Minnesota's community solar garden program set for a revamp under proposed legislation

New legislation would mostly scrap the subscription-based Minnesota's Community Solar Garden program — a critical part of the state's solar energy buildout.

Instead, a new Senate proposal would allow solar developers to build bigger projects — and also allow Xcel Energy to own part of them. But it would largely do away with subscriptions, which allowed most residents and businesses covered by the current community solar gardens to cut their power bills by selling electricity to Xcel.

"It is a major attempt to revise the program," the bill's author, Sen. Nick Frentz, DFL-North Mankato, told the Senate energy committee Thursday. "This program has been a real success up to now, but let's pivot to something better."

The Senate energy committee, which Frentz chairs, set aside the solar garden bill Wednesday for inclusion in a larger bill. A week ago, the House energy committee set aside a very different solar garden bill that would greatly expand the program.

The House bill's author and energy committee head, Rep. Patty Acomb, DFL-Minnetonka, said differences between the two bills would be worked out in a conference committee.

The Senate and House bills have key similarities: both would allow larger and effectively more "community" solar arrays. But the House bill would keep the current subscription model that allows all customers to receive bill credits for electricity generated.

Acomb said a "subscription model" would still be valuable "as long as it is not impacting ratepayers to the degree it has."

Currently, while solar garden subscribers see lower power bills, Xcel's ratepayers essentially fund some of those savings.

Any legislated changes in the solar garden program would not affect existing projects or those waiting to be built.

The Legislature created the Community Solar Garden program in 2013, requiring Xcel — the state's largest electric utility — to buy energy from small solar gardens built by independent developers. The solar gardens are aimed at residents, businesses and governments that want solar energy without setting up their own panels.

Developers earn a profit on the community solar gardens. Xcel, which has chafed at expanding the program, does not. Xcel was cold to the House bill, but it supports the Senate legislation.

"What we like about the Senate bill is that it steps back and looks at the whole program," Xcel's Minnesota president Christopher Clark said in an interview.

Minnesota's pioneering solar garden effort accounted for 62% of the state's 1,363 megawatts of solar power production capacity in 2021, the most recent year for which data is available. Minnesota's community solar program was the nation's largest until it was surpassed recently by New York state.

The program as it stands allows the community solar gardens to have power production capacity of no more than 1 megawatt. While the Senate bill would increase the maximum size to 10 megawatts, the House bill would increase to 5 megawatts.

Both bills would also allow solar gardens throughout Xcel's territory — not just certain counties. That provision was a high priority for solar developers.

But the Senate bill would replace the current subscription model for most solar gardens with power purchase agreements between Xcel and solar developers. Such agreements are typically used for "utility-scale" solar farms, which can produce hundreds of megawatts of electricity.

Xcel would be able to own up to 30% of these new solar gardens.

"I am really excited about this bill," Logan O'Grady, head of the solar trade group MnSEIA, told the Senate energy committee Wednesday. "For a decade we have been looking to tap the up-to-10-megawatt market. That being said, there are some concerns with the bill."

In an interview, O'Grady said those concerns are about the elimination of subscriptions for most new solar gardens. "Some people want to feel like they are contributing in their own way [to producing solar power] and achieving savings on their bills."

The subscription model would be retained for "low-income" solar gardens. For qualifying arrays, subscribers of at least 25% of the power would need to earn at or below 80% of the state's median household income.

Low-income solar gardens under the Senate bill would be owned by nonprofits, co-ops or Indian tribes. Commercial customers would be limited to grocery stores, clinics, childcare centers, churches and other more community-minded enterprises.

As of October, over 80% of the power generated by Xcel's current solar gardens — which number over 440 — was supplied to businesses. Only about 14% went to residential customers, leading to some criticism of the program.

Still, the solar gardens' 25,179 residential customers comprised 86% of all subscriptions.

Another criticism: power produced by the solar gardens is generally more costly on a per kilowatt-hour basis than electricity generated by utility-scale projects, which benefit from economies of scale. Xcel passes down electricity costs from the solar gardens to its residential ratepayers.

The company says its average residential customer pays about $4 per month for the community solar program.

"You have to look at the policy question as to why a certain customer is getting a bill credit and another customer is paying for it," said Allen Gleckner, executive lead for policy and programs at Fresh Energy, a St. Paul renewable power advocacy group.

Gleckner said the community solar program has been successful, accomplishing its goal of establishing a solid foothold for solar power in Minnesota. But the solar landscape has changed "dramatically" since the program was created.

The Senate proposal would boost solar growth by allowing for larger solar gardens — and better serve low-income customers, Gleckner said.

Despite the program's success in increasing Minnesota's solar power production, it has long engendered fighting between Xcel and solar developers over grid interconnection costs and delays.

With so many solar gardens in the pipeline, developers must sometimes wait months or even years to connect to the grid. And that long queue has also increasingly led to long waits for Xcel residential customers who want to connect rooftop panels to the grid.

The Public Utilities Commission fined Xcel $1 million in 2021 for interconnection delays involving a bevy of solar garden projects. Developers say Xcel has never liked the program because it essentially competes with Xcel's own power production.

The company says its power distribution grid is being overwhelmed by the community solar projects.