Xcel Energy Inc. warned state regulators Tuesday that a state-mandated solar garden program is encouraging large-scale projects that benefit commercial-industrial customers, but could sock all ratepayers with higher electric bills.
When the utility opened the door to solar gardens in December, renewable energy developers proposed more than 400 projects, each with an output of 1 million watts. But Xcel officials said most of the proposals are concentrated fields of solar panels 10 times that size — with the electricity marketed to large businesses.
"The statute has a 1-megawatt limit," Chris Clark, president of Xcel's Minnesota regional operations, said in an interview. "Most of the projects are a 1-megawatt garden next to a 1-megawatt garden next to a 1-megawatt garden."
Solar gardens are centrally located solar arrays whose output is shared by subscribers who pay an upfront or monthly payment to the developer. A 2013 state law requires Xcel Energy to set up the program, and the utility has publicly endorsed it.
Under tariffs established by the state Public Utilities Commission, the solar power is sold to Xcel at above retail rates, resulting in a savings to participants, but at a cost to all customers. So far, no solar gardens have been approved by Xcel. That process is expected to take several weeks.
In the meantime, the utility serving 1.2 million electric customers asked the PUC to take another look at the solar garden rules. Xcel said in a regulatory filing that energy developers proposing large solar gardens are "skirting" the typically competitive process used for big generating projects. Instead, solar developers stand to benefit from a rate structure "intended for small-scale development," Xcel said.
If all of the projects are built, it could add $50 million to all customers' rates, Xcel said. That would be a 1.5 percent hike to all residential customers bills and up to 1.8 percent to commercial-industrial customers, Xcel said.
"We are seeing the gardens being targeted to large commercial and industrial customers, which is not what we had anticipated," Clark said. "We had envisioned more neighborhood-type gardens where neighbors in the community, nonprofits or a church or something would have a garden. We envisioned something that was different."
In January, Ecolab Inc., a Fortune 500 company based in St. Paul, said it would subscribe to community solar gardens to offset all of its Minnesota electrical needs — and save money while doing it. Clark said other large Xcel customers have told the utility that they're being pitched solar garden deals.
David Amster-Olszewski, CEO of SunShare, a Colorado solar garden developer, said Xcel has done a good job setting up the program. "This will spur a good discussion," he said after reading the regulatory filing.
He said SunShare's proposed projects range in size from 1 megawatt to 9 megawatts. While the company is seeking large industrial customers as "anchors" in solar gardens, the goal is to sign up residential, small business and other customers as it has done on similar projects in Colorado, he added.
Amster-Olszewski said about half of the 430 proposed Minnesota projects probably won't get built, so the effect on rates won't be as dire as Xcel suggested in its filing.
Michael Noble, executive director of Fresh Energy, a St. Paul nonprofit that pushed for the solar garden program, said Xcel shouldn't be surprised that energy developers are choosing the least expensive approach to solar — large, concentrated projects on inexpensive land on the fringe of the metro area.
"The whole idea of community solar is that anybody who wanted solar could get it," he said. "You didn't have to have a sunny roof. You didn't have an expensive solar system on your business. You could get the economies of scale at the lowest possible cost and get credit on your bill."