero-Loss Drains $200/drain
Mist Eliminators $2.00/CFM
Cycling or VSD Refrigerated Dryers (75-2799 SCFM) $3/CFM
Dryer Purge Demand Controls for Heatless Desiccant Dryers (90-2499 SCFM) $1,500 plus $1/CFM
Heated Desiccant & Heated Blower Purge Desiccant Dryers w/ Demand Controls (90-2499 SCFM) $1,500 plus $4/CFM
Pressure/Flow Controller $10/Operating system HP
Compressed Air Storage Tank $1/Gallon added


Custom Efficiency Projects

Xcel Energy also provides incentives for custom efficiency projects outside the scope of the prescriptive incentive 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. Incentives 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 incentives, 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 incentive will be paid in about 6 weeks directly to you.

Compressed Air Studies from Xcel Energy

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 based on the horsepower of your system) when at least 75% of leaks are repaired. 

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. 

Supply-side studies may also include data logging and flow metering to measure compressor performance and efficiency. Supply-side studies may be used to identify opportunities for prescriptive or custom energy incentives.

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. Manufacturers can also earn additional bonus incentives, up to $100% of study costs, when they implement projects identified by the study. Demand-side studies are another great way to identify opportunities for energy savings that may qualify for prescriptive or custom incentives from Xcel Energy.  

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. 

Getting Started with Xcel Energy Incentives for Compressed Air Systems

Fluid-Aire makes it easy to qualify for incentive and incentive 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 incentives;
  • 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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