On an overcast day last week, a small crowd gathered at Shiloh Temple International Ministries in North Minneapolis to extol the virtues of Minnesota’s community solar gardens program.
Since the Legislature approved it in 2013, the solar garden initiative has created a vast market of the renewable energy. People who can’t install panels on their own can buy a piece of a shared solar plot to fight climate change — and to get credits to decrease their Xcel Energy bill.
Shiloh Temple is held up by many as a poster child for success. The church installed a 200 kilowatt solar array on their roof in 2018 that supplies energy for about 30 families in the community, said Bishop Richard D. Howell, Jr. “We believe that our presence here in this neighborhood is to provide whatever we can to bless this community in a greater way,” Howell said. “With cooperative energy that has happened.”
For critics, however, Shiloh Temple may be seen more as an exception than the rule of a program they say has morphed to benefit business and governments — at the expense of the average energy customer. Those detractors include Xcel, which administers the program, but also Republicans in the state Senate, who want to sharply limit the program in the future and take other efforts to make it cheaper.
Sen. David Osmek, a Mound Republican who chairs the Senate’s Energy and Utilities Finance and Policy Committee, told reporters their plan stops Xcel’s customers from being “continuously, continuously soaked for very expensive energy.”
The DFL-controlled Minnesota House, meanwhile, has instead pushed to expand the program and make changes aimed at enrolling more low-income Minnesotans. The split is one of the largest between the two political parties over energy issues at the Capitol this year, and one that will need to be reconciled as lawmakers write a two-year budget by May 20.
A flourishing program, with a big price tag
When lawmakers first passed the community solar program, they hoped to erase barriers that made buying residential solar energy difficult. For those renting an apartment, or homeowners with an unideal roof or without the initial cash to build solar panels, buying or leasing part of a shared plot is an easier option for solar power.
Plus, larger solar projects are cheaper than having a panels on a small roof because the project benefits from an economy of scale in production and operation. In exchange for subscribing to a solar garden, people get a bill credit from Xcel.
The program has exploded in popularity, and is now the largest of its kind in the country. An Xcel report filed April 1 with the Public Utilities Commission (PUC) says by the end of 2018, the program had more than 12,000 unique subscribers and a total power output of 505 megawatts. Nearly 260 of those megawatts came from projects installed in 2018, the report says.
Across the country, an average of 190 homes can be powered by one megawatt of solar, according to the national Solar Energy Industries Association. (For a comparison, Xcel says the Prairie Island nuclear facility can generate about 1,100 megawatts, enough for roughly 1 million homes.)
Xcel and many GOP lawmakers have complained about the program’s economic model, however. The company is required to buy solar power from the gardens, which are run by independent third-party operators. The price for that energy is determined mostly by state regulators through complex formulas.
The Xcel report says energy from a solar garden costs them between $110 to $125 per megawatt hour, while a larger utility-scale solar project costs about $40 for the same power. One reason is because solar gardens are still smaller than utility-scale solar and are more expensive to build. On average, each residential customer pays about $36-a-year extra to subsidize the program, the Xcel report says.
Most energy created by solar gardens comes from subscriptions by businesses, local and state governments and nonprofits, which also benefit from the break on energy costs. And though a solar garden can’t be larger than one megawatt, commercial subscribers with hefty energy needs can buy in to more than one garden, with some limits.
“More than 90 percent of the community solar garden benefits go to commercial customers who participate, while costs, expected to be more than $170 million in 2019, are borne by all Minnesota customers, more than 95 percent of whom don’t participate in the program,” says a written statement provided by an Xcel Energy spokesman.
The statement called the solar garden program “well intentioned,” but says “it’s becoming clear the program does not benefit our customers in the way it was originally intended, which is why we support reforming the program.”
Republicans push for change
State Rep. Pat Garofalo, a Farmington Republican and critic of the Community Solar Gardens program, was more blunt in his assessment. “What it’s turned into is a big bonus for business,” he said.
