On Tuesday April 28th, Xcel Energy announced they will take unilateral action to disallow Community Solar Garden (CSG) developers to group multiple projects for a total solar garden size over 1MW, in direct opposition to the Public Utilities Commission's ruling. Imposing this aggregate size limit of 1 megawatt would shrink their Community Solar Program by 80% from 560 megawatts (MW) down to just 80 MW.
If Xcel’s filing puts in jeopardy the 80% of the megawatts from solar gardens planned for this year, then the solar developers will not be able to take advantage of the 30 percent federal tax credit before it expires at the end of the year. (Update: Congress has extended the solar tax credits for an additional 5 years in the federal budget bill. But before that deal was struck, developers expected congress would simply let the tax breaks expire and hence had great worry the bulk of these CSG projects might never be built as a result).
Community Solar has value far beyond that which is reducible to finance. It provides is a powerful tool for an overall democratization of energy and a rare chance for individuals to gain entry into the energy market. Community solar gives us a chance to end of the alienating perception of solar energy as being a niche market for a few and to instead enable clean energy to tell a story of economic equity, prosperity and a pathway out of energy poverty.
In 2013 the MN state legislature passed the community solar program with the intention of providing a solar option for renters, for property owners whose building isn’t suitable for its own solar array or for the average income who lack the up-front capital to own an entire solar installation. There is plenty of debate that utilities, developers and state regulators can continue to have about the structure of Community Solar in Minnesota. Xcel Energy does have some merit in not wanting to see large commercial subscribers “taking advantage” of a program that is intended to be more community based. Community Power does not want the story of community solar to become something that big corporations use to make money while others being charged more as a result. However it is concerning that Xcel Energy feels it can openly defy the Public Utilities Commission's previous ruling, as many developers have highlighted.
Xcel’s complaint is that they did not expect 80% plus of solar garden proposals from 15 developers to be co-located clusters of up to 40 adjacent 1 MW solar gardens on single sites. Although the 2013 state statute does set a size limit of 1 megawatt or less onto individual community solar gardens, the PUC issued an order in 2014 that allowed the co-location of multiple 1 MW CSGs on a single site. Xcel still agrees to let different developers co-locate multiple solar gardens at the same site, as long as they don’t add up to more than 1 megawatt total.
A few days after Xcel issued the regulatory filing to the PUC, four developers submitted a letter sent Thursday to the Minnesota Public Utilities Commission asking the PUC to affirm Xcel’s move to be in violation of the pre-existing PUC order. The letter warned that Xcels move would cost the solar developers “tens of millions of dollars in damages” even though Xcel vows to refund deposits and fees for multiple garden applications. On Friday May 1st, the PUC ordered all parties a May 18th deadline to submit comments on the Xcel’s aggregate size limit proposal.
THE BASIC JUSTIFICATION
Xcel Energy denies that they are imposing this 1 MW limit with the intention to stymie deployment of solar power. Xcel has included 2,000 MW of overall solar energy into its 15 year business plan filed with the PUC earlier this year. Xcel says they are separately developing large “utility scale” solar projects at lower cost than solar gardens; 7¢ per KWH versus 14¢ per KWH Xcel says they can develop utility-scale projects for about half the price because they have to pay roughly twice as much for power generated by community solar gardens as compared with typical competitively-bid utility-scale projects.
Overall, Xcel management Xcel does not want community solar developments to attain the scale advantages of utility-scale solar while at the same time getting the more favorable financing terms that come with being classified by regulators as a smaller scale community solar installment. They do not want these community solar gardens to resemble utility scale solar on the notion that doing community solar on a utility scale would be too costly for all ratepayers.
The Xcel Regional Vice President said they are imposing the 1 MW aggregate size limits on CSGs with the intention of minimizing extra costs that would be passed on as a 1% to 1.5% rate hike paid entirely by Xcel customers who choose not to participate. That shows great sensitivity as far as not wanting to force non-CSG customers to subsidize utility-scale CSG projects. But contrast that sensitivity to when Xcel requested a near 10% rate hike largely to cover the cost overruns of their Monticello nuclear plant. The Star Tribune reported Xcel was wanting their customers to pay them to make profits on over $400 million in cost overruns on top of their customers rather than shareholders paying the entire $400 million.
A SOLUTION THAT DOES NOT MATCH PROBLEM
The problem Xcel claims to have is the costs of community solar being higher than comparably-sized projects that are paid at utility-scale rates. So then why can’t Xcel just push to renegotiate rates for co-located community solar gardens? Although Xcel may have some valid points in the compensation level maybe not being just right, Xcel’s solution does not match the problem. If Xcel is worried about overpaying community solar developers then let’s have a discussion about that rather than trying to impose a size limit that reduces the proposals by more than 80%.
