Incentive approved for residential customers who choose solar gardens for energy

While Minnesota's solar garden program is growing at a nice clip, renewable-energy advocates fear it will no longer be able to attract residential subscribers.

So, they petitioned utility regulators for an incentive payment to lure more households.

The Minnesota Public Utilities Commission (PUC) on Thursday obliged, voting unanimously to allow the incentive, but not at the level advocates wanted. The commission conceded it would add costs — albeit small — to the solar garden program.

The state attorney general's office, which represents ratepayers at the PUC, had opposed a residential incentive at this time, precisely because it would add costs, which are ultimately borne by Xcel Energy customers who aren't part of the solar garden program.

In the end, developers and solar power advocates were pleased they got something but wondered if it will work.

"My fear is that it's not going to be enough to move the needle in driving the market toward more residential," Ross Abbey, of solar garden developer U.S. Solar, said after the vote. "It's disappointing."

The legislatively mandated solar garden program, launched in 2014, is aimed at distributing solar power in Xcel Energy's service territory to households or businesses that don't want to build solar arrays on their roofs. Instead, they buy subscriptions to the independently developed solar gardens. Xcel administers the program.

After being mired in delays for more than two years, the program took off over the past 18 months, and now there are 134 community solar gardens, with the capacity to produce a total of 445 megawatts of power. That's about the same as one of Xcel's larger natural gas-fired power plants, though solar power can only be generated when the sun is out.

Currently, residents make up about 81 percent of the 9,405 solar garden subscriptions, though they comprise only 10 percent of the gardens' power subscription capacity. The rest goes primarily to commercial subscribers.

Customers receive a credit on their bills for subscribing to the solar gardens. So far, the gardens that have come online — and most of those expected to open during the next year — have been built utilizing what's called an "average retail rate," which is used to set the credits.

But the average retail rate was only meant to be temporary. It has since been replaced by a "value of solar," or VOS rate, which takes into account such benefits as electricity generation that's free of greenhouse gas and other toxic emissions.

Minnesota was the first state to adopt a VOS rate, and it hosts one of the nation's premier solar garden programs.

However, the VOS rate, which is set annually, is lower than the average retail rate — a gap that will be about 4 cents per kilowatt in 2019. That means the credits to subscribers will be lower.

And residential electricity subscribers are already more expensive to recruit and retain than commercial customers, solar developers say.

"Without a residential [incentive] we'll just have to sell it all to commercial," Abbey said. He and others argue that the spirit of the solar garden legislation was to bring clean energy to households.

The proposal before the PUC would have created a 2.5 cents per kilowatt hour "adder" in 2018 to a residential customer's bill credit, a bridge of sorts between the VOS rate and the average retail rate, and then adders at other rates for 2019 and 2020. The PUC adopted a 1.5 cents per kilowatt incentive for 2019 and 2020 only.

Subscribers to community solar gardens often pay rates that are less than or the same as those paid by Xcel Energy's customers in general. But the community solar gardens are a relatively expensive source of power, so part of their costs are relayed to all Xcel ratepayers through the fuel clause on their monthly bills.

"What is often missed is that the shortfall gets picked up by everyone else," Ryan Barlow, an assistant attorney general for Minnesota, told the PUC.

The total solar garden costs borne by Xcel customers through the fuel clause was $40.5 million from July 2017 through June 2018, according to data the company presented Thursday. Those costs comprise about 1 percent of an individual customer's bill, Xcel officials said.

In 2019, with a few hundred more megawatts of solar garden power coming online, the cost to all Xcel ratepayers will be up to $170 million, company executives told the PUC. That would equate to 4 to 5 percent of the average residential customer's bill, the executives said after the meeting.

The incentive approved by the PUC Thursday is likely to add only a few million dollars in extra annual costs for solar garden program, testimony at the meeting indicated. "I don't think it's breaking the bank if it means 5 or 10 cents more on my bill," said commissioner John Tuma at Thursday's meeting.

Mike Hughlett • 612-673-7003