General Manager’s Analysis of the 9/6/2016 PUC order on community Solar
The Public Utilities Commission formally released its order on the future of the Xcel Energy Community Solar Garden Program. I’m providing a quick summary and analysis for our members below, and you can read the full order here: puc-9-6-2016-csg-order
Switch to the Value of Solar Rate:
- Value-of-solar (VOS) rate adopted for all applications starting 1/1/2017. While we don’t yet know the 2017 VOS, the 2016 VOS was $0.0995/kWh, as compared to $0.1174/kWh for commercial and $0.146/kWh for residential under the ARR. So by itself, this is likely to decrease value for residential and low-income CSGs substantially (bad for CEF members).
- Xcel must use weather-normalized historic peak load capacity when calculating VOS (likely a good thing for CEF members).
- Starting with the 2018 VOS, Xcel must use a location-specific calculation of avoided costs of distribution capacity. This will likely incentivize load-connected and urban CSGs that avoid more costs, and will likely result in a higher VOS for those projects (this starts to accurately value the added efficiency of truly distributed (load-connected) energy. However, this won’t come into effect until 2018 garden applications.
- A garden application that is deemed complete in a given year will be applicable for the VOS of that given year (regardless of whether it was applied for or completed in a different year). This provides very valuable clarity that is helpful to CEF and other solar garden developers.
- Xcel must file their VOS calculation for the following year by Oct 1 of a given year (the clarity is also helpful, the timeline could be better and could be worse).
- The PUC instructed the Department of Commerce to evaluate and report back by 3/1/2017 whether adders (up or down) would be appropriate for any of (these adders would generally help):
- Brownfield sites or landfills (I assume a + to the VOS if anything)
- Public facilities (I assume a + to the VOS if anything)
- Commercial or industrial rooftops (I assume a + to the VOS if anything)
- Prime agricultural land (I assume a – to the VOS if anything)
- Directly in the communities the solar gardens serve (I assume a + to the VOS if anything)
- Residential subscribers (I assume a + to the VOS if anything)
- Low-income residential subscribers (I assume a + to the VOS if anything)
- Others the Department identifies as warranting modification or an adder
- PUC did nothing on almost all recommendations either positive or negative.
- They did require Xcel to propose a low-income CSG program for LIHEAP-qualifying subscribers by March 1. Non-Xcel entities may also submit proposals for consideration, though it is not clear in what form or timeline these will be welcome.
- The PUC’s inclusion of VOS bill credit adders to the Department’s review is relevant to benefiting low-income folks, but it is not complete/ final (see above March 1 timeline)
- Co-location will remain at 1MW. This will hurt big out of state developers and should be fine for smaller community-based developers.
- The $1 million material upgrade limit (the max a developer is allowed to pay for transmission upgrades) has been removed. This has little impact given the 1MW max because no developer will pay $1million for interconnection upgrades for 1MW anyway.
- There are a number of minor changes to the delays and timeframes allowed to developers to complete the projects. These are generally good and reasonable.
- On low-income provisions, not much good happened, but nothing bad happened (except the rate issues below). The process in 2016 did lay a foundation for future improvements in 2017 and beyond, so while we hoped for clearer and more ambitious improvements, we are making progress.
- The big deal here is the rates. The current value and calculation method for Value of Solar is bad for residential subscribers and low-income people, and creates a major hit to the program starting Jan 1. However, if the Department of Commerce proposes (and the PUC approves) meaningful adders to VOS for residential and low-income (and possibly other feature) it could end up being a very good thing for CEF and other developers seeking to serve residents and low-income families. There are also other predictability elements of VOS and the shift to locational avoided costs that are in the long-run a strong improvement to the financability of CSGs. The big question for low-income and residential subscribers is what the adders will be and how long it will take the PUC to review and approve them. CEF is exploring how best to contribute to this process.
- The CSG environment in MN will steadily be shifting towards small and mid-scale local and community developers and away from dominance by large out of state developers.
- Xcel has to propose a way to serve low-income people and others can develop alternative proposals to the PUC if they wish. CEF is exploring how best to contribute to this process.