Fake Punt! Minnesota Commission Immediately Reevaluates Motion, Advances Solar Plus One (or more) Gas Plants
In a follow up to our prior post, we now report that the Minnesota Commission subsequently modified its initial decision to clarify that Xcel Energy is directed to negotiate a power purchase agreement with the solar bidder, which will be reviewed by the Commission to ensure the terms are consistent with the public interest. Xcel is also directed to negotiate with the natural gas project bidders and develop pricing terms for its own natural gas project. Here is the text from the revised motion.
Although all terms will be reviewed by the Commission, Xcel Energy's Minnesota ratepayers will likely have a utility-scale solar project and at least one natural gas project to meet capacity needs in the 2017-2019 timeframe. And it's fair to state the Commission's decision puts solar in the red-zone, first and goal.
After the years of inconclusive resource planning, months of contested case proceedings, and days of oral argument, discussion and review that led to today’s deliberations, the Minnesota Public Utilities Commission (“Commission”) unanimously decided not to decide. The ultimate question before the Commission was what capacity needs had been determined in the record and what should be done to fill that need on Xcel Energy’s system. At the turn of the new year, the Administrative Law Judge’s (“ALJ”) answers to these questions made national news by finding that the solar bid provided the best value for ratepayers (see our blog on that here). The ALJ made his determination, in part, based on new modeling done at the request of the Commission given the significant changes in circumstances that had occurred since docket was opened (e.g., Xcel Energy acquired 750MW of new wind and Minnesota passed a Solar Energy Standard). In light of the changed circumstances and uncertain need, the ALJ recommended selection of the solar resource that was independently “needed” by statute, a capacity bid that could be added as necessary to bridge for any further shortfall, and then conduct a more thorough analysis for the longer-term needs. Today the Commission instead chose to rely primarily on the original need determination that opened the docket, accept the ALJ’s findings only to the extent they were consistent with their own findings, and direct Xcel to negotiate with everyone proposing to build something and report back.
Despite the above, the decision is a significant step forward for solar. This was the first time a solar proposal had competed directly with natural gas in a resource acquisition process and, despite significant pressure from the Department of Commerce to shuffle the solar bid off into a separate, solar-only proceeding, the Commission confirmed today that the solar bid was welcome at the big kids table.
Look for a forthcoming Order that includes something like this:
In order to meet reliability and adequacy requirements and to comply with MN energy policy statutes, direct Xcel to separately negotiate power purchase agreements with Geronimo Energy, Calpine, Invenergy and develop pricing terms for Black Dog 6 to address the overall Xcel system needs identified in this record and the March 5, 2013 Integrated Resource Plan Order and determine which resources best meet system needs and are in ratepayers’ best interests.
Find that negotiated terms that shift risk or unknown costs to ratepayers are not likely to be reasonable. Find that bidders shall be held to the prices and terms used to evaluate each bid for purposes of cost recovery from Xcel ratepayers. Ratepayers will not be at risk for costs that are higher than bid or for benefits assumed in bids that do not materialize. If actual costs are lower than bid, the bidders should be allowed to keep those savings.
Require that power purchase agreement provide terms that sufficiently protect ratepayers from risks associated with the non-deliverability of accredited capacity or energy from the projects as proposed.
Yesterday afternoon, the Minnesota Public Utilities Commission approved the methodology for calculating value of solar (VOS) tariffs in Minnesota as developed by the Department of Commerce. In doing so, Minnesota became the first in the nation to adopt a VOS tariff methodology.
The Commission was required by statute to take action on the VOS calculation methodology by the end of the month. It had three options: to approve it as proposed, reject it, or approve it with modifications and with the consent of the Department. For background on the Department's January 31st recommendation, see our blog posts here and here. The Department subsequently included several modifications affecting the fuel price escalation factor, the avoided distribution capacity cost, and the environmental cost categories.
In its ruling, the Commission approved the Department’s methodology, as amended, by a 3-2 vote.Continue Reading...
