Minnesota: Community Solar Maintains Growth Despite Challenges

Even facing pandemic slowdowns and legislative opposition, the state far outpaces its closest competitor in operating capacity. 

Minnesota’s community solar garden initiative continues to be the largest in the country even after dodging relentless utility opposition, a crippling pandemic and market forces that could have slowed growth.

Operated by Xcel Energy after being enacted by the Legislature seven years ago, the program boasts more than 680 megawatts of operating capacity in the first quarter of 2020, more than two times the amount installed in Massachusetts, its closest competitor.

And despite a nationwide economic slump, the program shows no sign of cooling off. A recent Xcel update reported 349 MW in the application process. No other state even comes close to the size of those numbers and applications show no sign of abating even in a time of economic turmoil. As of the first quarter of 2020 Massachusetts has 276 MW, New York 261 MW and Colorado 81MW.

David Shaffer, executive director of the Minnesota Solar Energy Industries Association, said he “would not be surprised” to see another 50 to 100 MW of community solar proposed before the end of the year. The finite availability of places for community solar developers to plug into the grid could have an impact, but that appears unlikely.

“The only thing that might hold this program down is the available substation capacity that’s more of a ‘might’ than ‘will’ at the moment,” he said.

The state’s community solar program likely still faces political pressure from Xcel Energy, which has lobbied at the state Legislature annually to either reduce or kill it. At the same time, the utility often boasts in regulatory filings and press releases that Minnesota has the leading program in the country.

There are several reasons why the program continues to grow. Shaffer said solar panel prices dropped nationally and internationally because projects have stopped in other countries, offering “a nice little surprise” to American developers in need of inventory. Minnesota’s “value of solar” payment method, which reimburses developers for the power they generate, has stabilized pricing in the market and given greater confidence to financiers. The 2020 value of solar rate is slightly higher than in 2019, leading some community solar developers to wait until this year to submit projects and receive approvals, Shaffer said.

Eric Pasi, chief development officer for Impact Power Solutions (formerly IPS Solar), said the prior reimbursement system known as “applied retail rate” changed the annual compensation rate of developers. The value of solar, in contrast, sets out how payments will take shape over 25 years.

The value of solar has one other advantage. Developers can sell residential subscriptions with less reliance on customers’ credit scores, said David Amster-Olszewski, founder and CEO of the Colorado-based community solar developer SunShare. “It makes it easier to explain to financiers that you’re financing not on the customers’ credit but on the strength of the value of solar and the program’s strength, which we found to be helpful,” he said.

SunShare has been able to waive credit score checks and offer community solar to a wider range of customers. “That’s been really beneficial,” Amster-Olszewski said.

The dropping prices of sophisticated solar technology allows developers to generate more power from projects than in years past, Pasi said. Bi-facial panels with single access trackers that follow the sun produce more electricity than community solar arrays of the same size did just a few years ago, he said.

This year Impact Power Solutions plans to install 50 MW of community solar, 35 MW in Minnesota and the rest in Illinois. Putting this year’s total in perspective, Minnesota had just 37 MW of community solar in 2015, he said. “Of all the solar we’ve [Impact Power Solutions] done in 30 years, something like 40% will be completed this year,” Pasi said.

Even with the program’s success, Minnesota’s community solar model has not spread. “We’re still the best state in the country for community solar, and I’m sort of sad to say that because I would like to see other states and places to do this kind of development,” said John Farrell, co-director of the Institute for Local Self-Reliance and director of the Energy Democracy Initiative. “Nobody else has hit upon the same combination of traits that make the program successful.”

Minnesota does not limit the aggregate capacity of community solar projects every year, as does Colorado. The value of solar offers a “fair price and a certain level of certainty” not available to developers in other states, which have struggled to create an acceptable formula, he said.

Looming challenges, maybe

Community solar’s trajectory in Minnesota climbs despite considerable opposition from Xcel and a changing regulatory landscape. Xcel has argued annually at the state Legislature that the program costs too much compared to utility solar projects. Community solar advocates contend the utility does not account for the benefits they bring to the grid.

The debate mirrors most political disputes in Minnesota and nationally over clean energy, with Democrats siding with community solar and Republicans typically supporting Xcel. “The program has a bit of a target on its head,” Shaffer said. “If the Legislature shook out in a different way, we could see radical program changes.”

Shaffer says geographic limitations leave only around 200 to 300 MW that can be realistically developed after this year. By law, developers can only sell subscriptions in the county where the community solar project is located and bordering counties. Potential garden sites in remote areas probably cannot work because they do not have a large enough base of business or residential subscribers, he said. The Minnesota Solar Energy Industries Association and other clean energy advocacy groups support a measure to eliminate the rule and they hope the Legislature makes the change if Minnesota has another special session this year.

The value of solar formula offers an additional payment to solar operators who attract residential subscribers. The “adder” ends next year and Shaffer worries developers will simply focus on attracting big institutions and commercial clients.

Minnesota’s law requires projects to have at least five subscribers, with two being able to claim at most 40% each of the electricity generation. Many operators sign two lead subscribers and add three, or more, commercial or institutional clients to fill projects.

Shaffer says a shift to serving business and nonprofits will make it Xcel to convince legislators that community solar no longer serves communities. “From a political perspective, it becomes a lot harder to justify the existence of this program when residential customers cannot even materially participate,” he said.

Recruiting and managing residential subscriptions costs more than a handful of large clients, said Amster-Olszewski. Although SunShare’s community solar arrays represent 70% of all active residential subscribers in Minnesota, he worries the low adder reimbursement will significantly diminish community solar options for homeowners and apartment tenants.

Even now Xcel reports Minnesota’s community solar gardens currently have around 19,000 subscribers, but the commercial and industrial clients represent 86% of their capacity. Amster-Olszewski joins Shaffer in predicting Minnesota community solar projects will eventually fill only with business clients.

SunShare also builds community solar in Colorado, where Xcel is the dominant utility. Last year the Colorado Legislature removed the contingency rule as part of a community solar modernization act, Amster-Olszewski said. With the Twin Cities interconnection sites growing increasingly congested – another growing problem — he hopes Minnesota will follow suit.

Colorado also increased the size allowed for community solar projects to 5 MW, another change he would like to see in Minnesota. Bigger gardens would allow developers to spread costs over more customers and allow them enough financial leeway to include more residential subscribers.

Removing the contingency rule and allowing 5 MW projects “don’t increase the cost of the program in any way, they just decrease the cost to customers because they make more products available and more competition,” he said.


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