Utility had planned to phase out the popular program next year.
Xcel Energy's popular program that subsidizes small-scale solar-power projects in Minnesota isn't going away after all.
A state agency on Tuesday indicated that it will reject the utility's plan to eliminate its Solar Rewards program -- a victory for the state's fledgling solar industry, especially installers who feared a drop in orders if the initiative ended.
"It will absolutely help stabilize the business," said Rebecca Lundberg, CEO of Powerfully Green, a Champlin-based solar installer, and a board member of the Minnesota Renewable Energy Society.
The $5-million-a-year rebate program has helped 560 homeowners and businesses afford solar arrays since 2010. It has been so popular that the funds for 2012 ran out in May.
The Minnesota Commerce Department's energy resources division, which has authority to approve or reject utilities' conservation programs, said it supports retaining Solar Rewards through 2015, then replacing it with something else.
Xcel, the state's largest electric utility, wanted to drop the program after 2013, arguing that solar power is too expensive and that it's unfair for all ratepayers to subsidize power generation for a few. Xcel said in a statement on Tuesday that it was "encouraged that the department recognizes the challenges of the current Solar Rewards program."
The utility also said it would "work with the department to explore alternative programs."
Solar industry officials were pleased with the division's position, even though it would reduce how much subsidy each project receives -- from $2.25 per watt installed to $1.50. Despite the decrease, Lundberg said, Solar Rewards would cover 25 percent to 30 percent of a typical home solar installation, which can cost $20,000 to $40,000 for a 5-kilowatt system.
Xcel said it was reviewing the energy division's position, laid out in a staff regulatory filing. The division is expected to issue a final order to Xcel on Oct. 11, after the company and others submit written comments.
The reduced payout likely means that rebates will be available to more people who apply.
Craig Tarr, president and founder of Energy Concepts, Inc., a Hudson, Wis.-based design and installation firm that works in Minnesota, said many people planning solar arrays put their projects on hold for a year if they missed out on the rebate. Then, they would try again the following year.
As a result, installers experienced "on-again, off-again" fluctuations in business. Solar Rewards will provide a three-year window of support as the cost of solar installations continues to come down, Tarr said. "The long-term goal is to have solar systems without the need for rebates," he added.
Minnesota has about 100 companies in the solar industry, employing about 2,000 people, said Lynn Hinkle, director of policy development for the Minnesota Solar Energy Industries Association, a trade group.
"Significant progress has been made in building an infrastructure to support a solar industry in Minnesota," the energy division said in explaining its position on Solar Rewards. "Jobs have been created, financial investments have been made in the state, and a new industry is gaining traction in Minnesota's economy."
One of Xcel's arguments against the solar rebates is that they increase electrical generation, but are funded under the utility's state-mandated conservation program. Under that program, the utility reduced power use by a record 1.5 percent last year. Xcel plans to increase conservation-related spending for 2013-2015, which officials endorsed.
State officials conceded that solar rebates don't fit with Xcel's conservation initiatives and recommended finding a new way to fund the program after 2015.
David Shaffer • 612-673-7090