Sunday, October 11, 2015

Xcel Energy Slow-Walking Community Solar in Minnesota

     On one hand we have seen recurring stories of Xcel Energy making impressive renewable energy promises in their 15-year integrated resource plan. On the other hand, we have seen a parallel narrative of about Xcel Energy that calls into question the reputation as a clean energy leader reputation the company has been trying to cultivate. It is a series of recurring stories on how Xcel has frustrated a massive grassroots push for Community Solar Gardens (CSGs) in Minnesota. Xcel has engaged in multiple delay tactics dating back to September 2013, shortly after Minnesota's Community Solar Garden law passed.

Minnesota's community solar program is the first time in recent history that a state allowed such a major type of competition into our monopoly-dominated energy system. CSG’s are competitive because they have the potential to help the low-income subscribers save about 5% on what they would otherwise be paying Xcel in their utility bills.

 Xcel spokespeople may offer a multitude of reasons and justifications for each delay tactic. But it does not take an expert analyst to figure out Xcel is concerned about potential competition from their own customers and worried about the spread of distributed energy generation which they can't own or control.

 According to a late August Star Tribune article that quotes several Community Solar Garden Developers, it was already apparent that Xcel Energy was running out the clock for Community Solar Gardens to get built by the end of 2015 before the snow flies. Some developers who filed their proposals the first day began accepting CSG applications (on December 12th, 2014) still have yet to hear any response on whether their project has been approved. All we really need to ask of Xcel at this point is to comply with existing state regulations on how they are supposed to approve the CSG projects. Xcel is supposed to approve or deny CSG project proposals within 90 days but has already violated that multiple times. As of early October, Xcel had only approved only 6 CSG projects out of 619 proposed projects whose applications were deemed complete. Xcel's online announcement of this first community solar garden reads like a typical self-congratulatory greenwash upon awareness of their delaying hundreds of remaining project applications.

HOW THIS YEAR'S REGULATORY REQUIREMENT WAS REACHED

On Tuesday, April 28th Xcel Energy announced they would take unilateral action to disallow co-located Community Solar Garden (CSG) projects over 1 megawatt (MW) in size, which turned into a regulatory filing with the Public Utilities Commission (PUC). Regardless of whether Xcel had a valid point in their alarmed reaction to the extensive clustering of single Megawatt CSG projects or whether the specific details of their arguments had merit or not, it definitely caused significant delay and injected a tremendous amount of uncertainty into the market. It gave many CSG developers a gold rush incentive to send in lots of applications before the rules could change. The Public Utilities Commission's eventual ruling gave Xcel Energy the retroactive size limits on Community Solar Garden projects that they asked for in exchange for requiring Xcel to provide “greater transparency and expediency” in allowing developers to move forward with construction of their proposed projects. Xcel was also required to more rapidly complete the interconnection engineering studies for connecting solar gardens to their grid. Simply put, Xcel has not been holding up their end of the deal. 

XCEL’S LACK OF TRANSPARENCY CONTRIBUTED TO DELAY

    Just a month after the June 25th ruling, Xcel’s CEO Ben Fowke told the Star Tribune that they will keep pushing to limit rooftop and subscriber-based community solar gardens but did not explain how. Is Xcel's slow-walking of the CSG project applications indeed their untold tactic? Has Xcel been intentionally under-staffing the personnel they need to process CSG applications or to interconnect the community solar gardens? Or was the workload of processing a sheer flood of CSG applications genuinely more than Xcel expected? Was Xcel's big mistake putting engineers in charge of processing the applications instead of project managers? Regardless of the answers to these questions, one thing we do know for sure is that huge workload of CSG applications on Xcel's desk is largely a consequence of a lack of transparency on Xcel’s part even before the June 25th ruling. 

       It was not until June 4th that Xcel released some key information about their distribution system. As a result of this lack of info, CSG developers were shooting in the dark about the best places on the grid their projects will be located. While it’s a fair argument if Xcel’s grid interconnections honestly could not absorb additional capacity from a particular proposed CSG project, it is totally unfair for Xcel to not notify project developers early on. In addition, CSG developers had to put down thousands of dollars just to find out the information they need. 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 more transparent information. If Xcel would have released information about the state of their grid in a timely manner, many of these project delays could have gotten this resolved long ago. This points toward a devious strategy to undermine the inputs then attack the outputs.

THE FEDERAL TAX CREDIT BUILDS URGENCY

      Another reason why CSG developers are rushing to get so many projects built is because a federal tax credit for solar expires at the end of 2016. The federal tax credit will drop from 30 percent to 10 percent for commercial solar projects and will be completely eliminated for residential installations unless the US Congress approves an extension. All of these factors combined together have given CSG developers every incentive to send a genuinely huge flood of CSG applications through the bottleneck of the apparent lack of staff capacity Xcel management has been devoting to the task.

