From coal exit to gas surge: What Xcel Energy’s 2.1 GW deal with Siemens means for Texas

Xcel Energy Inc. (NASDAQ: XEL) has announced it will purchase natural gas turbines from Siemens Energy AG for two new power plants in West Texas, a decision that underscores how U.S. utilities are racing to secure reliable capacity amid unprecedented demand growth. The deal adds a significant 2,088 megawatts of generation and highlights how natural gas remains a critical anchor in America’s energy transition, despite ongoing expansion in renewables and storage technologies.

This turbine order represents a key piece of Xcel Energy’s long-term strategy to replace coal assets with cleaner, dispatchable generation while meeting peak loads in Texas and New Mexico. Siemens Energy, which has seen its turbine order backlog climb to record levels this year, will supply ten of its F-class SGT6-5000F turbines alongside accompanying generators.

How much capacity will Xcel Energy’s new Texas power plants add to the grid and why does it matter?

The first project will be built at the site of the retiring Tolk coal plant in Muleshoe, Texas. Xcel Energy plans to install five Siemens SGT6-5000F turbines and five SGen6-1000A generators, collectively delivering 928 megawatts of gas-fired capacity. A second project in Gaines County will use another five turbines and five generators to produce approximately 1,160 megawatts of peaking power. Together, the two plants will contribute 2,088 megawatts—enough to power more than a million homes at peak load.

The technical profile is also important. Siemens’ F-class turbines are designed for fast starts and flexible operation, which is critical in balancing Texas’s volatile grid, where demand can spike dramatically during summer heat waves and winter freezes. These turbines allow Xcel to pivot between baseload operations and peaking needs, creating an adaptable generation mix that is increasingly in demand as renewable penetration grows.

How does the turbine deal fit into Xcel Energy’s broader decarbonization and reliability strategy?

The purchase comes as Xcel Energy accelerates its plan to exit coal in Texas and New Mexico. The company has already converted its Harrington Station to natural gas and committed to retire the Tolk coal plant by 2028. By building at Tolk’s existing site, Xcel can use established infrastructure and transmission connections, cutting down permitting timelines and interconnection challenges that often delay new projects.

These plants are part of a larger $10 billion portfolio expansion announced earlier this year. The utility expects to add 5,168 megawatts of new capacity across its Texas–New Mexico territory by 2030, with about 3,200 megawatts coming from dispatchable gas and storage projects and nearly 2,000 megawatts from wind and solar. For customers, this means a steadier blend of generation sources, with fossil-based reliability acting as a bridge until long-duration storage technologies reach economic maturity.

Why is Siemens Energy seeing record demand for its turbines and what does this say about global supply?

Siemens Energy has reported record order intake across its turbine and grid-equipment businesses, citing “enormous” demand from data centers, electrification projects, and utilities facing tighter reserve margins. Gas turbine manufacturing capacity is stretched, with lead times growing as more utilities lock in equipment. This order for Xcel Energy reflects a wider scramble among U.S. power companies to secure turbines before supply tightens further.

The deal strengthens Siemens Energy’s position as one of the few global manufacturers capable of delivering large-scale turbines at speed. Analysts say the company’s backlog—now over €130 billion—highlights its central role in bridging the gap between decarbonization goals and the practical need for 24/7 electricity. For Siemens Energy, the Xcel order represents both a commercial win and a marquee U.S. project reference as the firm expands its foothold in North America’s grid-modernization cycle.

What does the stock market and institutional sentiment reveal about Xcel Energy and Siemens Energy today?

Xcel Energy’s stock (NASDAQ: XEL) traded around the $80–$81 range on October 1, 2025. The market reaction to the deal was muted, reflecting that investors see the turbine order as a strategic necessity rather than a disruptive surprise. Institutional flows into utility stocks remain steady, with yield-focused funds continuing to support the sector. Analysts describe Xcel as a “hold” for income-oriented investors, with upside hinging on timely execution, cost recovery from regulators, and clarity on rate structures.

In Europe, Siemens Energy’s stock hovered between €101 and €103 on the Frankfurt exchange. The company’s shares have recovered significantly in 2025, buoyed by turbine and grid-equipment demand even as its wind division continues to normalize. Investor sentiment remains cautiously optimistic, with long-only funds treating Siemens Energy as a defensive growth play tied to global electrification and AI-driven load growth. For portfolio positioning, analysts suggest “accumulate on dips” given its order momentum, while cautioning that execution challenges and policy headwinds remain live risks.

Where will the new Xcel Energy plants sit in Texas, and why are the locations strategically significant?

By repurposing the Tolk Station site in Muleshoe, Xcel Energy gains a brownfield advantage, reusing existing infrastructure and reducing local permitting challenges. This allows the utility to move faster than greenfield projects, which often encounter siting and interconnection hurdles. The Gaines County peaker, meanwhile, adds geographical diversity and fast-ramping capability in an agricultural and industrial corridor that has seen sharp seasonal demand surges.

These plants fall within the Southwest Power Pool rather than ERCOT, meaning they operate under different reserve requirements and grid governance structures. For Xcel, this creates an added layer of resilience, as its Texas–New Mexico footprint can rely on firm capacity during both summer and winter, with less exposure to ERCOT’s more volatile pricing and reliability dynamics.

What risks could delay the project and how is Xcel Energy hedging against them?

Supply chain risk remains the primary concern. Several Texas-backed projects have already been canceled or delayed this year due to escalating costs and turbine shortages. By signing with Siemens Energy now, Xcel reduces exposure to turbine delays but must still navigate labor availability, balance-of-plant construction, and commissioning hurdles.

Permitting and regulatory risks also remain. Air-quality permits, water-use approvals, and gas pipeline connections must all clear state and local scrutiny. While natural gas emits less carbon than coal and Siemens turbines can potentially blend with hydrogen in the future, new fossil projects are increasingly subject to environmental opposition. Xcel has positioned its portfolio as a bridge strategy—reducing emissions while protecting reliability—but policy shifts could alter cost recovery dynamics.

How does this deal connect to the surge in AI-driven electricity demand and the future of grid investment?

For the first time in decades, U.S. electricity demand is growing at a sustained pace, with AI data centers driving much of the incremental load. Texas has become a focal point for this growth, as both population and industrial demand swell. Gas-fired generation offers the quickest and most scalable way to add large amounts of dispatchable capacity, and Siemens Energy’s record backlog illustrates how equipment suppliers are now a bottleneck in the grid expansion race.

Xcel Energy’s purchase reflects a broader truth: to keep up with AI, electrification, and climate-driven extremes, utilities need to secure steel in the ground now. By locking in turbine supply and accelerating coal retirements, Xcel positions itself to deliver on reliability promises while continuing its gradual shift toward a cleaner mix. Siemens Energy, in turn, gains validation of its role as a critical supplier during this pivotal decade for the grid.

For investors and policymakers, the lesson is straightforward. The future of the U.S. grid will be shaped as much by timely procurement and execution as by technology breakthroughs. Xcel Energy’s Texas gas plants may not make headlines like wind or solar, but they could prove to be the silent backbone of the AI era’s electricity demand surge.