Minnesota community solar projects are about to get bigger and more far-flung

Minnesota community solar developers will be able to build bigger projects, farther from subscribers, under a recent law aimed at reinvigorating the state’s shared solar program and making sure more lower-income customers are able to participate.

State lawmakers this spring approved several changes to the state’s decade-old community solar law, which lets Xcel Energy customers buy power from shared solar projects. The program allows households and businesses that lack sunny rooftop space or the ability to finance their own solar installations to still benefit from the clean energy transition.

Minnesota’s community solar program was the largest in the country for most of the last decade, with more than 30,000 subscribers sharing over 800 megawatts of capacity. The program’s success, though, has contributed to grid congestion, interconnection delays, and rising tension between solar developers and the utility in recent years. New York recently surpassed Minnesota in community solar capacity.

What’s in the law

The new state law (HF 2310) aims to address the biggest bottlenecks in Minnesota’s program by allowing larger projects and eliminating a restriction that subscribers be based in the same or an adjacent county as the project. In practice, that rule caused a permitting rush in a ring of counties surrounding the Twin Cities metro area, with capacity at substations in communities like Northfield being consumed by solar projects designed to serve urban and suburban customers.

A cap on the size of individual projects is being raised from 1 megawatt to 5 megawatts, which will allow developers to serve more potential customers for every interconnection application. 

The law also scraps the state’s “value of solar” formula for determining how much developers are paid. Starting on Jan. 1, 2024, projects will earn tiered compensation rates based on the type of customers they serve. Low- to moderate-income customers will be credited at the full retail rate, as will larger “public interest” customers such as schools, tribes, nonprofits and government agencies. Other residential customers will be credited at 85% of retail, while commercial customers will get 70%.

At least 30% of each project’s capacity must be set aside for low- and moderate-income residential subscribers, and at least 55% must go to low- and moderate-income subscribers, public interest subscribers, or affordable housing providers. That’s a big change from the current program, in which commercial customers account for 82% of capacity, according to data compiled by the Institute for Local Self-Reliance.

What solar developers have to say

Solar developers said they were optimistic the law will help with the recent interconnection problems. Some are already reevaluating potential project sites farther from the Twin Cities. 

“This new legislation does help by making projects viable that are located away from the most densely impacted areas when it comes to interconnection,” said Jeff Lee, director of development at Nautilus Solar Energy.

David Shaffer, director of policy and government affairs for Novel Energy Solutions, said his company had been worried about finding enough subscribers for two proposed projects in rural Clay County. Now, it will be able to recruit customers across Xcel’s entire service territory.

“It takes projects that were on the fence or borderline and makes them completely possible now,” Shaffer said.

Kevin Cray, senior regional director at the Coalition for Community Solar Access, said the 5-megawatt limit should also help clear the project queue. Developers who want to construct 5 megawatts of community solar must have had to submit five separate applications. 

A premium on low-income subscribers

Community solar developers will have an incentive to recruit as many lower-income subscribers as they can because of the premium rate offered for that customer tier. That higher rate is important, Lee said, because reaching those customers often takes more time and resources. 

“That was a lagging characteristic of our program,” said John Farrell, a longtime community solar advocate who helped craft the state’s original law as co-director of the Institute for Local Self-Reliance. “We were early out of the gate with a good community solar program but lagging many other states that have since adopted [low- to moderate-income] policies.”

The law prohibits companies from asking for subscriber credit scores, an issue that had hurt the ability of some people to join community solar. Solar developers must also pay prevailing wages on community solar projects.