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).

By statute (216B.164, subd. 10), the VOS tariff must compensate “customers through a bill credit mechanism for the value to the utility, its customers, and society.” The statute then provides the following guidance on what must be included in the calculation:

The distributed solar value methodology established by the department must, at a minimum, account for the value of energy and its deliver, generation capacity, transmission capacity, transmission and distribution line losses, and environmental value. The department may, based on known and measurable evidence of the cost or benefit of the 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. (emphasis added).

Solar and renewable energy advocates would like to see a value added that compensates generators for helping the utility meet the solar energy standard now in law. The Department and utilities generally argue against this approach because the VOS rate already explicitly includes externalities in its valuation and it is difficult to estimate a price for the compliance portion only – particularly in a market with very little pricing information for SRECs. As for those environmental benefits, utilities would like to limit the valuation to those strictly on its system and argue that the federal Social Cost of Carbon, for example, is untested, contentious and far too broad. For its part, the Department responded to the key comments and virtually every valuation component in its response here.