Xcel Energy's popular solar rebates won't be as generous

The popular Xcel Energy program to subsidize solar panels on Minnesota homes and businesses is slated for major changes next year that may make it less attractive to customers who install such systems.

But Xcel said Thursday that it expects more people to take advantage of its Solar Rewards program even if incentives are reduced further in 2015 and 2016 as the company proposes.

"We have a pent-up demand for the money that is allocated for incentives," said Deb Sundin, who directs Xcel's renewable strategy and planning.

Instead of giving customers an immediate rebate covering a quarter or more of the cost of their solar panels, the new incentive system will offer annual payments over 10 years based on each system's electrical output.

That change, specified in the state's 2013 solar law, had been anticipated. On Thursday, Xcel proposed how the new incentives would work.

Now, a 10-kilowatt solar panel array is eligible for a $15,000 rebate. A homeowner installing the same system in 2014 would get no money up front. Each year for 10 years, Xcel proposes to pay 8 cents for each kilowatt hour of power from the new system. Based on an average output of 12,500 kilowatt-hours per year, the 10-year payback would be $10,000. That would be cut in half for systems installed in 2016.

The change in incentives won't alter the credit a solar customer gets on his bill for excess power sent to the grid via a two-way meter. Those extra kilowatt hours are credited back to the customer, reducing his monthly bill. In effect, the solar customer sells power back to Xcel at retail rates, a system called net metering.

"They are trying to reflect how cost effective solar has become," Hinkle said.

Sundin said solar panel prices have dropped in the past few years, reducing the need for incentives. Even with the reduced subsidy, Xcel projects that Solar Rewards will encourage 918 customers to install new systems in 2016, up from 261 in 2012.

That's important to Xcel because the new solar law not only requires it to get 1.5 percent of its power from solar by 2020, it also requires 10 percent of it to be generated on small rooftop-type arrays.

Solar Rewards, which Xcel once wanted to drop, is funded by Xcel ratepayers at a cost of $5 million per year. Each year of the program, there has been such strong demand for the incentive money that it soon ran out, leaving many applicants out of luck.

In addition to Xcel's Solar Rewards incentive, solar projects also are eligible for a federal tax credit. If the panels are made in Minnesota, another ratepayer-funded subsidy also is available.