VALUE OF SOLAR
Xcel could have chosen to determine community solar rates by a Value of Solar Tariff as the 2013 law enabled, which very well could have offered a fairer price on Xcel’s terms. Value-of-solar is a rate that factors in decreased carbon emissions risk, the costs and the benefits of having distributed solar energy near load areas. But Xcel chose not to use this solution that solar advocates worked hard to provide for them. As a result the PUC had to approve separate rates for community solar projects.
THE BENEFITS OF CO-LOCATION
Co-locating CSG projects provides a way for customer-owned community solar to achieve the scale advantages of Utility Scale Solar. The PUC order actually recognized the benefit of co-locating CSG projects. It specifically states: “multiple community solar garden sites may be situated in close proximity to one another in order to share in distribution infrastructure.” Xcel energy has long proposed that letting them do utility scale solar to sell to customers is more cost efficient than having as many possible customers installing their own residential solar because of because of scale. Can’t Xcel agree to take advantage of the shared infrastructure and economy of scale benefits of co-location rather than limit the project’s size and ironically forfeiting the economies of scale they say they value? Why would Xcel be against co-location when it takes advantage of shared infrastructure and drive down prices for customers?
XCEL’s REAL MOTIVATION
Although articles in the mainstream media might not spell it out, there is a rather obvious reason why Xcel is uncomfortable enough with CSG’s to unilaterally defy a PUC order. When anyone decides to subscribe to a Community Solar Garden, Xcel essentially loses that former customer for the 25 year time period as far as energy supply. A devotion to maintaining market share is the reason Xcel so wants to instead build their own large-scale solar fields that mimic a central station power plant. Xcel can get their customers to pay for it and they get to keep them as full customers.
Xcel/ NSP also used to fight small-scale and locally owned wind for much the same reasons. Xcel prefers renewable energy to be structured in a way that allows them to buy on bids using customer ratepayer dollars so it can be added to their base of assets. Investor Owned Utilities (IOUs) thrive on this base of assets because they are guaranteed profits by the PUC about a 10% rate of return. Xcel began 'rate basing' the wind farms, very parallel to what they are trying to do with utility scale solar today. As a result, much of the original locally owned wind operations have been driven into bankruptcy.
A SLOWER PACE FOR COMMUNITY SOLAR GARDENS
It must have sent a shock to Xcel when large customers like Ecolab, Inc. and Macalester College announced plans to offset their entire energy consumption through solar gardens. Close to the same time Xcel Energy made quite significant changes to the language its solar garden website. Their website in February read:
“There is no limit to the number of solar gardens which can be placed on a property, but no single garden can exceed the 1 megawatt PV system cap. While there is no program restriction on multiple gardens in one area, there could be technical limitations that could require expensive distribution system upgrades.”
Then, they vastly simplified the corresponding language in the latter version of the same website in order to make room for their pursuit of a 1 MW aggregate size limit:
“The maximum solar garden system size is 1MW AC. The system size is based on the sum of the inverter(s) maximum AC output.”
Why this change in language? Xcel claimed the original intention of the Minnesota Legislature was to have a more gradual phase-in of community solar that would be much less than the 420 megawatts in CSG applications they received the first week of their program. What Xcel said in the April 28 filing was “If all current gardens in the queue were developed, the company would add nearly all of its planned distributed solar resources, not over 15 years, but in a single year.”
They basically want to slow it down. They are fine with people having community-owned solar power, but just not have so much of it that they will no longer need Xcel. IOU’s in general fear a future where they're no longer needed. Xcel would do well to embrace a future in which they claim less than a monopoly on generation. Even with distributed generation, utilities like Xcel still have a purpose in being the central entity primarily responsible for transmission & distribution, reliability, grid management, etc.
THE WISCONSIN PROGRAM
Xcel Energy in Wisconsin did voluntarily choose to offer the first-ever community solar to its customers in Wisconsin. But they plan to offer community solar on a much smaller scale than the 80 megawatts they are willing to do in Minnesota. Absent a state statute in Wisconsin, Xcel gets to do community solar its way which is a maximum of 3 megawatts of solar power through three or four arrays in their Wisconsin Service territory. Here is another big difference on community solar in the neighboring states. While Xcel projects that Wisconsin community solar customers would receive credits of 6.9 cents or 7.4 cents per kilowatt hour, Minnesota community solar participants are expected to receive 12-15 cents per kilowatt hour. The same Wisconsin Public Service Commission (PSC) that approved increased fixed charges to solar homeowners approved this community solar proposal. http://www.midwestenergynews.com/2015/04/30/xcel-pursues-community-solar-in-wisconsin-but-on-small-scale/