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 23^rd 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 1^st 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.

 XCEL’s REAL MOTIVATION

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.

 A SLOWER PACE FOR COMMUNITY SOLAR GARDENS

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. 

THE WISCONSIN PROGRAM

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. http://www.midwestenergynews.com/2015/04/30/xcel-pursues-community-solar-in-wisconsin-but-on-small-scale/s

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.

LACK OF TRANSPARENCY

 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 4^th, 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.

Community Solar developers in MN show Diversity of Opinions on Xcel's program size limit

On the Monday evening right before the June 23^rd hearing in front of the PUC, Xcel and several but not all of the solar developers struck an eleventh-hour partial settlement agreeing to a 5 MW CSG aggregate size limit. Xcel would have liked the cap to have been lower than 5 MW but considered 5 MW a settlement. The parties in the agreement include Innovative Power Systems, Minnesota Community Solar LLC, Novel Energy Solutions, Renewable Energy Partners, SolarStone Partners LLC and TruNorth Solar LLC. The terms of this partial settlement were adopted by the PUC.

Those who struck the settlement did so as a tactic to get the company to stop taking such an oppositional stance. Joe Devito of SolarStone Partners said "It's a trade-off. We're willing to make a trade for certainty." These CSG developers want to get the process moving more quickly so that they could be ahead of the looming 2017 step-down of the federal investment tax credit. And in exchange for that certainty they were willing to scale back the size of some proposed projects.
Those who spoke in favor of the partial settlement said 5 MW strikes a balance that is both financeable while still enabling economies of scale. Larger CSG projects should be closer to a substation so therefore having 5 MW distributes the solar resources more equitably.

However, there was a coalition of some of the larger solar development companies such as SolarCity, Sun­Edison and SunShare that rejected the partial settlement. Having to abide by an arbitrary limit of five clustered CSGs will be force the larger developers to revise their business plans and possibly find other sites, likely undoing a lot of work they had already devoted time and effort toward. The solar developers who rejected Monday night’s partial settlement thought that having a 5 MW cap would unnecessarily pit members of the CSG developer industry against each other thus resulting in some projects blowing up. Their explanation is that Xcel is using this co-location issue as a convenient red herring to strategically using to drive a wedge into the solar coalition. The group's attorney Andrew Moratzka, stated with insight "I think the issue of co-location is a red herring. The issue is program size; it's not co-location."  

What Xcel is actually concerned about is program size though of course they’d prefer not to directly admit that was the motivating issue. There is no denial that Xcel was quite concerned about the sheer size of the CSG program and the premium it would pay to purchase power generated by community solar. 
Any big establishment utility company that wants to slow the growth of the solar market will want to devise a strategy of trying to pit members of the solar community against each other. It’s the old tactic of playing the game of divide and conquer to increase the amount of win – lose situations and decrease the amount of win-win situations. Here is how that strategy applies to community solar from the perspective of the larger developers. Placing limits on co-location means dispersing sites and raising costs when there are only so many applicable sites for the taking. There are a limited number of places to get into Xcel’s distribution system. When the number of CSG applications are forced down to 200 MW to 300 MW of viable projects, then it becomes all about picking winners and losers. The overall size limits Xcel wants thus removes the space that would allow everyone from becoming a winner.  

There were at least two other differing opinions that CSG community told the PUC on 6-23. Sundial solar and John Kramer rejected the partial settlement but for different reasons than the big developers. He supported Xcel in its 1 MW aggregate limit in favor of a more community-scaled solar garden project instead of using co-location as backdoor way for utility scale solar. Then I heard another solar developer said placing a 1 MW limit will have a chill effect on the market. Meanwhile Lynn Hinkle of the Minnesota Solar Industry Association said that the aggregate size limits CSGs should be set according to grid and substation capacity and let distribution be the program cap rather than some arbitrary number. 

St. Paul Public Housing Agency joins Community Solar on behalf of 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 energy. Community 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 has signed on to become an anchor tenant of nearby community solar gardens to provide cost stability for their tenants. 

At the June 23^rd hearing on community solar, Louise Seeba told the PUC the message that low-income individuals should not be left out of clean energy."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 power from CSG’s that goes onto Xcel’s distribution grid, is credited to CSG subscribers at a solar-friendly rate that results in savings of 5 percent or more on their utility bills. 

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.” 

How the MN PUC ruled on the Community Solar Size limits

On the night before the June 23rd PUC hearing, Xcel and several (but not all of the solar developers) struck an eleventh-hour partial settlement agreeing to what is basically a 5 MW CSG size limit. Xcel would have liked the cap to have gone lower than 5 MW but considered 5 MW a settlement. It was only a partial settlement because Xcel pleaded to commission to make the size limits retroactive while the CSG developer community were in agreement that imposing a size cap retroactively would be horrible policy. On June 25th, the PUC ruled in agreement to the terms within the partial settlement while giving Xcel what they wanted by retroactively clarifying the rules. As a result, developers who had proposed co-located CSG projects of over 5 MW had to scale down their plans to fit under the size limit. 

At first impression, allowing developers to do clusters of 5-single megawatt CSGs sounds big enough to allow CSG’s to make a major market impact. However, the PUC ruling gave Community Solar Developers only until September 25 to propose co-located CSG projects that may be as large as the 5 megawatt limit. Beginning on September 26th, Xcel had its wish in limiting CSG projects to 1 megawatt at a single interconnection point. The cap has dropped to 1 MW for a period of one year in order to allow time for the commission to once again study and revisit the issue of putting limits to CSG co-location. 

