Minnesota Public Utilities Commission approves size caps, rate structure for solar projects

Minnesota utilities regulators Thursday maintained size caps on community solar gardens, a move developers say will squelch proposals for new projects.

The Minnesota Public Utilities Commission also adopted a new rate system for solar gardens after two days of deliberations on the promising but controversial program.

After the state's solar garden program was launched in late 2014, Xcel Energy — the program's de facto administrator — was inundated with applications from developers, as there was no output limit per garden. Minneapolis-based Xcel, the state's largest utility, complained the program had ballooned beyond what state law intended.

So the PUC said last year that solar garden projects already in the application process with Xcel were limited to 5 megawatts of output. New applicants after September would be allowed only 1 megawatt, or a million watts. The PUC Wednesday affirmed the 1-megawatt cap, despite pleas from developers.

"The economics are really much less feasible for anyone trying to do this going forward," said Ross Abbey, regulatory and legal director for SunShare, which has several solar gardens planned in Minnesota. Abbey and other developers argue that 1-megawatt gardens have no economies of scale, making them too small to secure financing.

In a statement, Xcel said it's "encouraged the commission has taken steps to move this program forward in the right direction."

Solar gardens offer electricity to those that are unable to or don't want to install solar panels on their properties.

Minnesota's solar garden program could become the nation's largest. But it's been plagued by delays stemming from the initial tide of applications and difficulties connecting solar arrays into Xcel's grid. Only three small solar gardens have been switched on, and together they generate less than 1 megawatt of energy.

At the PUC hearings this week in St. Paul, Xcel said it expects 200 megawatts of solar garden power to be online by 2016's close. By the end of 2017, Xcel says that capacity will rise to 400 to 450 megawatts — the equivalent of a decent-sized natural gas power plant.

Xcel buys electricity produced by solar gardens. However, 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 nonsolar consumers.

Xcel argued this week to effectively lower the rate paid to solar gardens. Solar groups opposed the stand, arguing instead for a new rate called the "value of solar" or VOS. The VOS rate would take into account nontraditional factors such as the production of clean energy instead of fossil fuels.

Minnesota has anticipated moving to the VOS rate. The question has been when.

Xcel argued the time is not now due to its issues with VOS methodology. But the Public Utilities Commission voted Thursday 5-0 to implement the VOS rate for solar garden applications filed after Dec 31, 2016. (Current applications aren't affected.)

"This is really precedent setting," said Allen Gleckner, director of energy markets at Fresh Energy, a solar advocacy group. "To our knowledge, it is the first time a value of solar rate has been implemented for a large utility."

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," said Julie Jorgensen, said CEO of GreenMark Solar. "It's a double whammy."

Mike Hughlett • 612-673-7003