Minnesota solar energy development caught in delays

Novel Energy Solutions has three community solar gardens up and running, but they are quite small — the latest one atop a St. Paul warehouse generating only enough juice to power 20 houses.

Novel's two dozen larger projects in Minnesota have been mired in delays. So has just about every proposed solar garden, as problems persist in hooking into Xcel Energy's grid. Indeed, 18 months after the program launched — and with more than 900 active applications pending — only Novel's three gardens are online, generating less than 1 megawatt of power.

That's far less than expected by now from a program that's supposed to provide hundreds of megawatts of power and make Minnesota the nation's leader in community solar gardens.

Solar developers like Novel blame Xcel for the delays and also have made a collective filing with Minnesota utility regulators claiming that Xcel's rates to connect to the grid are higher than anticipated based on experience elsewhere.

"Yes, there are a lot of issues to deal with [connecting to the grid]," said Duane Hebert, Novel's director of community solar, "but this is just too long to be waiting."

While they wait, many developers have financial obligations to meet — lease and debt service payments, for example — with no revenue coming in.

Xcel said it has worked to bring down interconnection costs and speed up the solar garden program and that some of the delays are due to the developers' own issues, including getting financing and local permits.

"It is a complex process, and it does take time and we did have a learning curve," said Lee Gabler, Xcel's senior director for customer strategy and solutions.

And despite its troubles, the solar garden build-out is finally at hand, Gabler said. "From my perspective, we are around the bend."

By the end of 2016, "it is more than realistic" that 200 megawatts of solar garden power will be up and running.

Within 18 months, 400 to 450 megawatts is expected to be online, he said, about as much generation capacity as a mid-sized natural gas-fired power plant. A megawatt, or 1 million watts, is enough to power about 125 houses, and the gardens generate up to 5 megawatts.

If Xcel's forecast holds, dozens of the solar gardens should be active by year's end. Some developers, though, are skeptical of Xcel's timeline.

Getting the power turned on quickly would ease the solar garden program's most pressing problems. But more vexing issues lie ahead. A debate over rates — what Xcel pays solar garden operators for power they generate — is expected later this month before the Minnesota Public Utilities Commission (PUC).

Xcel wants the rate to be lowered, closer to what it will pay for energy from its "utility scale" solar projects — large gardens of up to 100 megawatts. Xcel expects to have three such projects online by the end of 2016, producing a total of 262 megawatts.

Utility-scale projects, like community solar gardens, are being developed in Minnesota by independent companies. Xcel will sell its utility solar directly to its customers as part of a mix that also includes energy from coal and natural gas-fired plants.

Community solar gardens are a different animal, an example of decentralized power production known as "distributed energy."

Xcel's customers choose to become customers of a solar garden operator, banking on saving money or promoting clean, local power — or both. The gardens are designed to offer electricty to people and businesses that are unable or don't want to install solar panels on their property.

Some solar developers and renewable energy advocates say community solar gardens represent an inherent conflict for Xcel, adding to the program's delays. "Unfortunately, Xcel sees this program to some extent as contrary to its existing business model," said Allen Gleckner, senior policy director at Fresh Energy, a St. Paul nonprofit.

Xcel doesn't view it that way. "The bumps you are seeing are kind of typical when you roll out a new program," said Chris Clark, president of Xcel's Minnesota regional operations. "It's understandable there's tension back and forth [between developers and Xcel]."

Minnesota's solar build-out is part of a national boom, powered by rapidly falling prices for solar panels, federal tax credits for solar investment and state-mandated clean energy.

The community solar garden program was created by the state Legislature in 2013, and was supported by Xcel. But no caps were put on how much power could be produced — either in aggregate or per individual solar garden — so Xcel was inundated with applications.

Generation caps on individual gardens have since been put in place. But the cap remains a hot issue: Solar garden developers say it's now cripplingly low. The cap issue also is expected to be on the PUC agenda this month.

The first community solar garden, one of the Novel projects, went online in September 2015 near Kasota in southern Minnesota. At 40 kilowatts — a kilowatt is 1,000 watts — it's tiny. A second Novel garden of 250 kilowatts powered up this spring in western Minnesota, and a third launched last month in an industrial district off Vandalia Street.

There, a 125-kilowatt solar array is mounted on the roof of a building shared by Commercial Kitchen Services and Faircon, a mechanical contractor. They buy the rooftop garden's power, as do friends and families of their owners. The Vandalia Street site is an anomaly: Most solar gardens are mounted on poles driven into the ground, and a 5 megawatt garden would cover about 30 acres.

Rochester-based Novel has at least six larger projects that have "interconnection agreements" with Xcel. The agreements, which govern how a garden connects to Xcel's lines and substations, are crucial to starting construction. "There has been progress made to the point where we can put parts of [the gardens] into the ground," Hebert said.

Denver-based SunShare Energy, another developer, said it also expects to break ground on some gardens by late summer or early fall, before winter sets in and makes construction more difficult.

"We are trying to complete five or six sites by the end of this year," said Ross Abbey, SunShare's regulatory and legal director who works in the firm's St. Paul office.

But SunShare, like Novel, continues to have disputes with Xcel about connecting to the grid. SunShare filed complaints with the PUC over Xcel's handling of four separate sites, all of which were reviewed by independent engineers appointed by the Minnesota Department of Commerce.

The first independent engineer's report came out in April, criticizing Xcel's cost estimates and engineering standards for a solar garden near Becker. Complaints made by SunShare mirror issues that other developers say they've faced. Xcel has appealed the engineers' reviews, another matter the PUC will likely take up this summer.

Since solar gardens are pumping new power into Xcel's system, lines and substations often must be upgraded to increase their capacity. That cost is borne by the solar garden developer, and it often amounts to hundreds of thousands of dollars.

"The problem is Xcel's cost estimates are not very reliable," Abbey said. "I need a cost estimate I can build into my budget," Abbey said.

Cliff Kaehler, Novel Energy's CEO, echoed those sentiments. He said that for one of Novel's larger solar gardens, Xcel's cost estimates for grid improvements started at $24,000, rose to $70,000 and then $110,000, before falling back to $80,000.

In a regulatory filing, Xcel said its cost estimates were "reasonable and appropriate."

Kaehler praised the executives in charge of Xcel's solar garden program, but criticized the bureaucracy within the utility's engineering ranks. "A lot of the problems at Xcel have been on the engineering side."

However, Laura McCarten, a regional vice president for Xcel, said the solar garden program has presented new engineering challenges.

"Community solar was really a new venture for us," she said. "We had a large volume of applications to connect to our system in a way our system wasn't designed for."

Mike Hughlett • 612-673-7003