The Minnesota Solar Experiment — Community Solar: Part II

Editor’s Note: This is the second in a series of articles focusing on Minnesota’s solar market. Past articles can be accessed here.

Minnesota’s 2013 solar legislation started two new consumer-oriented solar experiments, both of which gained national attention:

1.     Develop a new community ‘Solar Gardens’ program for Xcel Energy customers

2.     Develop a new ‘Value of Solar’ payment to potentially replace net metering for the investor-owned utilities (Xcel Energy, Minnesota Power, Ottertail Power)

Three years later, these two programs have taken markedly different paths.  Solar Gardens, mired in a years long regulatory design process, has only a few operating projects as of June 2016, with approximately 1,000 in the project pipeline.  On the other hand, the Value of Solar methodology was finalized efficiently by mid-2014, but today is effectively dead.  This article will focus on Solar Gardens and the next, Value of Solar, comparing the very different outcomes of these two ground-breaking solar policies.

Seeding Solar Gardens

Minnesota’s Solar Gardens program has huge potential, even by national standards, and will dwarf the net metering market of many states.  Over 900 MW of solar projects have been proposed, compared to approximately 30 MW of rooftop solar currently installed statewide.

The Solar Gardens concept has three parts:

1.     A solar developer applies for a 1 MW or less solar project with Xcel Energy and once approved and installed, Xcel receives the output;

2.     The solar developer signs-up subscribers in the same or adjacent county to where the project is located.  No single subscriber can have more than a 40% share of a project nor can they sign up for more than 120% of their average load;

3.     Subscribers receive electric bill credit similar to net metering, with a renewable energy credit (REC) adder if the developer transferred them to Xcel.  Xcel also pays developers an avoided cost rate for any unsubscribed energy.

The entrepreneurial spirit is in the air.  Bill Grant, the Deputy Commissioner of Energy at the Minnesota Department of Commerce agreed on its potential stating, “I think [community solar] is a model that’s going to move solar forward a lot faster than individual rooftop systems.”

Source: Xcel Energy

Struggling to Germinate

Actual project development has been complicated by the regulatory program design process, amplified by the overwhelming number of projects.  The process began when Xcel filed an initial ‘Solar*Reward Community’ plan concept in September 2013 (referred to here as ‘Solar Gardens’ or ‘Community Solar’) and continued through about mid-2015 with stakeholder input and interim commission decisions.  One of the the largest issues was project size, which was limited to 1 MW by the legislation.  However some developers proposed co-locating multiple projects into 20 MW aggregate sizes.  A resulting compromise and legal decision now sets the limit at 5 MW.

The interconnection process is the current difficulty.  Overwhelmed by the approximately 1,000 projects totalling just over 900 MW, Xcel and project developers have had difficulty moving projects forward in a timely fashion.  Currently, about 200 have been approved for interconnection according to Xcel’s program tracking metrics.  The process is becoming more efficient as the learning curve improves, but has taken time to get to a sizeable number of projects into the construction phase.

Betsy Engelking, a Vice President at utility-scale solar developer Geronimo Energy (and former utility resource planner at Great River Energy and Xcel Energy), said: “Somebody put it very well by saying we don’t have a gigawatt of Solar Gardens, we have a gigawatt of applications.”  Holly Lahd, Director of Electricity Markets at Fresh Energy (and former utility analyst at the Minnesota Department of Commerce) agreed, saying “If half of the applications come out of the engineering review process that will be amazing.”  The reality is that the bookends of the project development and finding sufficient customer subscriptions will result in a fraction of real projects, albeit still likely hundreds of megawatts over the next few years…a very significant accomplishment.

Harvesting the Fruits of Labor

Developers are selling solar garden subscriptions to everyone from grandmothers to large key accounts like city governments, but little is publicly known about the market activity or prices.  “I think community solar is like the of solar. I would like a solar garden of this size and this nature, what’s out there?” cited Lissa Pawlisch, a director for the Minnesota Clean Energy Resource Teams (CERTS), a grassroots coalition-building groups at the University of Minnesota’s extension program.

Consumers have been waiting for solar gardens projects for three years now and news outlets are picking up on the delay.  Lissa Pawlisch wondered whether this could be problematic, “[For a consumer] who keeps hearing about community solar coming, that totally turns them off.  ‘Is it ever going to come? Should I just not worry about this?’  It’s disappointing that it hasn’t moved more quickly because there is a chance to capitalize on people’s enthusiasm.”  Holly Lahd echoed similar concern about the timing:  “[T]here was a lot of coverage about community solar gardens in 2013 when it passed…We hear customers around the state asking about when they can subscribe.  There is some frustration…and maybe they’ll lose interest, thinking this is never going to happen.”

