Monday, July 6, 2015

A co-located article on Xcel's Community Solar Drama

Why is Community solar important and relevant?

1: Community solar gardens (CSG’s) have the potential to help the low-income save about 5% on their utility bills which is why it is competitive. The St. Paul Public Housing Agency is becoming an anchor for CSG projects because of the economic justice community solar provides. You can read more on that amazing story with this addendum.

2: However, Xcel has issued a regulatory filing with the Public Utilities Commission to try to slow the Community Solar program down. Read this addendum to learn more about the background story on CSG’s and for more details on Xcel’s filing.

3: Xcel wants to cap the aggregate size of CSGs allegedly out of concern a bigger than expected CSG program would pose rate hikes for customers and you can read more about their reasoning with this addendum here.

4: However, the signs point toward Xcel being worried about the community solar garden programs getting competitive enough to infringe upon their market share. Read this addendum to explore more about what could be Xcel’s real motivation

5: After this long and contested proceeding at the insistence of Xcel Energy, the MN Public Utilities Commission has imposed a limit of 5 clustered single megawatt (CSG) projects as the most that independent energy companies want to build. Read this addendum to find out more about how the MN PUC ended up ruling on the issue.

6: I personally sat through all 7 hours at the PUC hearing on community solar on June 23rd so that I could share first-hand observations and I can attest that not all CSG developers have the same position on the co-location issue. What the PUC agreed to was a partial settlement reached between Xcel and several community solar developers that not all developers proposing projects in MN agreed with. Read this addendum to find out how their opinions differed.  

7: Xcel could make a valid point that they are friends of the Community Solar program who just do not want to see it turn into a way for big corporations to profit at the expense of smaller customers in actual communities. Xcel is probably recasting their actions as being supportive of CSG developers who are actually doing community scale solar as opposed to sneaking in utility-scale solar under the community solar banner. However Xcel hit Community Solar developers with another cloud of uncertainty by being so slow to offer developers the information they needed about the capabilities of the distribution grid. Read this addendum about Xcel’s lack of transparency.

Xcel Allegedly worried about rate increases from a larger than expected Community Solar program

It would be a fair assessment to say Xcel does not want community solar developments to attain the scale advantages of utility-scale solar while at the same time getting the more favorable financing terms that come with being classified by regulators as a smaller scale community solar installment. The big talking points that Xcel’s lawyer repeated at the PUC on 6-23 is that co-locating lots of megawatts is “utility scale” solar rather than the community scale solar the state legislature intended and that any utility-scale solar projects should be subject to a competitive bidding process.

Now let’s have a little fun with some of the logical contradictions:

1: Something interesting that I observed first hand is that different people have different definitions of what qualifies as utility scale solar depending on whose interests they serve. At the June 23rd hearing, I heard one solar developer say that anything under 10 MW is distributed generation and anything above 10 MW is therefore utility scale. Then I heard Ben Gerber from the Minnesota Chamber of Commerce who supported Xcel’s 1 MW cap say to the PUC that anything more than 1 MW is utility scale solar. Well which is it?

2: This would not be the first time, the Chambers of Commerce spokespeople have offered double standards. When I attended Xcel’s rate increase hearing last year, Todd Klingel from the Minneapolis Regional Chamber of Commerce was the only speaker aside from Xcel who actually supported Xcel’s nearly 10.4% multi-year rate increase proposal, saying that too many people take energy for granted. But when it came to Community solar on Tuesday, Ben Gerber from the Minnesota Chamber of Commerce said even a 1% rate hike from Community Solar can be a huge increase and burden for the large users they represent.

3: Ben Gerber from the Chamber said such increases from community solar are unnecessary because Xcel could do solar for half the cost. Xcel says they are separately developing large “utility scale” solar projects at lower cost than solar gardens; 7¢ per KWH versus 14¢ per KWH Xcel says they can develop utility-scale projects for about half the price because they have to pay roughly twice as much for power generated by community solar gardens as compared with typical competitively-bid utility-scale projects. Should we just leave it up to Xcel to do most of the solar if they can do it for cheaper?
Well, In a June 1st filing Xcel stated that it will not build any additional utility solar until 2025 or later once it meets the 1.5% mandate

