Minn. PUC weighs Xcel’s request to rein in community solar boom 

Source: Jeffrey Tomich, E&E reporter • Posted: Friday, June 26, 2015

They didn’t know it at the time, but the members of Minnesota’s Public Utilities Commission set off a solar tsunami last year when they approved rules for a community solar program in Xcel Energy Inc.’s service area.

Yesterday, the PUC opened a hearing on Xcel’s plea to retroactively put limits on the program, and on the consequences of doing so for Minnesota’s nascent solar industry.

Seven months after opening the doors to community solar, Xcel is sitting on applications totaling almost a gigawatt — all intended to be completed by the end of 2016. With few exceptions, proposals consist of multiple 1-megawatt solar projects clustered together to capture economies of scale (EnergyWire, May 4).

Xcel has complained loudly that developers are seeking to exploit a loophole in the 2013 law that created the program by clustering together 10, 20, even 40 of the “gardens” for the purpose of building utility-scale solar farms that aren’t subject to competitive bidding. And that has the potential to shift more than $100 million of costs to nonparticipating customers, the utility said.

The build-out of so many large-scale projects in such a short time could also have adverse consequences for Xcel’s distribution grid and give rise to land-use issues as projects cumulatively require thousands of acres of land.

“The company believes the program is seriously off-track,” said Andy Brown, a lawyer representing Xcel, said during the daylong hearing in St. Paul.

Xcel expected 15 to 30 MW of community solar development during the initial year of the program and maybe 100 MW over five or six years, Brown said. Instead, the utility received 400 MW of applications in the first week and 912 MW overall.

“You might find that number to be staggering,” he said. “It certainly is to the company.”

The utility’s initial solution — scaling all projects back to a maximum of 1 MW — was unpopular with solar developers that have invested a lot of time and money in the state based on their interpretation of rules approved last year. If regulators approved the size restriction, it would eliminate about 700 MW of the applications received so far, Xcel officials said yesterday.

But a new solution emerged Monday evening — an eleventh-hour partial settlement agreed to by the utility and several solar developers that would cap the size of co-located solar gardens at 5 MW.

The agreement would still allow up to 500 MW of community solar based on proposals received so far while limiting the rate impact for nonparticipating customers, said Aakash Chandarana, Xcel’s regional vice president of rates and regulatory affairs. The utility believes about half of that amount could ultimately get built, resulting in a community solar program that is one of the largest in the nation.

Trade-off or red herring?

Solar developers that signed onto the agreement said they were willing to scale back some projects in exchange for the ability to more quickly move forward with projects ahead of the looming 2017 step-down of the federal investment tax credit.

“It’s a trade-off,” said Joe Devito of SolarStone Partners. “We’re willing to make a trade for certainty.”

Other parties involved in settlement talks said the retroactive changes were unacceptable, failed to account for benefits to the utility’s grid and would send the wrong message to an industry that has invested a lot in the state.

“Millions of dollars were committed to those projects, and to not honor that in some reasonable fashion would put a real black mark on Minnesota’s solar market,” said Bill Grant, deputy commissioner of energy and telecommunications for the state Department of Commerce.

The department proposed a more modest 10 MW limit for project applications already deemed complete by Xcel.

A coalition of solar developers including SunEdison also rejected the settlement, saying Xcel’s objections to the project size is an attempt to limit the overall scope of the program, said Andrew Moratzka, the group’s attorney.

“I think the issue of co-location is a red herring,” Moratzka said. “The issue is program size; it’s not co-location.”

Moratzka also said the gigawatt of potential projects cited by Xcel is misleading because it includes applications that have not yet been approved. There’s actually less than 500 MW in the utility’s interconnection queue, much of which won’t be built because of limitations in the utility’s distribution grid and the inability of developers to get financing for certain projects, he said.

And the flood of applications is a product of a lack of transparency from Xcel regarding the capabilities of its distribution system and the cloud of uncertainty hanging over the community solar program based on utility objections.

“It’s not surprising that everyone is trying to apply before the rules change,” he said.

Opposition to retroactive changes

The solar coalition said it would agree to a voluntary 20 MW maximum on future projects. But it opposes any retroactive changes.

Among the Xcel customers that have already signed on to be anchors of solar gardens is the St. Paul Public Housing Agency, which operates 16 high-rise housing units.

Beginning last fall, the agency issued requests for proposals, chose a developer, negotiated contracts and “jumped through hoops” to obtain approval from the U.S. Department of Housing and Urban Development to participate in Xcel’s community solar program, said Louise Seeba, the agency’s general counsel.

To retroactively alter the rules of the program threatens to undo those efforts.

“This program is literally the only way that public housing can go solar,” Seeba said. “Our tenants should not be shut out of being part of green energy.”

The PUC is expected to rule on Xcel’s proposal to change the program rules at its meeting tomorrow.

Grant, of the Department of Commerce, summed up the decision facing commissioners this way: “The cow is out of the barn, to some extent. … How much of the cow do we want to put back in?”