After a full day of hearing arguments on Xcel’s proposed Community Solar Garden (CSG) program (see more on that here), the Minnesota Public Utilities Commission deliberated in public on the issue yesterday and made some important modifications to Xcel’s proposal. The program would allow Xcel customers to invest in off-site solar facilities and receive bill credit for their portion of generation. Ultimately that credit would be at the Value of Solar rate, but as parties await a decision on the Value of Solar (VOS) methodology (more on the VOS here), the Commission settled on an interim rate for the program (though its final vote on the matter is still forthcoming). It is largely based on average retail rates but importantly includes a placeholder value of any transferred Solar Renewable Energy Certificates (SRECs). A CSG developer could transfer the S-RECs to Xcel at a compensation rate of $.02/kWh for facilities with a capacity greater than 250 kW and at $.03/kWh for those with a capacity of 250 kW or less. The S-REC value is not intended to reflect a market rate and is intended and is intended to be strictly temporary, expiring upon the approval of Xcel’s VOS tariff. Furthermore the rate and S-REC value are to be reviewed annually and adjusted if necessary.
The illustrative range of rates (assuming the SREC is transferred) is as follows:
Residential: $.14033 or $.15033
Small General: $.13738 or $.143738
General Service: $.11456 or $.12456
In addition, Xcel’s proposed 2.5 MW quarterly cap on the program was removed given the statute precludes a cap. While a final decision has not yet been issued by the Commission, newsmedia have already begun to report on it (see Star Tribune article here).
Final comments were filed yesterday on the proposed methodology for calculating a value of solar (VOS) rate for utilities in Minnesota (more on the proposed methodology is here). With the Commission required to make a decision within 60 days of January 31, 2014, parties remain in fairly wide disagreement about what is required by statute, particularly what values are truly “known and measurable” and whether the value calculation or proposition applies to the particular utility or more broadly to society. Depending on the interpretation of these factors among others, the estimated VOS rate could vary from half of that suggested by the Department’s original $0.135/kWh example to something considerably higher. The rate would eventually apply to Xcel’s Community Solar Garden (CSG) Program and potentially as an alternative to net-metering arrangements for projects under 1MW. In a separate proceeding yesterday, the Commission set interim rates for the CSG program that could be even higher with a placeholder SREC value included (more on that in a separate blog).Continue Reading...
In May 2013, the Minnesota Legislature passed legislation that, among other things, set a solar standard, directed Xcel Energy to develop a community solar garden program, and provided for the development of an alternative tariff mechanism to net metering that would also serve as the rate for community solar garden programs. Under this new scenario and instead of traditional net-metering arrangements, customers would potentially buy all of their electricity from their local distribution utility and then sell all of their PV generation under that utility's Value of Solar (VOS) tariff which would be designed to capture the societal value of PV-generated electricity.
The legislation directed the Department of Commerce to work with stakeholders to develop a VOS methodology and to deliver its recommendations to the Minnesota Public Utilities Commission (Commission) on Friday, January 31, 2014. The Department’s filing today includes its recommendation, with a more in-depth document addressing the methodology. The Department’s recommendations do not set a rate, but rather propose the methodology for calculating a utility-specific rate for distributed PV solar (1 MW and smaller). If the Department’s sample calculation is any indicator of what’s to come, however, the value went from $0.126/kWh in its initial draft to $0.135/kWh in the documents filed this morning.Continue Reading...
At the close of last year, Minnesota Administrative Law Judge Eric Lipman determined that the single solar proposal in a competitive resource acquisition process would provide the best value to Xcel ratepayers (see more here). Key to his decision was his conclusion that Xcel's capacity needs in the timeframe considered were uncertain and potentially declining substantially. Yesterday Xcel and the natural gas bidders (Calpine and Invenergy) in the process filed exceptions to his findings and took sharp aim at the Judge's determination that Xcel's capacity needs appeared to be declining from what had earlier been predicted. In a related news article, Bill Grant, the Deputy Commissioner for Energy Programs at the Department of Commerce, voiced concern that the Judge had relied on an "untested and unusually low forecast for future sales" and suggested that ratepayers would be better served by Xcel's procurement of solar resources through a solar-specific process. The parties with the selected solar (Geronimo) and capacity (GRE) bids, perhaps unsuprisingly, do not agree with these voiced concerns and largely applauded the Judge'sselection of scalable resources in light of uncertain need . Reply comments are due at the end of this month and ultimately the matter will soon be taken up by the Minnesota Public Utilities Commission.