 Regardless, Xcel says they do not want these community solar gardens to be done resembling utility scale. The message from Xcel is that community solar program has the potential for a cost shift of more than $100 million onto nonparticipating customers on the rate side.  
They say that doing so has the potential for a cost shift of more than $100 million onto non- participating customers on the rate side.
 The Xcel Regional Vice President said they want a 1 MW aggregate size limits on CSGs with the intention of minimizing extra costs that would be passed on as a 1% to 1.5% rate hike paid entirely by Xcel customers who choose not to participate.  It is interesting how the same utility who filed for 10.4% multi-year rate increases just last year warns that leaving collocated CGS uncapped will be too costly on rates. Contrast that sensitivity as far as not wanting to force non-CSG customers to subsidize utility-scale CSG projects with how Xcel requested a near 10% rate hike largely to cover the cost overruns of their Monticello nuclear plant.  The Star Tribune reported Xcel was wanting their customers to pay them to make profits on over $400 million in cost overruns on top of their customers rather than shareholders paying the entire $400 million.    
Nevertheless, Xcel’s position was that the 1 MW aggregate limit has to be there in order to stop these supposed cost shifts. And then they asked the PUC to adhere to their role in protecting the public interest and “ratepayer” interest.

To paint a more accurate picture, here are the estimations I heard during the 6-23 hearing. If the 912 MW in co-located CSG applications were capped at a 1 MW limit, they project 100-200 MW to be built and a .5% estimated residential rate increase. With a 5 MW size limit, they project 500-600 MW of total MN projects and a 2% estimated residential rate increase. If the size limit was 10 MW they project 800 MW to be built with a 2.8% estimated residential rate increase.

What is Xcel's real motivation in filing to limit overall Community Solar program size?

Xcel filed with the PUC against co-located Community Solar Garden's above 1 MW. Is Xcel’s real motivation to slow the Community Solar Garden program down so that it does not infringe upon their market share?
Co-locating CSG’s gives the overall CSG projects the same shared infrastructure benefits, cost efficiencies and economies of scale aspects that Xcel frequently uses to justify their preference of utility scale solar over residential. The PUC order actually recognized the benefit of co-locating CSG projects. It specifically states: “multiple community solar garden sites may be situated in close proximity to one another in order to share in distribution infrastructure.” Why would Xcel be against co-location when it takes advantage of shared infrastructure and drive down prices for customers? When it comes to community solar energy which Xcel doesn’t own, control and sell to others then they are willing to forfeit those economies of scale they say they value.
Although articles in the mainstream media might not spell it out, there is a rather obvious reason why Xcel is uncomfortable enough with CSG’s. When anyone decides to subscribe to a Community Solar Garden, Xcel essentially loses that former customer for the 25 year time period as far as energy supply. A devotion to maintaining market share is the reason Xcel so wants to instead build their own large-scale solar fields that mimic a central station power plant. Xcel can get their customers to pay for it and they get to keep them as full customers. 
Xcel/ NSP also used to fight small-scale and locally owned wind for much the same reasons. Xcel prefers renewable energy to be structured in a way that allows them to buy on bids using customer ratepayer dollars so it can be added to their base of assets. Investor Owned Utilities (IOUs) thrive on this base of assets because they are guaranteed profits by the PUC about a 10% rate of return. Xcel began 'rate basing' the wind farms, very parallel to what they are trying to do with utility scale solar today. As a result, much of the original locally owned wind operations have been driven into bankruptcy.
It must have sent a shock to Xcel when large customers like Ecolab, Inc. and Macalester College announced plans to offset their entire energy consumption through subsription to community solar gardens. About the same time Xcel Energy suspiciously made some quite significant changes to the language their community solar garden website. Their website in February read:
“There is no limit to the number of solar gardens which can be placed on a property, but no single garden can exceed the 1 megawatt PV system cap. While there is no program restriction on multiple gardens in one area, there could be technical limitations that could require expensive distribution system upgrades.”
Then shortly after, they vastly simplified the corresponding language in the latter version of the same website in order to make room for their pursuit of a setting 1 MW aggregate size limit:
 “The maximum solar garden system size is 1MW AC. The system size is based on the sum of the inverter(s) maximum AC output.”
Why this change in language? 

Xcel intended to have a more gradual phase-in of community solar than the 420 megawatts in CSG applications they received the first week of their program. What Xcel said in the April 28 filing was “If all current gardens in the queue were developed, the company would add nearly all of its planned distributed solar resources, not over 15 years, but in a single year.” 
Xcel basically wants to slow it down. They are fine with people having community-owned solar power, but just not have so much of it that they will no longer need Xcel. IOU’s in general fear a future where they're no longer needed. Xcel would do well to embrace a future in which they claim less than a monopoly on generation. Even with distributed generation, utilities like Xcel still have a purpose in being the central entity primarily responsible for transmission & distribution, reliability, grid management, etc. 

