Minnesota PUC Approves New Rate Structure, Size Cap for Solar Gardens

by | Jul 26, 2016

Minnesota utilities regulators on July 21 retained (Docket No. MN:13-867) a 1-megawattt (MW) size cap on community solar gardens, rather than moving up to 5 MW of output, as developers had requested.

In addition, the Minnesota Public Utilities Commission (PUC) voted 5-0 to impose a value-of-solar (VOS) rate for solar garden applications filed after year-end 2016, the local Star Tribune newspaper reported.

The VOS rate would take into account nontraditional factors such as the production of clean energy instead of fossil fuels – providing lower compensation to developers. To date, according to the solar advocacy organization, Fresh Energy, the only other utility in the country to implement a value of solar methodology is a municipal utility, Austin Energy

Indeed, Fresh Energy states, “The decision to adopt a customer bill credit at the value of solar rate is the right direction for community solar in Minnesota. The value of solar bill credit as adopted will be a transparent rate for subscribers that is based on a set 25-year bill credit schedule – creating clarity and reducing risk for subscribers….Because the community solar compensation rate is set at the value of the solar installations, its adoption should put to rest concerns about cost fairness between community solar subscribers and other utility customers.

Sizing the solar gardens

After the state’s solar garden program was launched in December 2014, Xcel Energy — the program’s de facto administrator — was inundated with applications from developers, as there was no output limit per garden, the news outlet stated.

In response, in 2015, the PUC ruled that solar garden projects already in the application process with Xcel would be limited to 5 megawatts of output. However, applicants entering the system after September and going forward would be allowed only 1 megawatt, or 1 million watts.

Developers argued that 1-megawatt gardens lack economies of scale, making them too small to secure financing.

However, at the PUC hearings this week in St. Paul, Xcel said it expects 200 megawatts of solar garden power to be online by the end of this year. And by December 2017, the utility predicted that capacity would increase between 400 MW and 450 MW — the equivalent of a good-size natural gas power plant.

Precedent-setting pricing

Xcel buys electricity produced by solar gardens. The company claims solar garden rates are higher in Minnesota than in many other states, and that Xcel is effectively subsidizing solar gardens, to the detriment of non-solar consumers. Those arguments were to no avail last week, as the VOS pricing passed easily.

“This is really precedent setting,” Allen Gleckner, director of Energy Markets at Fresh Energy, a solar advocacy group, told the Star Tribune. “To our knowledge, it is the first time a value of solar rate has been implemented for a large utility.”

But there is a catch for solar developers. At least at the onset, the VOS rate will be lower than Xcel’s current average retail for residential solar.

“They cut the rate and limited us to 1 megawatt,” Julie Jorgensen CEO of GreenMark Solar told the news outlet. “It’s a double whammy

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