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Xcel, advocates at odds over Minnesota solar gardens rules

(Photo by Mike Baker via Creative Commons)

(Photo by Mike Baker via Creative Commons)

As customers begin putting money down to join one of Minnesota’s first community solar gardens, new comments to state regulators reveal significant disagreements about how the program should work.

A new state law requires Xcel Energy to develop a program that will allow customers to buy shares of power produced at nearby solar installations, known as community solar gardens.

The idea is to make solar power accessible to the majority of Minnesotans who either don’t own their home or have a rooftop that isn’t sunny enough, strong enough, or angled correctly for installing solar panels.

Xcel unveiled its plan for the program on Sept. 30, and last week solar developers responded with several objections over proposed fees, rates and restrictions the utility would place on the projects.

MN Community Solar started accepting deposits a few weeks ago for a 40-kilowatt solar garden to be built on the roof of a south Minneapolis warehouse. But it expects it will have to refund that money if major changes aren’t made to Xcel’s proposal.

“I don’t believe that we’ll have a successful [community solar gardens] program if we don’t get better terms. I firmly believe that it won’t be successful,” said Ken Bradley, CEO of MN Community Solar.

Others criticizing parts of the utility’s plan include SunEdison, the Interstate Renewable Energy Council (IREC), the Minnesota Solar Energy Industry Association (MnSEIA), and Fresh Energy (where Midwest Energy News is based).

Over the next several weeks, the Minnesota Public Utilities Commission will continue to hear public comments on the proposal and eventually make a ruling on the fine print for how Xcel should go forward.

A ‘good starting point,’ but changes needed

IREC, a national nonprofit that’s worked on similar policies in other states, wrote in its comments that Xcel’s proposal is “a good starting point.”

However, it identifies several elements “that could be improved” and a few areas where it believes Xcel’s proposal strays from the requirements laid out in the state law.

Among the latter: a proposed 2.5 megawatt per quarter cap on projects for the first 24 months. IREC notes that the law specifically says “there shall be no limitation on the number or cumulative generating capacity of community solar garden facilities.”

Xcel describes the first two years as an essential “learning period.” An official said the company is developing new computer systems for integrating solar gardens, and it needs to make sure they’re not overwhelmed out of the gate.

“When we don’t know what the volume is going to be, it’s pretty hard to do planning and put together an IT process that we know won’t be the next Obamacare,” said Deb Sundin, Xcel’s director of renewable strategy and planning.

A quarterly cap, however, is likely to create “a gold-rush mentality,” Bradley said, in which developers rush to submit projects, whether they are ready or not, just so that they can claim a spot in the queue.

It also wastes critical time, he said, when the state should be trying to capitalize on the Solar Investment Tax Credit, a 30 percent federal tax credit that’s only in place through 2016.

MnSEIA, which represents solar companies in the state, wrote in its comments the fees Xcel proposes to charge are “unreasonably high” and substantially higher than what the company charges for a similar solar program in Colorado.

Xcel is proposing a one-time, non-refundable $1,200 application fee, a $300 annual participation fee, a monthly metering fee between $5.50 and $8.00, plus $200 per kilowatt for an upfront deposit and escrow.

Compare that to Colorado, where Xcel’s solar gardens program has a $500 application fee, no annual participation or monthly metering fees, and just a $100 per kilowatt deposit with no escrow required.

(Update/Correction: Xcel Energy disputes the Colorado fee numbers included in solar advocates’ testimony. A company spokesperson says it requires both a $100 per kilowatt deposit and a $100 per kilowatt escrow in Colorado, same as is proposed in Minnesota. Also, the Colorado application fee is actually a “bid evaluation fee” on requests for proposals, the company said.)

Why the disparity? Sundin said it’s because in Colorado the state approved a monthly surcharge on all customers’ utility bills that pays for much of the program. “In Minnesota, we don’t have a funding mechanism to cover our administration costs,” she said.

Solar rates and renewable energy credits

The proposed rate Xcel would like to initially pay for electricity generated in Minnesota solar gardens — 6 to 10 cents per kilowatt hour — has also drawn comparisons to its Colorado program, which pays 16 to 21 cents per kilowatt hour.

Sundin said the Colorado rate is actually closer to 7 cents, and that the additional amount is actually a payment to the developer for the renewable energy credits — certificates the utility can use to comply with renewable energy mandates.

In Minnesota, Xcel proposes to claim the renewable credits associated with the solar gardens, but it doesn’t propose paying anything extra for them, and Sundin also notes the law doesn’t offer a funding source to cover the cost of buying those credits.

“We do not dispute Xcel’s proposal to transfer the [renewable energy credits] for compliance purposes; however, Xcel should pay for the value of these [credits],” IREC writes in its comments.

The Minnesota law says the rate Xcel pays for solar garden customers’ electricity should be based on “the value-of-solar” tariff that’s being developed by the state’s Division of Energy Resources.

It could be several more months, though, before officials settle on a formula for calculating a value-of-solar tariff, and Xcel plans to launch the community solar gardens program in the second quarter of 2014.

In the interim, the law says the rate should be based on an “applicable retail rate,” a term for which there is no clear definition. Xcel has taken it to mean its average retail rate — 10 cents per kilowatt hour for residential and small business and 6 cents per kilowatt hour for larger customers.

“Xcel’s rates are too low to support either the creation or financing of [community solar gardens],” which makes it inconsistent with the law, MnSEIA argues in its comments. IREC suggests the rate should at least equal the individual customers’ actual electricity rate.

Other areas of disagreement include whether and how much Xcel should pay for power generated by solar gardens that have not sold all of their shares or subscriptions. Xcel says it shouldn’t have to pay anything for that power.

Since MN Community Solar started selling subscriptions last month, about half of the 205-watt shares for its first 40-kilowatt project have been reserved. They’ve been claimed by about 10 customers, who’ve asked for between two and 18 shares each.

These early customers are mostly motivated by their concerns about climate change or energy security, Bradley said. They’ve been willing to sign up even after being told the price per share under the current program could as high as $950.

Said Bradley: “Most people say, hey, we like it, but we don’t know the final details, and we need to know those.”

Editor’s note: The IREC is headquartered in New York, an expert we spoke to is based in California. An earlier version of this story incorrectly referred to the organization as being based in California.

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