Minnesota lawmakers consider rate-based solar power incentives

Minnesota legislative leaders and Gov. Mark Dayton are proposing sweeping changes in state incentives for solar power, hoping to significantly increase the amount of electricity generated from the sun.

The measure heard Tuesday by the state House Energy Policy Committee would make Minnesota the first state to mandate that utilities pay solar power developers a "Value of Solar" rate for electricity generated by rooftop and back-yard solar arrays. The rate likely would exceed the current retail price of electricity.

It also would encourage construction of larger solar arrays, such as the one placed last year atop the Ikea retail store in Bloomington. The state's current rate-related cap on solar generators would be raised to 1 megawatt, or 1 million watts. That's 25 times larger than the cap in current law.

The bill also would create a mandate on utilities to get a certain percentage of their power from solar. The sponsors, Rep. Melissa Hortman, DFL-Brooklyn Park, and Sen. John Marty, DFL-Roseville, who chair the energy policy committees in the House and Senate, have left open what the percentage should be. Solar energy supporters have proposed a 10 percent solar mandate on utilities in a separate bill — a requirement utilities have complained is too high.

"We haven't included any numbers," said William Grant, head of the Commerce Department's Energy Resources Division, who has been working with utilities and other interests for 18 months to reach a compromise on the package.

But the department hasn't been entirely successful in getting power companies' buy-in. Officials from Minnesota Power, the Duluth-based electric utility, two municipal power companies and the Minnesota Rural Electric Association, representing cooperative power companies, all raised various objections to the measure at a hearing Tuesday.

Although the bill would mostly benefit solar, parts of it also would apply to small-scale wind power and alternatives such as small turbines that generate electricity from waste industrial heat.

The bill would order the state Public Utilities Commission to establish a buyback rate for solar at each utility. In calculating the "Value of Solar" rate, regulators would take into account that solar arrays don't require building new transmission lines and often generate power where and when it's needed most, such as on hot days when air conditioners run.

The municipal utility in Austin, Texas, developed the first solar-value rate last October, and its experience is being closely watched in the solar and utility industries. The Austin rate is 12.8 cents per kilowatt-hour, which exceeds many residential utility rates.

"It is the first solar rate design by a utility seeking to support solar but in a way that is fair to both solar and those non-solar customers and the utility itself," Karl Rábago, a former Austin utility executive who now is a consultant, testified before the House committee.

Anne O'Connor, a spokeswoman for the Commerce Department, said in an e-mail that Rábago is being paid $10,900 through a U.S. Department of Energy grant.

Rábago said the solar rate differs from the solar incentives employed in Europe — artificially high rates called feed-in tariffs — because it is based on a calculation of the actual value of solar generation. He has developed a method to make the calculation.

The committee did not vote on the bill. Hortman, the House sponsor, said it will get a vote after being folded into a broader energy bill.

David Shaffer • 612-673-7090 • Twitter: @ShafferStrib