Xcel Energy in Wisconsin shows what it is like when they voluntarily choose to offer Community Solar, which is the first-ever community solar to its customers in Wisconsin. But they plan to offer community solar on a much smaller scale than the 80 megawatts they agreed to be willing to do in Minnesota. Absent a state statute in Wisconsin, Xcel gets to do community solar its way which is a maximum of 3 megawatts of solar power through three or four arrays in their Wisconsin Service territory. Here is another big difference on community solar in the neighboring states. While Xcel projects that Wisconsin community solar customers would receive credits of 6.9 cents or 7.4 cents per kilowatt hour, Minnesota community solar participants are expected to receive 12-15 cents per kilowatt hour. The same Wisconsin Public Service Commission (PSC) that approved increased fixed charges to solar homeowners approved this community solar proposal.

Xcel's lack of transparency about the grid hurts Community Solar Garden developers

The first person who spoke during the June 23rd daylong community solar hearing at the MN PUC was Andy Brown who was a lawyer representing Xcel. He stated "The Company believes the program is seriously off-track".  He said Xcel was talking about having 15- 30 MW of CSG next year and then maybe 100 MW of CSG in 5 years but they have received to date applications for 912 MW.

Brown told the PUC in reference to the 912 MW figure "You might find that number to be staggering. It certainly is to the company."

However, the 912 MW figure should be no cause for alarm, even by Xcel’s standards. Yes 912 MW in applications is a huge, but almost none of those megawatts to anyone’s knowledge had been approved yet. Seven months after they first started taking applications for community solar, Xcel is sitting on the huge stack of CSG applications totaling almost a gigawatt. Developers intend all of these projects to be completed by the end of 2016 so that developers can capture the federal investment tax credit before it expires. No applications have made it through in 7 months! This looks like a sign of a delay tactic but there is more to the story at play.

Xcel has sent a one-two punch of uncertainty to CSG developers by being slow to offer transparency about the capabilities of its distribution system as well as injecting another cloud of uncertainty for community solar developers by filing these objections about the program itself. This double uncertainly led to a gold rush mentality for developers to get their applications in before the rules might change. Xcel received 420 MW of CSG proposals the first week they started accepting applications in December of 2014. The day that Xcel made its regulatory filing back on April 28th, there were a total of 560 MW Xcel received for CSG project applications. Then that figure almost doubled in less than 2 months because of CSG developers regulatory uncertainly. Given this, they should have had no justification to complain about how staggering the number of MW was they received in CSG applications.

In addition, so many of the megawatts in these proposals won't be built because of limitations in the utility's
distribution grid. There isn’t even capacity for 500 MW of CSG in Xcel’s interconnection queue. 
The upgrades needed to the distribution system could prohibit close to half of the proposed CSGs. Plus even if certain projects are wholly feasible on the technical side, the developers may be unable to get financing to build them.

An interesting part about the whole ordeal is that the CSG developers themselves are on the hook for paying for the grid system upgrades. I heard there is an up-front cash deposit of about $100,000 per MW. Pay to play is required and that limits a lot of people. In that case, developers are doing a generous deed for Xcel volunteering to invest in the distribution system rather than as merely a nuisance to their market share. It is only fair to compensate CSG developers for displacing a utility's need for peaking capacity. 

Solar developers that have already invested a lot of time in Minnesota were inspired by their interpretation of rules the PUC approved in 2014. As a result, they already have millions of dollars committed to those projects.


 The flood of applications Xcel has received is also a product of a lack of transparency on their part. Solar developers tried to be as transparent with the utility as possible. Many CSG developers had no other option to submit what they had because Xcel was not releasing some key information about their grid. The developers did not know the best spots to have CSG’s in Xcel’s distribution system due to this lack of info. Before June 4th, developers were shooting in the dark about where their site will be because only the most rudimentary info about CSG was recently made available by Xcel. CSG developers had to put 12 K or 100 K money down just to find that information out. The solar developers were not trying to hoodwink anyone and tried to be transparent. If Xcel would have released information about the state of theirs
 grid, we all could have gotten this resolved long ago.  
This points to a devious strategy and unfair tactic to undermine the inputs for CSGs then attack the outputs. Xcel giving limited insight into their distribution system hurts market certainty. Xcel also injected tremendous amount of uncertainty into the market by making these regulatory filings. Lots of hard work could be lost if more uncertainty is injected.
For example developers should not have to start over and shift their site 20 yards just because of a change in permitting that could have been foreseen with transparent info.
CSG developers need sufficient timeframe and directives or they won’t have any program at all. It is a vicious cycle that has started. Developers had a gold rush incentive to apply before the rules changed and are faced with an expiring federal tax credit. In turn, the process of application tracking is delayed by the sheer number of applications Xcel has to process.

Hopefully with the partial settlement that the PUC approved, there will be some more accountability for an application tracking process to move through in a timely way.