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 Value of Solar Achieves a New Dawn in Minnesota

This morning, Xcel Energy announced plans to issue a Request for Proposals (RFP) for up to 150 MW of solar energy generation. Xcel included its RFP plans in a filing submitted to the Minnesota Public Utilities Commission (Commission) outlining its strategy for complying with Minnesota’s new solar energy standard. The standard requires that public utilities like Xcel obtain 1.5 percent of their retail sales from solar energy resources. Xcel expects to obtain about 1/3 of its Minnesota solar requirement from distributed solar resources (including community solar gardens and small projects eligible for certain incentives). The other 2/3 of the mandate would be met via large-scale solar projects, which are the focus of the RFP.

Xcel anticipates issuing the RFP on April 15, 2014 with proposals due June 1, 2014. Following contract negotiations, selected projects would be submitted to the Commission in October 2014.

In other Minnesota solar news, the Commission conditionally approved Xcel’s community solar garden plan yesterday, including the interim rates we wrote about last week. A compliance filing will be due within 30 days of the Commission’s written order. Then, Xcel is required to open the program within 90 days of the Commission’s approval of the compliance filing.

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.

Maine appears poised to replace its net-energy metering (NEM) program with new legislation that is projected to increase the state’s solar photovoltaics (PV) penetration by over 12 times the current installed capacity by 2022. The legislation has the support of a broad coalition of consumer advocates, utilities, solar installers and environmental advocates, by contrast to the contentious and divisive NEM battles in states like California, Nevada and Arizona. (One prominent solar advocate, The Alliance for Solar Choice, has stated that the current NEM program should be kept in place until the new policy demonstrates that it will support solar growth.)

The move comes as Central Maine Power, the state’s largest utility, is nearing the 1 MW cap on NEM, and as the state has undertaken the ambitious effort to determine the proper value of solar. A study conducted last year found that the value of solar might be as high as $0.33 per kWh, whereas under the current NEM framework, customers with rooftop solar who export energy to the grid are paid the retail rate of $0.13 per kWh.

The new legislation provides that Maine utilities will enter into long term contracts for a total of 248 MW over the next five years, divided between four market segments: residential and small business, community solar gardens, large commercial and industrial, and grid scale projects (up to 5 MW). Nearly all of Maine’s 20 MW of solar PV is currently sited at residential and small business customers, and under the new legislation, that capacity could increase to 118 MW, or 47% of the market. Community solar could increase to 45 MW, or 19% of the market, large commercial and industrial could increase to 25 MW, or 10% of the market, and grid scale could increase to 60 MW, or 24% of the market.

Contract terms will vary based on the market segment. For example, residential and small business customers can either sell the entire output of their system to the utility or use the generation to offset their consumption and sell any excess generation. Unlike NEM, where the price per kWh varies over time, the price per kWh under the new legislation is set by the Maine Public Utilities Commission (PUC) in order to meet installation targets, subject to an overall cap on the cost of the program. The price is expected to step down as installation grows.

Existing NEM customers can continue under that program for 12 years, but NEM is not available to new customers once the program goes into effect. The Maine PUC will review the program after 18 months or 21 MW of installed capacity, whichever comes first.

A summary of the legislation is available here (pdf), and the draft bill is available here (pdf).

On Monday, the MN PUC addressed whether ‘tis nobler in the pocketbook to suffer the slings and arrows of the MISO market or to invest in new generating units against a sea of uncertainty.

As we noted in prior blogs, the MN PUC initiated the competitive process seeking bids to meet a claimed capacity need on Xcel Energy’s system from 150 MW by 2017 to up to 500 MW by 2019. Over the course of the proceeding, circumstances changed so drastically that it became entirely uncertain whether Xcel would have any capacity need during the relevant timeframe. Nonetheless, the MN PUC decided in March of this year that, notwithstanding the uncertainty, the record demonstrated a need for more than 300 MW by 2019. The MN PUC then found that if the parties can agree to terms that are consistent with the public interest, the Solar PPA provides an appropriate choice for meeting a portion of Xcel’s reliability and adequacy needs (and to fulfill the state’s energy policies) AND that all of the remaining thermal bids may also provide appropriate choices for the same. In other words the Commission directed Xcel to finalize agreements with all parties (or estimates for its own Black Dog project) and submit these finalized terms to the Commission for review.

After the MN PUC’s March decision, Xcel Energy filed yet another updated need assessment explaining that the company no longer expects to have a resource need until perhaps 2024. Xcel Energy also asked the MN PUC to delay action on all thermal projects as a result.

When the MN PUC began deliberations this week, it first took up the question about whether to revisit the need assessment and decided to stick with the original capacity need estimate set forth almost 2 years ago. The Commission then proceeded to oversee some modification of the Solar PPA terms but ultimately determined it was in the public interest and then went on to also find that the Calpine and Black Dog 6 terms were also consistent with the public interest. Thus at a time when even Xcel Energy is arguing it has no capacity shortfall for almost 10 years, the MN PUC authorized over 600 MW of capacity resources to move forward (71 MW solar project, 345 MW Calpine project, 209 MW Black Dog 6 project).

Furthermore, Xcel Energy’s Community Solar Gardens program opened on Friday, December 12. The MN PUC did not inquire as to the initial level of applications. Although verifiable numbers have not been publicly released, there could be a material amount of community solar gardens entering the system by 2015, which could put additional downward pressure on Xcel Energy’s capacity needs.