Potential solar rebate cutbacks cloud future for many projects

  • Article by: DAVID SHAFFER
  • Star Tribune
  • June 5, 2011 - 5:08 PM

Minnesota's subsidies to the solar power industry may soon get a little less rich.

State regulators have been asked to reduce a rebate for installing Minnesota-made solar-electric panels after the state Commerce Department concluded that some Xcel Energy customers could conceivably recoup more than 100 percent of installation costs by combining the rebate with other incentives.

Solar industry officials say nobody has gotten that much, and that uncertainty about future incentives has caused potential customers to hit the pause button on new projects.

"Hardly anything has gotten installed in the last few months" in Minnesota, said Joel Cannon, CEO of TenKsolar, a Bloomington company that manufactures solar-electric panels.

TenKsolar, which built up its inventory for the spring construction season, had to find out-of-state customers for panels it intended to sell in Minnesota. "We thought that product was sold, so we basically had to sell it again," Cannon said.

That outcome is the opposite of what the Legislature intended when it enacted the Minnesota Bonus rebate last year to boost solar-panel manufacturing in the state. The solar business is booming around the country, with the industry projecting a doubling of installations this year.

When combined with Xcel's separate Solar Rewards rebate and federal tax incentives, customers taking advantage of the Minnesota Bonus stood to recoup 80 to 90 percent of their installation costs. But Commerce Department officials worried that a federal tax benefit for depreciation could theoretically enable some businesses to recoup more than 100 percent.

A new payout formula proposed by Xcel, which manages the program, would eliminate that possibility and cut future Minnesota-made bonus rebates for businesses significantly. The rebate money comes out of a state-mandated renewable energy account funded by Xcel ratepayers. That's why the rebates are only available to them.

It remains unclear how much customers could expect to recoup from combined incentives, but it apparently could be at least half the cost of a small solar installation. Such projects range in price from about $40,000 for a small residential system to more than $300,000 for a commercial project, before incentives.

Awaiting regulators' vote

The proposed change to the Minnesota-made rebate program is pending before the state Public Utilities Commission, which likely will schedule a vote this month. While awaiting approval, Xcel has stopped sending confirmation letters to applicants listing the amount of a project's expected rebate.

Kelley Benyo, an electrician who co-owns Ecovision Electric of Minneapolis, said customers want certainty about what a system will cost them. She said her company has 10 solar panel projects on hold as customers await letters on whether they qualify, and how much they will get.

"When they put a hold on the bonus, they put a hold on the projects," added Donna Pickard, co-owner and business manager of Aladdin Solar of Excelsior, which installs commercial and residential solar electric and heating systems.

Residential solar projects are eligible for the Minnesota-made rebate program, but haven't tapped it because TenKsolar, the state's only solar panel manufacturer, makes systems for flat roofs, seldom used on Minnesota homes.

Many installers are anxiously awaiting the opening of a new Mountain Iron, Minn., plant by Silicon Energy, a panel maker based in Marysville, Wash. That company sells units for residential and commercial applications, but its Minnesota plant has not yet begun production.

One effect of reducing the Minnesota-made bonus is that more applicants may be able to get those rebates, especially after residential customers start ordering systems. State law commits Xcel to hand out $4 million in the next round starting July 1, and $5 million annually for the succeeding three years.

Lynn Hinkle, policy director of the Minnesota Solar Energy Industries Association, a trade group, said the rebate uncertainty and the resulting solar slowdown is on the government's radar screen, and everyone wants the problem solved.

"We've been concerned about it all along," he said. "We certainly want all of the glitches to be worked out."

David Shaffer • 612-673-7090

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