Update: Initial exceptions to this ruling are due on January 21, 2014, see attached scheduling notice.
On December 31, 2013, Minnesota Administrative Law Judge Eric Lipman determined in a competitive bidding process that solar provided greater value to ratepayers than natural gas. In a first-ever competitive bidding process under Minn. Stat. §216B.2422, subd. 5, 4 bidders competed directly with Xcel Energy’s own natural gas proposal to fill an increasingly uncertain future need for capacity resources. If the Minnesota Public Utilities Commission (the “Commission”) agrees with Judge Lipman, Edina-based Geronimo Energy will build 100 MW of solar energy across 20 different sites in rural Minnesota and additional procurement would be put off until better information is available for the timeframe beyond 2019.Continue Reading...
After much anticipation, Xcel Energy submitted its petition for approval (PDF) of the company's proposed community solar gardens program on September 30th. The program would give utility customers a new way to engage in solar generation without having to invest onsite. A solar garden is a "facility that generates electricity by means of a ground-mounted or roof-mounted solar photovoltaic device whereby subscribers receive a bill credit for the electricity generated in proportion to the size of their subscription." Other required details of the program are set forth in Minnesota Statutes 216B.1641 and include:
- each garden must also have at least 5 subscribers whereby no single subscriber has more than a 40 percent interest;
- each subscription must be at least 200 watts and the total garden size cannot exceed 1 MW; and
- each garden must be within Xcel's service territory and its subscribers must be retail customers located in the same or contiguous county as the solar garden site.
While many of the details of the program are set forth by law, Xcel also clarified several procedural elements of its filing. For example, Xcel plans to take applications online on a first-come, first-served basis but limit the program to 2.5 MW per quarterly application period for the first two years of the program. A successful applicant would enter into a 20-year, fixed rate power purchase agreement with Xcel Energy.
Although the rate paid for the energy generated by a solar garden facility will eventually be the forthcoming Value of Solar rate, Xcel states that it is likely the solar gardens program will need to begin operations and issue bill credits before Xcel has a Value of Solar rate in place. For the interim period Xcel proposed to use a blended retail rate that differs by demand and non-demand class and by season. For no-demand metered service this would be just over $0.10/kWh and for demand metered service this would be just over $0.06/kWh, both with slight increases for the summer months. This price is expected to include the transfer of any and all solar renewable energy certificates generated by the garden to Xcel.
Last Thursday, the Environmental Protection Agency released its proposed rule for the 2013 Renewable Fuel Standard (“RFS2”) volume obligations. Every year the EPA is required to determine and publish the annual volume requirements for each class of renewable fuel that obligated parties will have to comply with for the upcoming year under the RFS2 program. The volumes required under the proposed rule for 2013 are as follows (generally in ethanol equivalent volume): 14 million gallons of cellulosic biofuel, 1.28 billion gallons of biomass-based diesel (actual volume), 2.75 billion gallons of advanced biofuel, and 16.55 billion gallons of renewable fuel. As always the categories are nested and the advanced biofuel volume includes the volumes set for the cellulosic and biomass-based diesel categories. The renewable fuel category accounts for all renewable fuel including traditional corn starch ethanol.
Three of the four categories are consistent with the volumes set forth by statute. The volume for cellulosic biofuel, however, is set by this rule because it must be the lesser of the statutory volume and EPA’s projection of industry production for any given year. As with each ruling prior to this one under the program, EPA set a dramatically lower cellulosic biofuel volume than the statutory volume based on its assessment of the industry’s status. Rather than 1 billion gallons as would otherwise be required by statute, EPA is requiring obligated parties to account for 14 million gallons of cellulosic fuel. Despite the dramatic reduction from the statutory requirement, this is significant because it is an increase over the 2012 standard of 10.45 million gallons that has been the subject of considerable recent controversy.Continue Reading...