The CERTS program solar gardens webpage has become the de facto clearinghouse for consumers, including finding a program, subscriber disclosure checklists, and other information that might set expectations for consumers (and potentially influence developers).  However, a place to compare offers is lacking.  Prices, escalators, down payments, contract terms, etc. are largely unknown.  The worry is that many consumers won’t read the fine print in subscriber contracts and won’t entirely understand the ramifications.  Bill Grant concurred, saying “If you’re signing up for a 25 year subscription…you ought to know more about the developer than just that they have solar in their name. I think we’re going to see the need for more transparency and more disclosure to customers.”  The Minnesota Attorney General’s Office has received some complaints about solar gardens, which may increase as the market begins to ramp up.

Although third-party leasing isn’t available on rooftops in Minnesota, it’s effectively now available through the solar gardens program.  When asked whether the new products and services third parties will offer with community solar gardens are pushing utilities to innovate, Aakash Chandarana, Regional Vice President of Rates and Regulatory Affairs at Xcel Energy, said: “If [utilities] don’t find ways to make our products more tangible for our customers, they’re going to lose sight of what the real value of [our] product is…[We need] to stay ahead of the demand curve and create the products that our customers will gravitate towards.”

Outside Growers

For many rural parts of Minnesota outside of Xcel’s service territory, utility community solar programs are the biggest solar market, with only modest NEM rooftop activity.  Unlike Xcel’s Solar Gardens projects, these are typically designed and run by the electric utility.

There are currently 14 Minnesota electric cooperatives running community solar programs not required by legislation, with one more being planned.  Jon Brekke, Vice President and Chief Market Officer at Great River Energy, a generation and transmission cooperative, was supportive saying, “Community solar has been a really attractive model and it’s popular and the thing about it is that it protects the rest of the membership from any economic hardships.”  Unlike Xcel’s developer program, utility-run programs are generally priced directly to the project costs, which only participants pay for.

Minnesota Power, an investor-owned utility in the northeast part of the state, will be starting a community solar program by the end of the year.  The 1+ MW project was approved in early June and will start generating later this year, with three subscription options for consumers.  The upfront payment is priced at $2.13 per watt, while the performance rate is 11 cents/kWh, which are competitive with rooftop systems.

Reflections on the Harvest

‘Wild west’ is a common refrain when discussing Solar Gardens in Minnesota, which implies that innovation and entrepreneurialism will inevitably meet with misunderstanding and failure at some level.  If the initial legislation did one thing, it created a palpable solar excitement in the state, on a scale that rivaled other solar programs nationally.  Ellen Anderson, Executive Director of the University of Minnesota’s Energy Transition Lab (and former state senator and utility commission chair), summed it up well in saying, “[Community solar] is kind of like our Hawaii where we are getting this incredibly fast deployment of solar and we’re trying to figure out how to handle it.”

The question is whether the excitement will remain as actual garden projects begin to roll out to consumers and the market becomes normalized.  Rebecca Lundberg, the owner of Powerfully Green, a local solar installer, summarized the gap between excitement and reality well.  “Community is awesome. But right from the beginning [we] recognized this was going to be a very big business-oriented proposal. At least at the beginning. Lots of lawyers and developers involved. Lots of RFPs. We’re still in the learning curve in Minnesota. Some of these policies were making it seem like we had this really established solar community.  They really didn’t.”

Part three of the Minnesota series will continue by examining the value of solar, which took a markedly different turn from community solar…

Past Articles

Part 1: Can Solar Really Work in Minnesota?


Previous articleConsolidation Will Spur Future C&I Success for Solar
Next articleHanergy Unveils Solar-Powered Cars to Expand Use of Technology
Mike Taylor is currently the Principal of Knowledge at the Smart Electric Power Alliance (formerly the Solar Electric Power Association), having previously served as the Director of Research, Director of Research & Education, and Technical Services Manager. While at SEPA, Mike has published dozens of reports, hosted dozens of webinars and conference sessions, successfully applied for and managed several U.S. DOE grants, and has extensive contacts and experience within the solar industry.

No posts to display