The rules could be revised more favorably at that point in the future. However there is a real danger CSG development could be effectively snuffed out by Xcel getting the regulatory/ bureaucratic red tape they asked for. Changing the rules of the game sends a damaging signal to the solar market and hurts the perception on MN as an unreliable place to do solar business. From that standpoint of that risk, merely having a decision from the PUC removes a major barrier of regulatory certainty for CSG developers. But now, we can't even count regulatory certainty as a benefit because Xcel has actually not been holding up their end of the bargain. 

In exchange for giving Xcel what they wanted in the co-location size limits, the PUC ruling required Xcel to more rapidly complete the interconnection engineering studies for connecting solar gardens to the grid and to provide for “greater transparency and expediency” in allowing developers to move forward with construction of their proposed projects. In other words, they PUC tried to tell Xcel they will not be able to use a foot-dragging tactic as a way to run out the clock on the federal tax credit. But in the following months, Xcel was still slow-walking their processing of CSG applications. Xcel not holding up their end of the deal, basically confirming allegations they have an agenda to chill the market for solar.


What have we seen when Xcel does Community Solar voluntarily without any state mandate as they have in Wisconsin? it ended up being a maximum of 3 megawatts of solar power through three or four arrays in their Wisconsin Service territory.

The Basic Background of Xcel's filing for size capping MN Community Solar

 On Tuesday, April 28^th Xcel Energy announced they would take unilateral action to disallow co-located Community Solar Garden (CSG) projects over 1 megawatt (MW) in size. Regardless of whether their specific arguments had merit or were justified, this move served as a particularly big flashpoint in Xcel's delay of their Community Solar Garden program.

Xcel’s complaint is that they did not expect 80% plus of solar garden proposals from 15 developers to be co-located clusters of up to 40 adjacent 1 MW solar gardens on single sites given that the State Legislature set a 1 MW limit on the size CSGs could be. Although the 2013 state statute does set a size limit of 1 megawatt or less onto individual community solar gardens, the PUC issued an order in 2014 that allowed the co-location of multiple 1 MW CSGs on a single site. The PUC ruling specifically states: “multiple community solar garden sites may be situated in close proximity to one another in order to share in distribution infrastructure.” Overall, in their April 28^th announcement, Xcel acted in defiance of many CSG developer’s interpretation of that PUC ruling as allowing for unlimited co-location. 

It is clear Xcel intended to have a more gradual phase-in of community solar than the 420 megawatts in CSG applications they received in just the first week of their program. Xcel said in their April 28 filing: “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.” 

The size of solar projects that Xcel does not own or control are arguably a far bigger concern to them than the issue of co-location itself. 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 doing utility scale solar projects over residential solar projects. 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 which Xcel can’t own, control or sell, then they are willing to forfeit those economies of scale they say they value in order to prevent community solar from infringing upon their market share. 

Imposing this aggregate size limit of 1 MW as Xcel had originally asked would have put in jeopardy 80% of the MW from solar gardens planned for this year. Perhaps Xcel intended this particular filing as a delay move to block most solar developers from being able to capture the benefit of the 30% federal tax credit before it expires at the end of the year. Perhaps Xcel figured that if they just find creative ways of running out the clock through 2016, a great number of these CSG projects might never be built unless Congress renews the important solar investment tax credit that has helped grow the industry. 

A few days after Xcel issued the regulatory filing to the PUC, four developers submitted a letter sent to the Minnesota Public Utilities Commission asking the PUC to affirm Xcel’s move to be in violation of the pre-existing PUC order. The letter warned that Xcel's move would cost the solar developers “tens of millions of dollars in damages” even though Xcel vows to refund deposits and fees for multiple garden applications. On Friday May 1^st, the PUC ordered all parties a May 18^th deadline to submit comments on the Xcel’s aggregate size limit proposal. On June 23^rd, the PUC held a hearing for stakeholders to give commentary on this matter. 

The main legal issue Xcel brought forth to the PUC are interpretations on what the state legislators meant in their 1 MW limit within the statute. Xcel used that to make a case that the PUC's 2014 order could not and did not explicitly call for unlimited co-location in CSG projects. Xcel thus forced the PUC to revisit what it meant in their earlier ruling. They argued that no developer at the time of the earlier 2014 ruling had asked the PUC to do unlimited co-location. A side issue for Xcel is that the PUC set a solar-friendly rate for community solar during the same time no party was expecting unlimited co-location. Xcel’s lawyer's closing argument at the June 23rd hearing was that no solar stakeholder speaking gave a good reason to disregard the 1 MW limit. Yes, the statute is silent on co-location. But the mere fact there was a 1 MW limit implies there had to be a policy reason for setting the 1 MW limit and the way the developers were doing co-location had thus rendered the 1 MW cap set by the legislature as meaningless. 

In 2013 the MN state legislature passed the community solar program (CSG) with the intention of providing a solar option for renters, for property owners whose building isn’t suitable for its own solar array or for the average income who lack the up-front capital to own an entire solar installation. While all investor-owned utilities are required to get 1.5 percent of their electricity from the sun by 2020, Xcel is the only utility that is required to offer the CSG program under the same 2013 state law.