Minnesota utility regulators’ decision to cap the size of community solar gardens has been upheld by a state appellate court, which shot down a challenge by solar developer Sunrise Energy Ventures.

The Minnesota Public Utilities Commission (PUC) a year ago limited developers like Sunrise to clusters of five community solar gardens, each with a maximum output of 1 megawatt. In essence, a community solar site would max out at 5 megawatts, while Sunrise and some other companies had planned for far more power.

The PUC acted on Xcel Energy’s complaint that it had been flooded with proposals for large solar gardens that were bigger than intended by state law. Sunrise, which is partnering in Minnesota with solar industry heavyweight SolarCity, challenged the PUC’s ruling before the Minnesota Court of Appeals.

In a decision released this week, the appeals court ruled that the PUC didn’t — as Sunrise claimed — engage in unlawful, retroactive and capricious rule making.

“In light of the overwhelming response to Xcel’s [Community Solar Garden] program, we concluded that the PUC made lawful and reasonable fact-specific determinations under the circumstances,” Judge Jill Flaskamp Halbrooks wrote in an opinion.

Dean Leischow, managing director of Minnetonka-based Sunrise Energy, called the appeals court ruling “ridiculous.”

The company hasn’t decided whether to appeal to the Minnesota Supreme Court. Sunrise and some other developers have significantly scaled back their projects because of the PUC ruling.

“Xcel has conjured up a sort of Norman Rockwell version of community solar,” Leischow said regarding the size limitations for solar gardens.

In a press statement, Xcel said it was pleased with the court’s decision. It “brings closure to these issues and allows us to move forward to make Xcel Energy’s solar gardens program one of the largest and most robust programs in the country.”

Solar gardens are designed to offer solar power to people who are unable to, or don’t want to, install panels on their own property. The gardens are built by independent developers, who sell subscriptions to customers and produce power that goes onto Xcel’s grid.

A 2013 state law requires Xcel to offer the community solar garden program, and mandates that all investor-owned utilities in Minnesota get 1.5 percent of their electricity from the sun by 2020. Xcel is also developing its own large solar farms, with one slated to pump out 100 megawatts of electricity. (A megawatt is 1 million watts).

Since December 2014, Xcel has been reviewing about 1,000 applications from community solar garden developers, who have chafed at the program’s progress. So far, only three small community solar gardens, each under 1 megawatt, are operating in the Xcel program.

Sunrise Energy in Minnesota has partnered with San Mateo, Calif.-based SolarCity, the nation’s largest installer of residential solar panels. Publicly traded SolarCity was founded by energy impresario Elon Musk.

Sunrise Energy and Solar City had planned 100 solar gardens in Minnesota, which would be built and operated by Solar City — a $200 million investment. The gardens would have been 20 megawatts to 50 megawatts apiece, Leischow said.

“The PUC’s decision has cut into that significantly,” he said. “We are working to get as many as we can.”