 Xcel running out the clock on solar developers' window of time to be able to take advantage of the federal tax credit is a move which many agree would chill the market for distributed solar and undercut potential competition from their own customers. Xcel officials will probably deny that is their intent, but the behavior would be eerily consistent with a pattern of Xcel’s attempting to slow other solar incentives in the recent past, such as the Solar Rewards program and the Made-in-Minnesota Solar Panel Incentive Program.


BUT ISN'T XCEL A CLEAN ENERGY LEADER?

      To revisit the double narrative about Xcel, how could the same company that prides themselves in being a national renewable energy leader among investor-owned utilities conceivably be doing such a stonewalling effort against Community Solar? How can this possibly be consistent with Xcel Energy’s impressive renewable energy targets they set this year in their 15 business plan? Xcel’s CEO offered an explanation in the same late July Star Tribune Article, vowing to pursue utility scale solar to the effective exclusion of residential and community solar. That announcement came after a June 1st filing when Xcel stated that it will not build any additional utility solar until 2025 or later. To cut through all the red herrings, Xcel only prefers to do renewable energy that can own and controlcharge their customers for and build into their rate base.
Investor owned utilities seek to put renewable energy into their base of assets because then they are guaranteed profits by the Public Utilities Commission about a 10% rate of return on those investments. In doing so, they seek to prevent others from developing our own clean energy in other ways. Xcel fights against small-scale and locally owned wind for exactly the same reasons.



THE KEY DILLEMMA CSG DEVELOPERS FACE WITH XCEL

       If Xcel’s intent they won't admit to is indeed to run out the clock on solar developers being able to capture the benefits of the federal tax credit, then slow-walking the CSG application process is a "heads Xcel wins / tails the CSG Developers lose" type of a situation. That is the key dilemma of having monopolies in control of energy. It is also the consequence of a situation where Xcel has key information and assets Community Solar Developers need but not vice versa. 
If CSG developers issue a regulatory filing or lawsuit against Xcel for not holding up their end of the deal in the PUC ruling, then such a move will kick up enough uncertainty into the market to lead to even further delay. That is a vicious cycle which threatens the hard work and capital CSG developers have already invested into projects, particularly among the smaller developers who only have CSG projects in Minnesota. If Xcel continues their slow-walking behavior, then it means Xcel would rather pay the million dollars in legal fees defending themselves in court from CSG developers as long as it shrinks those 900 megawatts of proposed Community Solar down into an 80 megawatt program.

       I would love for Xcel to disprove that hypothesis about their slow-walking 
and follow up on a promise to expedite the installing the great back log community solar projects next year before the tax credits expire. Aakash Chandarana, Xcel regional vice president for rates and regulatory affairs, has said the delays in approving the CSG's was a dilemma of trying "to feed large amounts of electricity onto the undersized rural power grid, creating a queue of projects competing for limited connections". But we will soon find out whether they will drag their feet on the smaller, urban grid system in Minneapolis. Community Solar development for Minneapolis residents and businesses already been approved as a priority by both parties in the Clean Energy Partnership between the City of Minneapolis and Xcel. We invite Xcel to explain to developers of Community Solar projects in Minneapolis how they will meet deadlines and release all of the grid data the developers need in a timely manner. Otherwise they are being inconsistent not only with the Minneapolis Clean Energy Partnership goals they agreed to when they signed the partnership agreement but also with the PUC’s order.

IF XCEL HAS BIG PROMISES TO DO SOLAR ENERGY ON THEIR OWN, THEN WHAT IS THE PROLEM? 

      At this point, isn’t any renewable energy good and necessary regardless of how it is done? What exactly is wrong with the way Xcel prefers to do renewable energy? Large utilities in general prefer renewable energy to mimic their familiar central station power plant model as opposed to distributed generation. Otherwise, we, the energy users, not Xcel shareholders, reap the economic benefits of being power producers.
If Xcel's preference to get renewable energy fit their familiar central station model manifests as setting up utility owned solar and wind generation very distant from population centers, then Xcel customers will have to pay for the great big new transmission line infrastructure. If that is the model which Xcel intends belie its big clean energy promises, then likely fights over new transmission lines and who is going to pay for what raises the risk that Xcel will fall short of the impressive clean energy targets they promise. Other studies show how such delivery costs can cancel out the modestly better economies of scale utility-scale solar has at the point of generation. 


LOCAL RENEWABLE ENERGY IS NEEDED

        We are much more likely to get renewable energy deployed quickly enough to make a difference in environmental impacts if we simply strategically size and locate renewable energy projects to fit within the existing grid. There are huge opportunities for thousands of megawatts of renewable energy that could be sited in the existing infrastructure in Minnesota right now that would not need any new transmission because it will be much closer to the load where people are using it. Local renewable is the model which so many CSG developers are trying to manifest if they are given a chance to succeed. But it is not a model that allows the cartel energy monopoly interests to simply extract the resources and take the money.
   
Under the local renewable power model, people in the local community will be investing in the infrastructure and making a return on that infrastructure, thus producing local wealth. Local and community-owned renewable energy increases reliability, is cheaper in terms of infrastructure, and the communities who use it are bought into the project. Whenever the body politic is bought into renewable energy, we are much more likely to get enough of it in time to reverse some of these terrible environmental trends.

