Minnesota’s New Clean-Energy Policy: Two Years Later

How has Minnesota’s Omnibus Energy Bill, HF 2834, changed the climate for clean energy in the state since its signature on May 24, 2013? Heralded as a bold action to make Minnesota a national leader in clean energy, the multifaceted bill established a solar carve-out in addition to the state’s existing renewable portfolio standard. It also created a community solar program and reformed Property-Assessed Clean Energy (PACE) policies. However, perhaps the most significant change was the new law’s use of the Value of Solar model that replaced net metering.

Solar Carve-Out

First, the bill added a new solar-generation requirement of 1.5 percent by 2025, boosting solar generation to approximately 450 MW from the then-current 13 MW over that period and giving the state one of the highest solar carve-outs in the country. This carve-out came in addition to the 2007 implementation of 25 percent renewable power by 2025 for most investor-owned utilities and 30 percent for Xcel Energy, the state’s largest utility.

Community Shared Solar

St. PaulBeyond this effective 30-fold increase in solar generation, the state implemented a new community solar garden policy intended to grant access to families whose homes do not have the right conditions for rooftop solar.

The policy encouraged the development of community shared solar projects up to 1 MW. By mid-June, the demand climbed as high as 914 MW. Further, with so many project applications in the queue, Xcel Energy was set to exceed its requirements under the renewable portfolio standard, which were between 300 and 400 MW, before finalizing its own plans for nearly 2 GW of utility-scale projects over the next decade.

Xcel Energy was the only utility that this legislation required to create a community solar program.  Many of the state’s cooperative utilities have installed community solar projects and plan to expand them further.

Despite its rampant success, this community shared solar boom has not been without conflict or criticism. For example, Xcel Energy claims that community solar gardens will cost ratepayers up to 1.5 percent extra on their utility bills, double the increase that would result from its utility-scale projects.

Additionally, developers and Xcel Energy came to a standoff earlier this year over co-location of projects. Many development proposals bundled multiple 1-MW projects together at the same location in order to reduce project costs. This included projects as large as 50 MW. Xcel Energy claimed, however, that this violated the program’s legislated constraints and ratcheted down all co-located applications to the 1-MW limit.

Further, Xcel Energy criticized developers for having primarily large corporations as their customers instead of the intended beneficiaries of the policy: residents, nonprofits, churches, and other small customers. Developers responded in outrage and were prepared to take their case to the courts. In June 2015, Xcel Energy agreed to a 5-MW limit for co-located projects.

PACE Reform

While much attention has gone to the ambitious solar provisions in HF 2834, the bill also contains several interesting implications for energy efficiency through its reform of the state’s PACE program. Under the new provisions, local governments are allowed to aggregate administration of PACE in order to make the program more accessible for smaller county governments in the rural areas of the state who would not have sufficient volume to justify administering the previous program.

Like the lackluster media coverage, the results of this program have been a bit muted. The Saint Paul Port Authority has taken the lead on the largest aggregation. It has seen less than 10 projects, all in the $50,000-200,000 range, with about as many in the approval pipeline.

Carl Nelson, director of program development at the Minnesota Center for Energy and Environment, said that while the increase in energy efficiency projects due to the reform hasn’t been as dramatic as that in the solar industry, the reform has been successful in bringing access to PACE to a new set of projects.

Value of Solar Pricing

Minnesota treesSignificant media attention – such as these articles from The Washington Post and Greentech Media – has been dedicated to the battle between utilities and distributed generation.

However, John Farrell, director of democratic energy at the Institute for Local Self-Reliance (ILSR), said Minnesota already has a solution in its Value of Solar policy.

According to a report by ILSR, this pricing mechanism institutes a “transparent, market-based price for solar energy” based on the avoided purchase of polluting energy sources, the avoided cost of new power-plant construction, the long-term predictability of energy prices, and reduced wear and tear on the grid from distributed generation.

This tariff will compensate solar generators for the value their energy provides for the grid and for society even as production-based incentives fade away.

Looking Forward

Despite the conflict surrounding the solar garden program, the Omnibus Energy Bill has generally had its intended effects. Solar energy is set to expand rapidly in the coming years. Xcel Energy's Solar Rewards Rebate Program is currently under consideration by the Minnesota Public Utilities Commission. More municipalities have access to PACE now than they did before. The solar garden program is one of the largest in the country.

However, clean energy advocates still have their eyes on the horizon. HF 880 successfully proposed a renewable portfolio standard increase to 40 percent and extended the target date to 2030. Other advocates in the state have lobbied for a feed-in-tariff to accompany the Value of Solar pricing for distributed generation. Only time will tell if the political will for these additional initiatives will materialize.

Note: This article was corrected on July 29, 2015. The magnitude of some figures was changed to MW. The article was edited to clarify that Minnesota's community solar policy is not an incentive program, does not have a lottery system, and does not provide financing. A sentence about cooperative utilities was added. A sentence about Xcel Energy's Solar Rewards Rebate Program was also added. 

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