Minnesota modernizes community solar program, opens DG space, and dismisses Xcel Energy as program admin

Minnesota Governor Tim Walz signed an omnibus bill on May 24th that outlines new community solar measures, establishes a market for distributed generation and removes Xcel Energy as the program administrator.

House File 2310, an Environment, Natural Resources, Climate, and Energy Finance Policy bill, is estimated to deliver about 1.5 GW of community solar and DG project development to the state over the next six years, said Logan O’Grady, Executive Director of Minnesota Solar Energy Industries Association (MnSEIA), in an interview with NPM.

In January, the state committed to 100 percent renewable energy by 2040 with the passage of Senate File 4, however the bill was missing specifics on how to meet that standard, O’Grady said. H.F. 2310 addressed it with the modernization of the existing community solar garden program and the establishment of a new Distributed Generation Standard.

Community solar projects built under the current program will continue operating under its rules.

Beginning January 2024, projects sizes will increase from 1 MW to 5 MW, and contiguous county restrictions, which requires subscribers to live in the same or contiguous county as the solar garden, will be removed.

“The Minnesota legislation was a long time in the making," said Corrina Kumpe, SunShare COO, in an interview with NPM. "We were really excited to see the garden size increase to 5 MW and the removal of the contiguous county requirements. We think we will be able to deliver a lot more renewable energy to Minnesotans as a result."

The previously un-capped market will now have annual project caps that decline over time.

“The reason for that step down is as you develop those projects, logistically, you run out of space and you can’t just put a community solar garden anywhere—that was one compromise,” O’Grady said.

The first three years of the program (2024-2026) will be capped at 100 MW. Then the program steps down to 80 MW for the following four years (2027-2030). The final step down will be to 60 MW ongoing in 2031.

The new program also taps what has been an untapped market in Minnesota—the DG space.

"There’s been very little development, under 10 MW, in Minnesota because there hasn’t been any type of program and there’s no requirement that utilities do any development," O'Grady said.

This bill changes that and requires all major investor-owned utilities in Minnesota to procure energy from DG projects to cover a certain percentage of their retail sales.

The state’s largest utility, Xcel Energy, will be required to derive generation equal to 3% of its retail sales from DG projects by 2030 in the new 10 MW space. Minnesota Power, the second largest utility in the state, will also be required to reach 3 percent with some exclusions. Otter Tail Power Company has a 1 percent requirement by 2030.

DG generated energy procurements will be conducted by the utilities through a competitive bid process.

The bill also adds an equity component by requiring 30 percent of all projects be subscribed by low-to-moderate income (LMI) households.

“One of the criticisms of our old program was that it didn’t reach enough residential subscribers or enough underserved communities, so one of our equity goals was to diversify that program,” O’Grady said. “Even though if you look at the numbers, there are 28,000 subscribers to solar gardens in Minnesota currently and about 25,000 of them are residents.”

“So, we are doing a good job reaching residents, but if you look at the actual energy consumed, it’s the opposite,” he added, pointing out that commercial subscribers consume over 80 percent of the total megawatts offered in the solar garden program.

“Lawmakers wanted to do a better job of reaching more residential subscribers so more megawatts were benefiting residents rather than businesses,” he said.

The bill also names the Minnesota Department of Commerce as the new program administrator, dismissing Xcel Energy, the state’s largest utility, from the position.

Like Colorado, Minnesota has been having challenges when it comes to interconnecting projects across the board, from small residential up to large community solar projects.

“There’s been some concern that the utility is intentionally delaying those interconnection timelines—[we’ve heard some] residential subscribers being told they’re going to have to wait 30 years to interconnect their 10 kWh system,” O’Grady said.

“Lawmakers have heard from constituents here in Minnesota that are facing those long wait times. They have seen news stories out of Colorado who also has Xcel Energy, and they don’t think that the utility is capable of properly administering that program anymore,” added O’Grady. "The Department of Commerce is a public entity and serves a public purpose. I think they are going to be more inclined to meet the requirements of these new laws."

In a statement to NPM, Xcel Energy said they are committed to working with the state to implement the changes that take effect in January.

“This session, we saw an opportunity to pivot away from the current community solar garden model to reduce costs for all customers, make the program more equitable for our income-qualified customers, and reduce grid congestion,” Theo Keith, Senior Media Relations Representative, told NPM.

“While we appreciate that lawmakers saw the challenges with the current model, we remain concerned that the final product doesn’t fully address those challenges,” Keith added, outlining components such as the cost to customers, equity, and distributed grid congestion.

Xcel is required to pay a pre-determined rate for energy from community solar facilities, which is roughly double the market price of solar. All residential customers pay this cost regardless of their participation in a solar program.

“The bill introduced a new, complex pricing structure that may increase the cost to customers. We are still analyzing the cost impact of the bill,” Keith said.

Keith also said distribution grid congestion was not addressed in the bill.

“While we are required to evaluate grid congestion and a possible solution, the bill does not provide a process at the Public Utilities Commission to accomplish it. In some areas, community solar gardens have taken all the available space on the grid, preventing residential rooftop solar installations.”

“We think community solar gardens should ultimately be regulated by the PUC, as utility-scale solar projects are, to better coordinate with the distribution grid,” he said.

Keith said that while they work with the Department of Commerce and Public Utilities Commission to confirm, their initial understanding is that their engineers will do the interconnection studies and the Department of Commerce will decide which applicants are in or out. Keith said they will work closely with the department to transition that administrative function and will continue processing applications for the legacy program for the rest of 2023 as required in the law.

Minnesota had the largest community solar program in the country until last year when the state was surpassed by New York.

*This story was originally published exclusively for NPM subscribers last month.


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