In addition, the more geographic diversity in the locations of solar panels, the more reliable solar energy becomes, allowing renewable energy to thrive with less need for expensive natural gas power plants that Xcel has announced plans to build in their latest IRP.

   COMMUNITY SOLAR IS ECONOMIC JUSTICE

Community Solar has value far beyond that which is reducible strictly to finance because it provides is a powerful tool for an overall democratization of energyCommunity solar allows individuals and organizations to mutually benefit from the advantages of solar energy — no fuel cost, no moving parts, no emissions — without having the solar built on their own property. The power from CSG’s go onto goes onto Xcel’s distribution grid, and CSG subscribers are credited at a solar-friendly rate that results in savings of 5 percent or more on their utility bills. When community solar uses innovative and flexible financial tools such as on-bill repayment, pay-as-you-go, and revolving loan funding, solar energy dramatically more affordable and accessible to a greater number of people.

With Community Solar, we finally have an opportunity to put an end to this alienating perception of solar energy as a niche market for a few. Having a successful example of a community solar garden will tell a new story of renewable energy as a pathway out of energy poverty and prosperity circulating through the local economy. 

THE SAINT PAUL PUBLIC HOUSING AGENCY

The Saint Paul Public Housing Agency has signed on to become an anchor tenant of nearby community solar gardens to provide cost stability for their tenants. 


At the June 23rd hearing on community solar, Louise Seeba told the PUC "This program is literally the only way that public housing can go solar. Our tenants should not be shut out of being part of green energy." 

The Saint Paul Public Housing Agency has 2500 residents in 16 high-rise housing units. So far, it is the only public housing to go solar. Seeba explained how they had to jump through lots of hoops and then the U.S. Department of Housing and Urban Development approved their community solar involvement.

Solar energy is attractive because it has no fuel costs and is a hedge against fuel price spikes. When natural gas or fuel prices inevitably spike again, utilities pass through the costs directly onto their customer base. This will leave the low-income very vulnerable once the fracking boom goes bust unless there is an alternative source of power such as CSGs ready to snap over to. 


Jon Gutzmann, executive director of Saint Paul Public Housing Agency stated “With two-to-four percent increases every other year, our utility costs have been increasing at a faster rate than our revenue. Community solar provides us with cost stability and certainty for 25 years — without having to find space or capital for on-site solar.” 



WHAT IS AT STAKE? IT’S MORE THAN A FEW SOLAR PROJECTS

 Fossil fuel interests and energy monopoly groups like the Edison Electric Institute have been using divide and conquer tactics to try to pit low-income and minority communities against advocates for solar energy options. Their most common line of attack is to unfairly and inaccurately accuse solar households of raising electricity rates for non-solar households, chiefly those struggling to pay their energy bills. They fight for a restrictive policy outcome where only people who have access to solar energy are those who can install their own solar panels on their own property so that they can paint an alienating story of solar energy as an exclusive party that only the well-to-do are invited to. The easier policies make it for low-income residents to participate in solar energy, the greater our ability to fend off these alienating divide and conquer techniques and the more powerful tools we have for the democratization of energy. We don’t want the story of Community Solar to be one of "Out of State big money interests setting up large corporate solar farm projects to take advantage of a law they wanted passed to make money".

FEAR OF RATE HIKES ARE XCEL’s BIG TALKING POINT

The big talking point that Xcel uses to shrink or slow the community solar program is that it will lead to rate increases with the potential of a cost shift of more than $100 million onto non-solar customers. Xcel’s Regional Vice President asked for a 1 MW aggregate size limits on CSGs in order to minimize 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. The estimations I heard during the June 23rd hearing were a .5% estimated residential rate increase due to 100-200 MW of community solar, a 2% estimated residential rate increase for 500-600 MW total and a 2.8% estimated residential rate increase from 800 MW total. To start with, Fresh Energy has done some rate and cap impact calculations that suggested Xcel was overestimating the rate impact of the community solar program onto non-solar customers.
It is important to note how the same utility which recently requested a near 10% rate hike largely to cover the cost overruns of their Monticello nuclear plant is suddenly becoming so sensitive about the supposed rate impact from residential and community solar onto non-solar customers. The Star Tribune reported back on March 6th that Xcel was wanted their customers (rather than shareholders) to not only pay for the entire $400 million in cost overruns, but also a profit margin to Xcel on those cost overruns. Why is Xcel suddenly so concerned with the impact on energy users where solar is concerned, but has so little consideration for the much larger impacts on utility customers when their own nuclear plants are at fault?   
INTERESTING ADDENDUM: XCEL CHANGED THEIR WEBSITE:
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 solar gardens. Close to the same time Xcel Energy made quite significant changes to the language its solar garden website. It was interesting how 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, they vastly simplified the corresponding language in the latter version of the same website in order to make room for their pursuit of a 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 claimed the original intention of the Minnesota Legislature was to have a more gradual phase-in of community solar that would be much less than the 420 megawatts in CSG applications they received the first week of their program. 

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