'Deep disappointment' over Xcel's new policy that restricts small solar

The financial benefits of rooftop solar were part of Kenneth and JoAn Warwick's retirement plan at their historic house in Faribault — once home to the inventor of the Tilt-A-Whirl.

So in 2021, they began the process of installing an array, spending $2,000 to remove a large maple tree in their yard and lining up a loan for initial costs.

But to hook up solar to the grid, Xcel suggested the family would need to pay an enormous sum: $1 million.

"Hours and hours of work, thousands of dollars and a deep disappointment in a company which pretends to care for the rate payers," Kenneth said in an October letter to state regulators.

The Warwick family is not alone in receiving a shockingly high estimate. The exorbitant cost would pay for infrastructure to make space on Xcel's power distribution network, which has long had capacity problems.

But a group of solar developers and customers argue the choked system is worse than ever, and contend Xcel is to blame. It's the latest disagreement between developers and Xcel — who have long fought over the costs and benefits of shared community solar gardens — and a particularly acrimonious dispute that has raised accusations of illegal activity.

In September, the Minnesota Solar Energy Industries Association, along with a coalition of developers, customers and advocacy nonprofits, filed a complaint with the Minnesota Public Utilities Commission (PUC) accusing Xcel of breaking the law by restricting the amount of energy the company can take from solar gardens and rooftop arrays. This restriction is limiting solar construction and creating a financial benefit for Xcel, the group alleges.

The state Attorney General's office has called on the PUC to investigate, and Gov. Tim Walz's administration said it appears the utility violated an order from state regulators.

Xcel argues the policy is legal and meant to ensure the infrastructure's reliability. The utility says a huge amount of community solar has flooded the system and caused congestion — prompting a controversial and restrictive rule.

At issue is Xcel's "Technical Planning Standard" policy that was installed in March of 2022, aimed at preventing more energy from flowing onto its system than customers can use. Excess power on the grid can lead to equipment damage and failure, Xcel said in a written statement, causing "serious reliability and safety concerns for line workers and the public."

Utilities traditionally transmit power by way of generating plants that are connected to transmission lines. But energy from rooftop solar and larger community solar gardens — installations built by independent developers aimed at customers who don't want to or aren't able to put up their own solar panels — flows back to Xcel for use elsewhere on the grid. This sends power both ways on the feeders and substations that handle power distribution.

The amount of this distributed solar on Xcel's grid has skyrocketed since the community solar program was created by the Legislature in 2013, though construction has slowed. Xcel argues there was congestion before the restrictive planning limit, caused in part by solar gardens clustered on a few company feeders.

The utility says it created the planning limit to reserve some space on the lines as a buffer. "No utility should be forced to run its system to the very brink," Xcel wrote to the PUC. Still, exactly how much solar Xcel can hook up to the grid without risking problems is at the heart of the dispute.

Many developers argue that Xcel's buffer isn't critical for safety and reliability, unnecessarily cutting off 20% of space on the distribution system. That's enough room to roughly triple the amount of community solar on Xcel's grid, the coalition contends.

Not only does that hurt developers who make money off new projects and cause headaches for customers, it can help Xcel, which is required to buy power back from residential and community solar. The company says energy from community solar is more expensive than electricity produced by large-scale solar projects owned by Xcel even if it has helped expand solar in the state.

With the planning limit, Xcel says about 4% of feeders and 22% of substations are "capacity constrained," according to an October report. The company said 198 rooftop projects are on hold because the substation is at capacity, while 57 community solar gardens are on hold because of the space crunch.

Kim Benjamin, co-founder and president of the Plymouth solar installer MN Solar and More — which does about 150 small-scale installations a year — said the capacity crunch was a problem even before the planning limit. The new standard has been an extra hurdle.

She currently has 11 customers on hold with Xcel, Benjamin said, and in the last year she told 66 potential customers not to pursue a solar array because they likely couldn't be built without expensive infrastructure upgrades. The cost of that work falls on the customer hoping to build, according to state law and policy.

"It's frustrating and the customers get frustrated because they're not able to move forward with their projects," Benjamin said.

Xcel spokesman Theo Keith said the planning standards allow the company "to address capacity challenges caused by the increase in large, developer-owned community solar gardens built on the distribution grid." The company also argues their policy isn't unusual. Others, specifically Duke Energy in the Carolinas and the state of Oregon, have more restrictive planning limits, Xcel said.

"We are acting within our authority and have been transparent about the steps we've taken," Keith said.

Regulated utilities like Xcel have leeway to use engineering judgment to manage the grid. The solar developers argue the company went outside the bounds of that principle and needed approval from the PUC to implement its planning limit.

The PUC will decide whether it's worth investigating if Xcel had the authority to implement the planning standard, or whether the utility broke state law by establishing one.

The Minnesota Attorney General's Office told the PUC there is enough of a question to warrant an investigation. The state Department of Commerce says Xcel's actions appear to have violated an earlier order from the PUC.

"If public utilities like Xcel feel they can act unilaterally to implement significant changes like the [Xcel planning standard] — particularly when those actions are apparently in direct violation of a legally binding Commission Order — that could create a very unpredictable regulatory environment and landscape for ratepayers," Commerce said in a letter.

The debate is rooted in years of rancor between Xcel and advocates of the community solar program.

Xcel says it supports community solar, but has pushed to curb it at the Legislature, saying it's too expensive for ratepayers who broadly shoulder the costs of the program. Community solar has often benefited large businesses rather than residential customers. And it's not a small program. Xcel says it hosts the most production from community solar in the country.

The impact of congestion on the distribution system is one of several frustrations Xcel has with community solar.

Defenders of the program say it benefits public schools and city governments who use it, along with residential customers. Supporters argue it allows more people to be involved in the energy transition and gain financial benefits in a utility-dominant system.

The Legislature overhauled the program this year, making changes meant to steer its benefits toward residents, especially lower-income households. Lawmakers also approved changes that aim to speed up the time it takes for residential customers to hook up small arrays to the grid, including $10 million for distribution system upgrades.

Still, where Xcel sees prudence in grid management, solar developers and other advocates see a strategy for restricting solar gardens and rooftop projects. Either way, some homeowners hoping to build rooftop solar are stuck.

"Having lived in MN for 25 years we sensed that we lived in a state that would support the move to sustainable energy," says the letter from the Warwick family in Faribault. "We were impressed with the stated goals of Xcel and wanted to play our part."