By Douglas D. Shaftel
The state Public Utilities Commission (PUC) has unfortunately issued recent decisions that may discourage cities from subscribing to community solar gardens. On Sept. 6, the PUC adopted the value-of-solar, or VOS, rate for solar garden subscribers’ bill credits, and affirmed the 1 megawatt (MW) cap on the size of co-located gardens.
Xcel Energy customers who subscribe to a garden receive bill credits for the energy the garden generates. The subscriber’s credit for each kilowatt hour (kWh) generated is a combination of the applicable retail rate and $.02/kWh for the associated renewable energy credit. For commercial subscribers like cities, the credit would currently be $0.11740/kWh. Xcel believes this pricing structure does not reflect market forces and causes non-participating ratepayers to subsidize the program.
A 2013 state law on community solar gardens envisioned that the bill credit would eventually reflect the value of solar to the utility, its customers, and society. The concept behind this price model is that utilities should pay a transparent and market-based price for solar energy based on (1) avoiding the purchase of energy from polluting sources; (2) avoiding the need to build power plant capacity; and (3) avoiding costs associated with wear and tear on distribution and transmission facilities.
In September, the PUC adopted the VOS rate and required that Xcel use it for all garden applications submitted after Dec. 31, 2016. Each year, Xcel will have to recalculate the VOS rate by adjusting for infl ation, but Xcel calculates that a 2016 VOS rate would be $0.09950, substantially less than the existing bill credit for cities. On Sept. 26, Xcel asked the PUC to reconsider its decision.
Cap on solar gardens
The 2013 law also included a 1 MW cap on the size of gardens, but it was silent on how many gardens developers could “co-locate” to maximize economies of scale. The PUC initially refused to cap such co-locations and, as a result, Xcel received many applications for co-located projects that resembled utility scale projects. By July 2015, Xcel had received applications with a combined capacity in excess of 900 MW.
In August 2015, in response to Xcel’s concerns that adding so much power would strain the grid and cause bill increases for non-participating ratepayers, the PUC put a 5 MW cap on all co-located projects. It further ordered that all project applications submitted after Sept. 25, 2015, must comply with the statutory 1 MW cap. In its recent order, the PUC affirmed the 1 MW cap on all projects, noting that to do otherwise would “undermine the legislative intent to foster small, widely distributed solar gardens.” Since Sept. 25, 2015, applications for new solar garden projects have decreased substantially.
Douglas D. Shaftel is an attorney with Kennedy & Graven, Chartered.
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