Minnesota Utility Seeks to Double State’s Solar Power in Coming Years

6 Nov 2013


If approved by the Minnesota Public Utilities Commission, Xcel would seek to develop up to 2.5 MW per quarter during the next two years, for a total of up to 20 MW.

As the solar industry continues to expand and grow, states across the country are recognizing the importance of going solar and taking aggressive action to do so.  Minnesota is one such state that has recently taken the initiative to expand their solar presence. Minnesota’s H.F. 729 energy law, approved in the spring of 2013, seeks to significantly increase the presence of solar energy in the state’s power supply. While Minnesota passed a first piece of legislation in 2007 that created a Renewable Energy Portfolio Standard for the state, it did not include a specific solar carve-out requirement for the state’s utilities. This most recent law mandates that public utilities, including the state’s biggest utility Xcel Energy, meet a 1.5% solar standard by 2020.

While this percentage may seem low, in order to reach the 1.5% standard, Minnesota’s solar energy capacity would have to increase by 30-fold from the 13 MW currently installed in the state up to 450 MW by 2020. In an effort to comply with these new requirements, Xcel’s leadership has focused on finding new opportunities to expand the presence of renewables in their portfolio.

Community Solar Gardens

Through a subscription system, Xcel is looking to introduce community-owned solar gardens to the North Star state. The utility would construct and maintain solar arrays, and home and business owners would have the opportunity to buy specific panels or a share from this community array. Since all financing and EPC costs are taken care of by Xcel, customers would buy into a part of a solar energy project and receive a credit on their utility bills equal to their share of the system, just as if that portion of the system was installed on their own roof. In Xcel’s Colorado Solar Garden program, for example, a kilowatt of solar capacity will cost approximately $2,000 – $2,500. For every kilowatt purchased, subscribers receive a monthly bill credit of $150 – $180 per year. As electricity rates fluctuate, these credits will also change. These incentives vary from area to area, so prices in Minnesota will be available after Xcel’s program rules are complete and the construction bids are received.

One goal of this program, by offering individual shares of a system, is to make solar energy more available for thousands of home and business owners that do not have the capital to finance their own systems.  Under this new law, individuals have the option of purchasing a share of the system as small as 200 watts or as large as 40% of the system’s capacity. These limits will encourage home and business owners to participate at a cost they can afford, which in most cases will be lower than installing a system on their home.

This community solar initiative is not a new idea in Minnesota though. Clean Energy Collective installed the first solar garden in the state, a 40 kW system that went online in September 2013 with 25 customers purchasing a share of the array so far. This one project, however, is no indication of what the future holds for community gardens in Minnesota.  Xcel plans to construct much larger projects. If approved by the Minnesota Public Utilities Commission, Xcel would seek to develop up to 2.5 MW per quarter during the next two years, for a total of up to 20 MW.

With the passage of this program, Minnesota joins a small list of states that currently support solar gardens, including California, Colorado, Massachusetts, Utah, and most recently Washington, DC. The Xcel program’s target size is still off the charts for the typical size of other solar gardens. In comparison, Massachusetts’ Brewster Community Solar Garden has a capacity of 345.6 kW and California’s Sacramento Municipal Utility District SolarShares project is 1 MW. With this aggressive project size and installation rate, if passed, Xcel’s solar gardens program could double the state’s installed solar capacity in two years.

Solar Production Incentive

In addition to the solar gardens program, Xcel will look to add a smaller, more residential focused program to its efforts to increase the share of renewables in the state’s overall power supply. Beginning in January 2014, Xcel energy will also offer a performance-based incentive for systems 20 kW DC or less. The incentive rate for this program has yet to be determined and it will first have to be approved by the PUC. With a budget of $25 million, this program will allocate $5 million each year for the first five years of the program until 2018. The production incentive will be paid out to the customer for 10 years and it will be calculated based on the system’s production.

Sol Systems will continue tracking the progress of these programs. If you are currently developing commercial projects in Minnesota, and are in need of financing, please contact our team at finance@solsystemscompany.com or (888) 235-1538×2. Our team is happy to discuss your project with you and assess financing opportunities.

About Sol Systems
Sol Systems is a boutique financial services firm that offers investor clients direct access to the renewable energy asset class and provides developers with sophisticated project financing solutions. Founded in 2008, Sol Systems focuses on meeting the most critical needs of the industry, including SREC monetization, capital placement, tax equity, and New Market Tax Credits. To date, the company has arranged financing for thousands of projects and facilitated hundreds of millions in investment on behalf of Fortune 100 companies, private equity, family offices and individuals.

For more information please visit www.solsystemscompany.com.

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Alejandro Neira

Alejandro Neira