New Minnesota solar mandate law will give power companies a jolt

Minnesota's solar industry is getting a jolt of energy.

It doesn't sound like much — a requirement that major utilities generate 1.5 percent of their power from the sun by 2020. That's roughly the output of one power plant or wind farm.

Yet the state's new solar standard, signed into law Thursday by Gov. Mark Dayton, will force four investor-owned electric utilities to generate 30 times more solar power than they do today.

Power companies had opposed the mandate, and remain wary of solar's cost, which they say can't compete with low-cost wind and natural gas-fired generation.

"It doesn't mean that we don't support renewables, but at least today, solar is quite a bit more expensive than other alternatives," Ben Fowke, CEO of Minneapolis-based Xcel Energy, said in an interview.

The law also adds fresh incentives for homeowners and businesses to install rooftop solar panels, expands a subsidy for solar equipment made in Minnesota, and allows people who can't put solar panels on their roof to invest in a shared system, or "solar garden." The law also encourages building of larger solar projects and creates a new solar-friendly reimbursement rate for rooftop systems.

Only the state's four investor-owned utilities are subject to the mandate, including Xcel Energy, the largest power company with 1.2 million Minnesota customers, and Duluth-based Minnesota Power, serving the Iron Range. Municipal utilities and co-operative power companies successfully lobbied for an exemption. Mining and paper industries also are exempt.

To meet the mandate, the largest power companies must consider building large, utility-scale solar generators that are common in California, the Southwest and other states, like New Jersey, that have solar standards. A 2-megawatt array — large by solar standards, but equal to the output of just one wind turbine — can cover nearly eight football fields, said Rick Evans, regional government affairs director for Xcel.

In a sign of what might be coming, Edina-based renewable power developer Geronimo Energy recently proposed 31 large solar arrays in 18 Minnesota counties on properties adjacent to Xcel substations.

Each solar array would be as big as or bigger than the state's largest solar power collector — the system completed last year in Slayton, 180 miles southwest of Minneapolis.

"We firmly believe that the way solar prices have come down, solar is a competitive capacity resource," said Geronimo Vice President Betsy Engelking.

Like Geronimo, many of the companies that stand to gain from the solar standard are in the wind power industry. They include the two largest U.S. wind energy contractors — Mortenson Construction of Golden Valley and Blatner Energy of Avon, Minn. — and EDF Renewable Energy, the state's largest wind power developer whose Midwest office is in Minneapolis.

All three have built large solar arrays in other states, and Mortenson is constructing the world's largest solar-photovoltaic system in California, said Trent Mostaert, manager of the company's solar and emerging renewables group. He said Mortenson probably will add solar training programs for electricians and other workers who will build solar projects in Minnesota.

Blattner Energy, which rivals Mortenson in the number of renewable energy projects it has built, sees opportunities in solar if electric utilities embrace big projects. Doug Fredrickson, a company vice president, said Geronimo's strategy to roll out a string of large projects makes sense, and likely will save utilities money.

"You put three 2-megawatt projects together in a schedule and you can push costs down even lower," he said.

At EDF, a unit of Paris-based EDF Energies Nouvelles, Shanelle Montana said the company also is looking at solar projects, including for large rooftops.

"That could be a big-box store or a municipality, a school or a university," said Montana, the company's associate for legislative and regulatory affairs. "We are going to cast our net fairly wide and look at who wants solar, who has actual space for solar, whether it's rooftop or ground mount."

Minnesota is the 17th state to enact a solar energy standard. The law is modeled after the state's renewable energy policies that required utilities to add wind farms. Most Minnesota utilities must get 25 percent of their electricity from renewables, mostly wind, by 2025. The 1.5 percent solar mandate by the end of 2020 is on top of that.

Lynn Hinkle, policy development director for the Minnesota Solar Industries Association, said the state has more than 100 solar-related businesses, including installers who work on residential and commercial projects. He said the law requires 10 percent of solar generation to be from such systems. He estimated that the law will create or maintain about 2,000 industry jobs.

Under the law, Xcel also will change its Solar Rewards program, which has offered upfront rebates to those who install solar systems. Now, the incentive will be a long-term subsidy based on the amount of power generated, and solar customers will be paid for their power instead of getting a credit for watts produced. Xcel's Evans said the latter change will avoid a hidden subsidy that shifted utility distribution costs to nonsolar customers.

Xcel and other utilities still need to work out many details of their solar programs. Fowke, Xcel's CEO, said the problem with small, rooftop solar is that it costs about 20 cents per kilowatt/hour, or roughly twice the residential retail rate. He said the utility needs to work with regulators and industry to "get it right" on solar policy.

"If it is done wrong, it will be expensive for our customers," Fowke said.

Otter Tail Power Co. of Fergus Falls, another investor-owned utility subject to the solar mandate, predicts it will trigger a rate increase of 3 to 5 percent.

Solar supporters say it will help build an industry.

"Our hope is that we are taking the first steps to continue to grow solar and take advantage of opportunities," said Minnesota Commerce Commissioner Michael Rothman.

Rep. Melissa Hortman, DFL- St. Paul, a sponsor of the measure, said she expects that incentives for made-in-Minnesota solar equipment will bring new businesses to the state. "It is $15 million a year for 10 years," she said. "That will leverage private investment."

Two existing solar panel makers — Silicon Energy of Mountain Iron and TenKsolar of Bloomington — stand to benefit from the expanded Minnesota-made subsidy. The law also creates new rebates to encourage installation of Minnesota-made thermal solar equipment to heat buildings or hot water without generating electricity — a sector that had been left out of the earlier subsidy program.

"It means that solar thermal is recognized as a solar technology that is manufactured in Minnesota," said Randy Hagen, CEO of Solar Skies Manufacturing, which produces solar water heaters in Alexandria.

Jason Edens, director of the Rural Renewable Energy Alliance, a nonprofit manufacturer of solar air heating equipment in Pine River, Minn., said the new rebates of $2,500 and up will help with the company's mission to bring solar to families with low incomes. "This is going to catalyze a lot of activity," he said.

David Shaffer • 612-673-7090

Twitter: @ShafferStrib