Applications are now open for new community solar garden projects aimed at providing working class Minnesotans with clean, affordable energy.
Minnesota’s robust community solar garden program got a makeover during the 2023 legislative session that intends to steer more benefits toward residential customers, particularly those in low and moderate-income households. The Minnesota Department of Commerce started accepting applications on February 1 for projects targeting those customers.
The new program is launching while legacy community solar projects are being challenged by a proposed rate change from Xcel Energy that is under consideration at the Minnesota Public Utilities Commission. Some advocates warn that Xcel’s attempt to change how solar subscribers are credited could drive up costs for households, cities, and companies with existing contracts, and scare away investment in solar energy.
Lawmakers established the community solar garden program in 2013, and it became the primary driver of solar power development in Minnesota. The projects are a middle ground between rooftop solar and large, utility scale arrays that can be hundreds of megawatts. The gardens are built by solar developers who sign subscribers to 25-year contracts. Subscribers essentially lease panels in the array that supplies power, which shows up on their utility bills as a credit.
Community solar made up 58% of Minnesota’s solar capacity through 2022, according to Commerce Department data. Environmental justice advocates pushed for changes to the program that would bring benefits to residential customers, particularly energy burdened households who spend more than 6% of their income on utilities.
“The focus seems to be on equity and access, and we’re really happy with that,” said Pouya Najmaie, policy director for Cooperative Energy Futures, a Minnesota solar cooperative that specializes in community solar projects that benefit energy-burdened households.
The new program eliminates provisions commonly used in community solar projects, like requiring someone to pass a credit check before they can sign up for community solar, and charging a fee when someone wants to cancel their subscription.
The new program will also require projects seeking state approval to have a subscriber base that is at least 30% low- to moderate-income households, and at least 55% a combination of those households and entities serving the public interest such as schools, religious institutions, and nonprofits.
The low- to moderate-income rate varies by location, and eligible households must be below 150% of the area median income. In Hennepin County, a four-person household could earn up to $186,000 a year and qualify.
The goal of the community solar program has always been to enable solar power to reach more people, according to Logan O’Grady, executive director of the Minnesota Solar Energy Industries Association, which represents solar firms.
The industry felt the legacy program was accomplishing that goal, O’Grady said. Despite relatively low levels of residential subscribers, community solar was embraced by local governments and school districts, which lowered their energy costs and benefited residents and taxpayers. But solar developers feel the updates will help benefit more diverse and underserved communities.
“We’re actually hearing developers excited about reaching those Minnesotans that maybe weren’t being reached before,” O’Grady said.
Minnesota’s Department of Commerce is now in charge of processing and approving community solar garden applications. The program was previously administered by Xcel Energy, which drew criticism from the solar industry for delays that slowed the process of plugging completed solar gardens into the power grid.
Xcel Energy still has key roles to play, including approving interconnection plans for projects before the solar provider can apply with the state. Xcel must also provide credit reimbursements on subscribers’ electric bills once projects are online.
Xcel Energy is working to finish an information technology system needed to issue bill credits for the new program by January 2025, according to Xcel spokesperson Theo Keith. Getting a signed interconnection agreement is only the first step, and projects will continue through the standard interconnection process once approved by the state, which can take up to two years, Keith said.
“We support the increased focus on residential, income-qualified and public interest subscriber benefits for Minnesota community solar gardens coming out of the 2023 legislative session,” Xcel Energy said in a statement.
The new program should cause a boom in residential subscribers, and incentives are designed to make sure that many who sign up are energy burdened, Najmaie said.
The locations where community gardens are built will also change. The original law required arrays to be built in the same or an adjacent county as their subscriber base, which led to a boom in projects in places like Scott and Carver counties in the suburban metro. Now, the gardens can be built anywhere in the state, no matter where their customers reside.
The size of community solar gardens expanded, too, and can now be as large as 5 megawatts, which is enough to power roughly 850 homes.
Those new rules should boost equity initiatives, O’Grady said. Allowing gardens to be built across the state will also help farmers, many of whom are interested in turning low-production land into a steady source of income via solar projects, he said.
The new program will approve up to 100 megawatts of community solar projects this year, according to John-Michael Cross, who is helping administer the program with the Commerce Department. The state will open applications for the first 21 days of each month until it approves 100 megawatts worth of arrays.
Should the state receive 100 megawatts worth of projects this month that meet the program’s criteria, it will close applications for the year. But if 60 megawatts are approved in February and another 60 megawatts worth of projects apply in March, the state will use a scoring system to determine which projects in the March batch are accepted.
Solar gardens that provide the most benefits to low-income households and public serving entities will be given the highest score, Cross said on a call with solar developers in late January.
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Threat to legacy gardens
The launch comes at a time when key players in the solar industry are concerned about potential changes to legacy community solar gardens that would reduce benefits for subscribers, including a host of Minnesota cities.
Xcel Energy proposed changes last fall to the way legacy community solar garden subscribers are compensated. The company is asking the Minnesota Public Utilities Commission (PUC), a governor-appointed body that regulates power providers, to switch the bill credit rate on existing community solar contracts. The new rate would reduce subscribers’ bill credits by roughly 30 percent—meaning they would save less in the future than they are saving now by using solar—and change the compensation written into 25-year contracts signed by those subscribers. The proposal would apply to the vast majority of the 860 megawatts of community solar gardens online today.
Those legacy community solar gardens are expensive to operate, Xcel Energy argued at a November PUC hearing. Bill credits earned by subscribers to those projects are paid out at a higher rate per megawatt hour than the utility pays for other power sources. The difference is passed onto all Xcel customers, which the company says costs an additional $7 per month on the average energy bill in 2024.
That argument is catching on with state lawmakers, who submitted a letter to the PUC saying the program is too costly, the Star Tribune reported in January. The proposed change would save Xcel Energy $48 million in bill credits, which the utility said it would pass on to its customers.
Supporters of community solar say that argument is flawed. The community solar garden program benefits far more than the 26,000 residential customers currently subscribed to a solar garden, Najmaie said. Its clean energy savings help public school districts and dozens of Minnesota cities that have installed community solar gardens, including Minneapolis, St. Paul, Bloomington, Minneapolis, St. Cloud, St. Paul, and Winona.
“They’re all getting benefits. This is not a huge subsidy,” Najmaie said.
Community solar gardens are close to where their subscribers live, which decreases transmission costs, said John Farrell, co-director of the Institute for Local Self-Reliance, a Minnesota-based organization that advocates for energy democracy. The projects also can be built faster than larger, utility scale arrays that require long permitting processes, he said during a meeting hosted by the Just Solar Coalition, a group of energy justice nonprofits and solar firms.
“If we are in a hurry to solve the climate crisis we really need local solar,” Farrell said.
Xcel’s proposal could bring a chilling effect to the solar industry in Minnesota, O’Grady said. If the state allows contracts to be changed, developers will be nervous about doing business here, he said.
“We are concerned about the broader impact that this could have,” O’Grady said.
Attempts by major utilities to downplay community and even rooftop solar benefits are not new. Utilities don’t own or profit from community solar, and are not incentivized to support their growth, O’Grady said.
“Any type of solar that is not owned by the utilities is at risk in our country right now,” O’Grady said.
The Minnesota Public Utilities Commission is hosting a hearing on community solar bill credits on Thursday, February 15, at 10:30 a.m. at its St. Paul offices, 121 7th Place East.
Solar companies interested in proposing community solar projects can find more information at the Department of Commerce’s requests for proposals page.
