Solar industry-Xcel flap won't dim long-term growth of Minnesota industry

Superior Third Party Logistics, a warehouse and logistics outfit near the fairgrounds in St. Paul, makes a tidy chunk of change selling parking space during the Minnesota State Fair.

No cigar this year when the fair was canceled due to the pandemic.

However, crews from Blue Horizon Energy, an 11-year-old solar-engineering firm, were busy in Superior's parking lot during fair time.

They installed 3 acres of solar arrays and a new roof atop the Superior building. That should save Superior about $90,000 a year in energy costs that will become profit after the $2.4 million project is paid for in about 10 years. Heck, that's approaching what Superior grosses annually on fair parking.

"We designed the system to produce enough to power our building and [the] rest goes to Xcel Energy," said Superior President Christopher Wyffels, 50, also the founder of the 400-employee firm. "That means $90,000 to $100,000 a year at today's prices. I pay for the system in the first 10 years. Then we make money in year 11 through 25 of what's designed as a 25-year system. The solar system is about $1.4 million and the roof costs the rest.

"We worked with St. Paul Port Authority and our lender, Spire Credit Union. The numbers make sense. The electrical savings over 25 years are about $2.3 million. And then there are the environmental benefits of pollution-free energy."

Wyffels, 50, a graduate of nearby St. Paul Central High and Hamline University, is among the growing cadre of business owners embracing renewable energy. And it makes economic sense. The big news, recently, in solar energy, has more to do with bureaucratic delays than power from the sun, as the Star Tribune's Mike Hughlett has reported.

Minnesota solar-energy developers have filed 120 complaints with Minnesota utility regulators against Xcel Energy. The solar industry charges that Xcel's approval process for analyzing projects, for which it is the largest electricity buyer, has led to expensive delays and project abandonment. At issue is a 2019 Xcel measure designed to standardize Minnesota's electric-interconnection process for hooking up solar projects to the electric grid.

"Most projects go very well, but there are some exceptions," Kerry Klemm, Xcel's manager of renewable-choice programs, told the Star Tribune this fall. "There is a lot of solar that we have brought on line."

Michael Allen of St. Paul-based All Energy Solar, said delays have cost All Energy "well into the six figures."

David Shaffer, executive director of the Minnesota Solar Energy Industries Association, said last week that many project developers are losing money due to the delays and that some projects have been abandoned.

Still, Xcel and other Minnesota utilities, such as Great River Energy and Minnesota Power, are forecasting that solar energy should power about 10% of Minnesota electricity by 2030, up from less than 2% today. The solar industry forecasts that it should be able to supply up to 13% of Minnesota's energy in a decade or less.

Eric Pasi, veteran chief development officer of IPS Solar, a 29-year pioneer of the Minnesota industry, said: "Utilities should address the existing backlog of commercial and community solar projects in their interconnection queues, which are holding up more than $1 billion in private investment. Not only would those projects deliver significant savings for Minnesota consumers but they'd also result in an upgraded and more resilient grid."

Shaffer, whose membership has doubled to 110 solar-and-related firms since 2015, is pressuring Xcel at the Minnesota Legislature and the Public Utilities Commission.

"I think there will be a fix," he said. "Xcel, 90% of the time, is missing deadlines on their study of solar-project applications. I think the best way to fix this is a penalty. We're asking for $1 million. Maybe we should ask for $1 million per infraction."

That fracas should be resolved this winter by the PUC. Griffin Dooling, an executive at Blue Horizon Group, noted that Minnesota's solar development is being driven by so-called solar gardens, where a land owner gets paid for solar arrays owned by community members, and commercial projects such as that on the Superior building.

"In our business of design and engineering we've been fortunate to see an increase in sales," Dooling said. "Our customers see solar as the ultimate energy-efficiency tool. Superior also installed a white roof and LED lighting to reduce consumption. The last step for them was producing their own power. They are able to take their energy bill very close to zero on some days."

The federal-state tax credit of up to 26% is declining to 10% in 2022, Dooling added. But declining costs of solar cells and growing efficiency of the maturing industry will offset the loss of that subsidy.

Meanwhile, proponents also like to point out that renewable energy and conservation, from wind power to energy-efficient windows to energy-conservation software, created more than 60,000 Minnesota jobs in recent years, before this year's recession. Those jobs were growing 2½ times the rate of the overall employment market.

Moreover, renewables use free, clean fuel. Environmental and health costs typically were not calculated in the cost of fossil fuel-burning plants that cost billions annually, from greenhouse gases to respiratory diseases.