Roadblocks and Challenges
Due to the early success of its program, Minnesota experienced some challenges in scaling the implementation of its program. Throughout 2014 and 2015, the Minnesota Public Utilities Commission wrestled with developers and the state’s largest IOU, Xcel Energy, over details of the state’s community solar program. Lured by the promise of a program with no cap on total project capacity, community solar developers flooded Xcel with applications totaling 431 MW in the first month of the program alone. As the capacity in the interconnection queue continued to rise, Xcel warned that the average residential ratepayer could see their rates increase 2-3% if all the queued projects were developed.
In addition, although Minnesota’s legislation set a 1 MW size limit for individual community solar gardens, developers and Xcel soon locked into a disagreement over the developers’ tendency to locate 1 MW gardens in close proximity to each other. Xcel argued that these “co-located” gardens resembled utility-scale solar and violated the legislation’s intent. Developers argued that the statute permitted co-located gardens and that co-locating allowed developers to reduce overall costs by sharing distribution, construction and other development costs. The Minnesota Public Utilities Commission eventually took a compromise position, deciding to allow co-located gardens of up to 5 MW until September 2015, at which point the limit dropped to 1 MW.
Beyond the challenges mentioned here, Minnesota regulators also worked through issues involving who should pay for interconnection upgrade costs, how to better facilitate developers gaining access to capital for these projects, interconnection queue procedural changes, customer access issues, terms of customer subscription agreements, potential bill impacts to non-participating customer, and myriad other issues.
[C]ommunity solar developers flooded Xcel with applications totaling 431 MW in the first month of the program alone.
Similarly, in part due to its early leadership on solar, by the time its community solar program came around, California had already begun to experience some push-back from consumer protection groups and utilities on the cost impact of these programs on ratepayers. As such, the California program rules required that ratepayers who did not sign up for a community solar project would experience no “cost shifting.” This decision led regulators to provide subscribers with a utility bill credit that was well below the full retail rate for energy. This meant that subscribers would have to pay for their subscription to a community solar project and also pay a portion of their former utility bill. This placed pricing pressure on developers, which limited the early growth of the California community solar market.
The arduous regulatory process needed to work through these issues was challenging, but it helped pave the way for a nationwide expansion of community solar programs that continues today.