We're excited to share that Bruce Stewart is our new CEO, and we have secured $7.2 million in Series A funding.Learn more

Minnesota Community Solar Policy Guide for Asset Owners & Developers

Everything you need to know about Minnesota’s current community solar legislation, eligibility rules, crediting mechanisms and other important market details, created by Perch’s internal policy team. We help asset owners navigate the growth of community solar in markets across the country, and as new laws are considered and passed, Perch will provide updates and perspective on how it impacts your business.

Share

Sunny day in Minnesota

1. Minnesota’s Community Solar Garden (CSG) program

Minnesota’s community solar law was initially passed in 2013 and has since led to explosive development of community solar throughout the state. Community solar now accounts for at least 826 megawatts across 400 sites, with over 28,000 subscribers.

The law applies only to CSGs in Xcel’s service territory in Minnesota which covers nearly 4 out of 5 electricity customers in Minnesota.

Minnesota has recently introduced a law to ensure residential subscribers – specifically low-to-middle income (LMI) households – receive greater benefits, namely reduced energy bills, by gaining greater access to CSGs. The updates to the CSG program would require at least half of a solar farm’s generating capacity be used by residential subscribers.

This is significant because across all projects, only 14% of generation capacity is being used by residential subscribers.

With Minnesota placing a greater focus on extending the benefits of community solar to LMI customers, Perch is particularly well positioned to increase the share residential subscribers because of our internal emphasis on residential subscriptions and our foothold of 6.5 MWs managed in the state.

2. Eligibility rules and CSG’s specification requirements

Current Spec requirements:

  • Maximum capacity of 1 MW
  • Project must be located in Xcel territory
  • The CSG and its subscribers must be in the same county or adjacent countyi
  • A credit must be applied to the bill of the subscribing customer making the project financeable
  • At least 5 subscribers per project

Subscriber Requirements

  • A subscriber must be an electric retail customer of Xcel Energy
  • Subscriptions must not exceed 120% of your average annual electric energy usage
  • Subscriptions must not exceed 40% of a single garden
  • Subscribers will be provided with a monthly credit on their bill. The credit will be determined on a dollars per kilowatt-hours produced ($/kWh) basis by Xcel Energy.

Community Access Projects

This proposed update to Minnesota's community solar law is aimed at increasing residential participation in CSGs. To be considered an "access project," it is required that:

  • At least 50% of the CSG’s generating capacity be residential subscribers
  • A solar garden owner cannot screen subscribers based on income or credit score
  • The CSG must be operated by an entity with a physical address in MN
    • Must also have a designated contact person to respond to subscriber inquiries
  • A CSG owner must publicize and hold at least 1 meeting annually to get input and take questions from subscribers

3. Credit mechanisms

Renewable Energy Credits (RECs) represent the environmental benefits associated with the energy produced from a renewable source. REC ownership determines the claims subscribers can make about their renewable energy participation. In Xcel’s community solar program, the RECs are kept by Xcel and used towards the company’s renewable energy goals.

  • Xcel Energy customers who are subscribed to a solar garden are eligible for a solar energy bill credit each full month the garden is in production.
    • Standard Bill Credit – the applicable retail rate at time of generation
    • Enhanced Bill credit – sum of Standard Bill Credit and Commission approved REC pricing
  • The customer’s bill credit is found from multiplying the kWhs generated per subscription by the bill credit rate
  • In Xcel territory, subscription contracts with community solar developers are up to 25 years long. Residents might be wary of making such a long-term commitment. Some developers have addressed this issue by allowing subscribers to leave the program without a fee by giving 60 or 90 days’ notice. Other developers charge a fee to exit a contract early. Subscribers can typically transfer their subscription to a new address if they are staying in Xcel territory and in a county bordering the solar garden

Rates and Adders

Applicable Retail Rate(ARR):

The ARR was set between $0.14033 and $0.1503 cents per kWh for residential customers depending on the size of the CSG, with a guaranteed annual escalation. The ARR bill credit is smaller for commercial and industrial subscribers

  • The current ARR generally ranges from $0.12770 to $0.158670 / kWh

Value of Solar (VOS):

VOS tariff calculation replaced the ARR for all CSG projects applying after January 1, 2017.

  • VOS changes every year based on a variety of factors and an agreed-upon methodology compromising 3 basic categories
    • The avoided costs to the utility
    • The benefits that solar's distributed nature provide
    • The benefits to the environment
  • 149 online CSG projects are receiving the VOS rate

Residential Adder:

  • Boosts compensation rates for residential subscribers by 1.5 cents. Began in 2018 and will continue through 2022 (included in the VOS rate only)

4. Policy guidance

What Perch would like to see

  • HF653: There is ongoing advocacy by the MnSEIA and other solar groups to remove the “contiguous counties” requirement. This part of the law requires CSG subscribers to either be in the county where the CSG is located or adjacent to the county where the CSG is located. Striking this requirement would open up much more of Minnesota to CSG development.
  • Increase the maximum size from 1 MW to at least 3-5 MWs
  • Universal Consolidated Billing (whether by statute, or by Xcel)

See here for more information on how bills are passed in Minnesota.

5. Market analysis

While the rate at which CSGs come online has decreased, there is still significant potential for expansion in the state, especially when it comes to residential subscribers. The residential adder also makes the acquisition of residential subscribers more appealing as it has been extended through 2022. If the contiguous counties rule is removed, the ability to accommodate more subscribers with community solar expands significantly.

Additionally, if the proposed law passes and CSGs aim to be Community Access Projects, they would be required to have 50% of their subscribed capacity go to residential customers.

Xcel

How many CSG customers does Xcel have?

Customer type Subscriptions
Large business & other: 2,012 subscriptions
Small business: 1,416 subscriptions (5% of total)
Residential: 24,861 subscriptions (86% of total)

 DC Capacity in kW allocation used by type of customer

Customer type Subscriptions
Large business & other: 960,418 (85% of subscription capacity)
Small business: 14,165 (1% of subscription capacity)
Residential: 162,655 (14$ of subscription capacity)

Subscriptions by rate class

ARR

Customer type Subscriptions
Large business & other: 1,891
Small business: 1,140
Residential: 23,091

 VOS

Customer type Subscriptions
Large business & other: 700
Small business: 276
Residential: 1,770

6. Appendix

Utility service area maps

minnesota-utility-service-map.png
Source: ResearchGate.net, Minnesota Solar Potential Analysis by Marc J. R. Perez
minnesota-investor-owned-utility-map.png
Source: mn.gov

Important terms:

Virtual Net Metering:

  • Virtual (or group or neighborhood) net metering (now also called “shared renewables”) allows utility customers to share the electricity output from a single power project, typically in proportion to their ownership of the shared system.
  • Allows electric bill payers to choose to source their power from a shared energy source (usually some form of renewable energy) off their property, which supplies additional power to the grid.

Value of Solar explainer:

  • “Vintage” year refers to the discrete value of solar calculation for a particular year
  • How VOS is calculated

Xcel Chart of Bill credit rate for ARR, VOS

Other state community solar policy guides from Perch


Share

More Blogs

Get matched to a local solar farm and save on your electricity costs.