Yesterday, Minnesota Governor Mark Dayton signed the Omnibus Energy Bill into law. After months of negotiations, state legislators came to an agreement that brings Minnesota to the forefront of solar power following the creation of a solar energy standard, community solar garden program, and a unique value of solar tariff. Key provisions of the new law include: a solar energy standard, performance-based incentives for solar photovoltaic module manufactured in Minnesota, new pricing options for public utilities, and an expanded opportunity for distributed generation.

Solar Energy Standard

With Governor Dayton’s signature, Minnesota became the 17th state to enact a solar energy standard. Minnesota’s solar energy standard requires investor owned utilities to generate or procure a sufficient amount of solar energy so that by the end of 2020, at least 1.5 percent of the utility’s total retail electricity sales to retail customers in Minnesota comes from solar energy, with the goal of reaching ten percent solar by 2030. In addition, at least ten percent of the 1.5 percent required by 2020 must be met by solar energy generated by or procured from solar photovoltaic devices with a nameplate capacity of 20 kilowatts or less. Notably, the 1.5 percent requirement is in addition to, rather than carved out of, Minnesota’s existing renewable energy standard. Initial reports estimate that the solar energy standard will result in the development of more than 450 megawatts of solar by 2020.

Made in Minnesota

In addition to creating a solar energy standard, the new law creates a performance-based incentive for systems that use solar photovoltaic modules that were certified as “Made in Minnesota.” Beginning January 1, 2014, and every each January 1 through 2023, $15 million will be collected from the public utilities and distributed to owners of eligible grid-connected solar photovoltaic modules with a nameplate capacity below 40 kilowatts as a production incentive payment. The commissioner of commerce is responsible for setting the solar energy production incentive rate for each module within 90 days of certifying a module as Made in Minnesota.

Solar Energy Incentive Program

The new law creates an additional incentive for small solar energy systems. Set to begin in 2014 and operate for five consecutive years, the program will collect $5 million a year from Xcel Energy (through its renewable development account) to fund solar energy systems of no more than a total nameplate capacity of 20 kilowatts. This program will assist the utilities in complying with their duty to secure 10% of the 1.5% solar standard from solar photovoltaic devices with a nameplate capacity of 20 kilowatts or less.

Community Solar Gardens

By September 20, 2013, Xcel Energy must file a plan with the Public Utilities Commission (“PUC”) to operate a community solar garden program, which will begin 90 days after the PUC approves the plan. Community solar gardens give utility customers and other members of the designated community the option to buy solar panels that will be included in an array built in a communal location, rather than on the purchaser’s roof or in their backyard.  Participants receive the benefit of a monthly credit on their electric bill while avoiding the cost of maintaining the panels. A community solar garden may be owned by either a public utility or any other entity or organization that contracts to sell the output and must be designed to offset the energy use of at least five subscribers in each community, of which no single subscriber has more than a 40% interest. A single community solar garden cannot have a nameplate capacity of more than one megawatt or supply more than 120 percent of the average annual consumption of electricity by each subscriber at the premises to which the subscription is attributed.

The first community solar garden (developed before the passage of the new law) in Minnesota is expected to be completed this weekend and consists of 171 panels located on an empty field owned by the Wright-Hennepin Cooperative Electric Association. Subscribers purchased panels priced at $869 each.

Value of Solar Tariff

For the first time, a public utility will be able to offer an alternative tariff that compensates customer-generators through a credit on their energy bill for the value to the utility, its customers, and society for operating distributed solar photovoltaic resources interconnected to the utility system and operated by the customer-generator primarily for meeting his own energy needs. Once approved, the utility’s value of solar tariff can be applied to a customer-generator’s interconnections occurring after the date of approval and in lieu of the rates mentioned in the net metering section below.

By January 13, 2014, the Department of Commerce’s Division of Energy Resources (“DER”) is tasked to establish a methodology that utilities would follow in appropriately calculating or setting their alternate tariffs. The calculations should, at a minimum, account for the value of energy and its delivery, generation capacity, transmission capacity, transmission and distribution line losses, and environmental value. The DER may also, based on known and measurable evidence of the cost or benefit of solar operation to the utility, incorporate other values into the methodology, including credit for locally manufactured or assembled energy systems, systems installed at high-value locations on the distribution grid, or other factors. Further, the PUC may not authorize a utility to charge an alternative tariff rate that is lower than the utility’s applicable retail rate until three years after the PUC approves an alternative tariff for the utility. Lastly, the utility must enter into a contract with the owner of the solar photovoltaic device receiving an alternative tariff rate that has a term of at least 20 years and pays the same rate per kilowatt-hour generated each year for the term of the contract.

Net Metering

The new law will also greatly expand the opportunity for distributed generation by raising the limit on net metering from 40 kilowatts to 1,000 kilowatts. Facilities generating less than 40 kilowatts will continue to receive the utility’s retail rate for net excess generation, while systems between 40 kilowatts and 1,000 kilowatts will receive the avoided cost rate for net excess generation. In the future, utilities will have the opportunity to decide whether to continue offering net metering or switch to a value of solar tariff. Once the cumulative generation of net metered facilities reaches four percent of the public utility’s annual retail electricity sales, the public utility may request the PUC to limit the public utility’s additional net metering obligations.

In addition to raising the cap on net metering, the new law authorizes utilities to use meter aggregation. Meter aggregation allows customer-generators to offset charges for energy usage from multiple meters located on contiguous property owned by the customer.

Setting the Stage for Further Renewable Development

Although the final version of the new law did not increase the existing Minnesota renewable energy standard, it directs all electric utilities and transmission companies to conduct an engineering study of the impacts on reliability and costs of, and to study and develop plans for the transmission network enhancements necessary to support, increasing the renewable energy standard to 40% by 2030, and to higher proportions thereafter, while maintaining system reliability. A team of 15 individuals appointed by the commissioner, in consultation with the electric utilities and transmission companies, will review the study’s proposed methods and assumptions, ongoing work, and preliminary results. The study is due to be completed by November 1, 2014. Other studies required as part of the new legislation include: the value of on-site energy storage and the value of solar thermal.