INTERVIEW: Minnesota developers discuss new LMI-Accessible CSG Program

The first application window for Minnesota’s new Low and Moderate-income Accessible Community Solar Garden program (LMI-Accessible CSG Program) opens for applications on February 1 and experienced Minnesota developers, such as Nokomis Energy and Enterprise Energy, are ready.

The application window will be open for 21 days and set to close at 4 p.m. on February 21.

"Enterprise Energy is eagerly anticipating the latest iteration of Minnesota's Community Solar Program,” said Eric Pasi, Enterprise Energy CEO, in an interview with NPM.

The Minneapolis-based developer is aiming to submit between 30-50 MW of projects in the program over the next three to five years, Pasi said.

During the 2023 Legislative session, the Minnesota Legislature made changes to the former Community Solar Garden statute, sunsetting the Legacy program operated by Xcel Energy and establishing a new program to be administered by the Minnesota Department of Commerce.

The state agency will be reviewing the community solar applications in batches on a monthly basis. The application window for each batch will open for 21 days at the beginning on the 1st of each month. If the total capacity of complete applications from the first round does not exceed 100 MW, projects will be approved to move forward, according to the program website. If the capacity of applications exceeds 100 MW, the commerce will look at applications in more detail to score them against other projects to award the last increment of capacity.

“We don’t think the cap will be hit for the first few months or maybe even couple of years just because the interconnection process still is the gating process to be able to achieve the requirements to apply into the program,” said Brendan Dillon, Nokomis Energy President, in a separate interview with NPM. “That will continue to be the constraint on the number of megawatts that can apply.”

With what the queue looks like today and how many interconnection agreements have been issued over the last couple of years—it’s not 100 MW a year, Dillon noted.

“It’s possible that we’ll see an early rush of applications because projects have been waiting for the new program, but we don’t anticipate hitting the program cap for a while,” Dillon said.

“It will be interesting to see what new developers show up, whether we see some large national developers try and re-enter the market that they may have left when they transitioned to the Value of Solar (VOS) in 2017,” Dillon said. “That will all shed some light on what that competitive environment looks like when we do actually hit the program cap.”

Minnesota is Nokomis Energy’s leading market where they’ve been developing projects from the program’s conception.

Katie Kavanaugh, Distributed Solar Development (DSD) Community Solar Manager, told NPM that while they’re not currently planning on submitting any projects in the first round, they do intend to participate in 2024.

“DSD has successfully operated community solar projects across the state within the VOS program and is excited to continue to take part in the new Low-to-Moderate-Income Accessible Community Solar Garden program,” Kavanaugh said.

Changes

“The new program includes features that will remove many challenges to community solar development within the state,” Kavanaugh said. “The increase in allowable project size from 1 MW to 5 MW in the CSG program will allow developers to serve more customers and incentivize growth within the market.”

The increased project size cap will also help increase the viability of projects and potentially reduce the size of the interconnection queue that is expected to spur growth within the state, added Kavanaugh.

Pasi and Dillon echoed the sentiment, both noting that a significant shift in their approach will revolve around an increased focus on system sizing.

“Larger project sizes give a lot more flexibility in how you site projects,” Dillon said. “When you can build up to 5 MW, you can better fit that project into the local community.”

Dillon said that some jurisdictions have done their homework and they’ve written their ordinance in a way that gives developers a clear understanding of where they should develop, but other jurisdictions are behind, and have not outlined sufficient rules for developers.

“Having that flexibility with a larger project size allows you more options to engage with the local communities,” Dillion said.

Larger projects also amortize the fixed interconnection costs over more megawatts, so projects can harvest the tougher to find capacity on the system. According to Dillon, there are several feeders in Xcel Energy service territory that are nearing or at capacity and the ability to build a larger project size allows you to amortize a larger upgrade for the system whether that’s building a feeder out to an area of land that’s well suited for solar development or increasing the wires or equipment that’s installed on the system to unlock that last economically viable remaining capacity on the system.

“That also upgrades the local grid significantly and defers a lot of costs that essentially would get passed down to rate payers,” Dillon said.

Another challenge from the development standpoint is the separation of the interconnection process from the program application process where developers previously applied for interconnection with Xcel and by doing so, they were also applying into the program, according to Dillon. But since there was no annual megawatt cap on the program, every application that successfully made it through the interconnection process was in the program and received a contract. Now that this is changing, developers will need to submit for interconnection separately from the program.

“Which is interesting in this market because there’s been a robust interconnection for several years now,” Dillon said. “There’s lots of projects sitting there in the queue in some cases with interconnection agreements and those will be the first projects that get submitted into the program—projects that were essentially developed under the previous rules of the legacy program and because of this transition will now just get to apply into the new program.”

Therefore, the three most notable elements to Nokomis Energy are the separating of interconnection from the program approval, flexibility for larger project sizes in terms of siting and permitting, and the ability to harvest the last remaining capacity on constrained areas.

“That’s how we’re sort of evolving our development—taking advantage of those three things to deliver projects that local communities want,” Dillon said.

Kavanaugh said that DSD will also be shifting its offtake strategy to prioritize subscribing a greater number of income qualified households in new community solar projects.

“The new CSG program has removed geographic restrictions around the location of potential customers and enhanced requirements around participation to ensure that the benefits of community solar will flow to a greater number of residential and low-to-moderate income subscribers,” Kavanaugh said.

“You’ll see a heavy emphasis on LMI subscribers and residential subscribers just because that’s where the way they set up the bill credit value system,” Dillon said. “That’s where it pushes developers to go. Which in my opinion, that’s the right way for community solar to be deployed in a given state—the ability to direct the financial benefits of projects to those that most benefit from it.”

“It creates a very sustainable program going forward and that’s kind of what any local developer I think is really after—is just having a lot of certainty as to how long this thing is going to be around and they’re not going to monkey with the rules every couple of years like you see in a lot of states,” Dillon said.

*This story was originally published exclusively for NPM subscribers.

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