Garofalo said community solar could survive without a special program or subsidies and has done so outside of Xcel’s bounds in Minnesota. He also said the most cost-effective way to fight climate change with solar is with utility-scale solar projects.
The Senate GOP budget plan would greatly scale back Xcel’s program, allowing just 25 megawatts in total solar projects each year and placing other limits on the size and characteristics of a solar garden.
The PUC would also be required to select applicants to the program with the lowest cost to Xcel customers. Osmek, the GOP Senator, likened the change to a “competitive bidding process.”
Osmek said the legislation “brings some market forces involved with the energy and the amount we’re paying for off these arrays right now.”
Xcel supports a 25 megawatt cap on new projects each year, a competitive bidding process and “giving the Minnesota Public Utilities Commission more oversight and authority over the program,” according to its statement. The company also noted the importance of “low-cost” renewable energy in their push to reach carbon-free energy by 2050.
Supporters tout jobs and defend the program
Back at Shiloh Temple, many in the solar industry had dire warnings about the Senate GOP’s plan. “It would kill the industry,” said Jamie Borell, the CEO of IPS Solar, which develops solar in Minnesota. “Our company would not work in a market where there were 25 megawatts available.”
Borrell said his company had three employees in 2012, but now expects to have between 50 and 60 in the height of construction season, largely because of the community solar legislation. He said IPS Solar has built $150 million worth of solar projects in the state, good for more than 70 megawatts of power.
“Back in, let’s say 2006, no electrical distributor in town would carry a solar panel or take a phone call from me,” Borrell said. “Today we’ve actually got a conference in town where we’ve got hundreds of people in the solar industry that flew in to support the local solar industry.”
Overall, a report put together by the solar advocates, including the Minnesota Solar Energy Industries Association, attributed 4,000 jobs in the state to community solar. The report emphasizes that that the majority of subscribers in the program are households, even if the majority of power generated is not credited to residential subscribers.
As for the higher prices, the report says community solar infrastructure is determined by the PUC to be more valuable because it’s better at delivering “power directly to customers” through local energy grids. That means community solar is “improving efficiency and helping to avoid the need for more grid infrastructure.”
DFL looks for expansion and low-income help
Many supporters of community solar are instead supporting the DFL plan for the program, which does not put any new limitations on the program but aims to encourage more residential customers to subscribe.
Democrats, who have a majority in the Minnesota House, would allow larger solar gardens — up to three megawatts instead of one — in the aim of making gardens cheaper.
The solar advocates’ report says current law restricts subscribers to gardens located in their county or an adjacent one. That has limited the number of sites for customers in the metro, driving up cost, the report says.
To address that, the DFL plan would allow an exception to the rule that reserve 10 percent of solar gardens power for residential subscribers. Rep. Jamie Long, a Minneapolis DFLer and vice chairman of the House Energy and Climate Finance and Policy Division, said the change could benefit more than metro-area subscribers. “We’ve seen struggles in the farm economy quite a bit this year and so we’ve had dairy farmers, for example, who are looking to do community solar to help diversify in the worst dairy market in years,” Long said.
DFLers would set up two new initiatives aimed at helping low-income, residential customers participate, including a grant program for smaller solar gardens in which all subscribers are low-income, residential households. Democrats would also put the state’s Department of Commerce in charge of the community solar program instead of Xcel.
John Farrell, director of the Energy Democracy initiative at the Institute for Local Self-Reliance, said the community solar program empowers people to get energy from “their own rooftop or from a rooftop in their community” instead of Xcel and reap benefits. Solar power owned and operated by Xcel instead makes profits for shareholders, he said.
“So the important thing about community solar isn’t just the fact that it’s a way to tap electricity from the sun, but that it’s giving communities a new sense of choice in the economy and a way to recapture a lot of economic benefits,” Farrell said. He pointed to Shiloh Temple as a perfect example.
Garofalo, however, said DFL changes would ultimately hurt low-income people through price hikes on their energy bill. “If the stated goal is to help low-income ratepayers and reduce pollution, there are far more cost effective ways to do that than this,” he said.