Minnesota was one of the first states to enable community solar and became an early leader as its program flourished. The original policy, passed in 2013, established a community solar program bound to the state’s largest investor-owned electric utility, Xcel Energy, and was noteworthy for allowing for unlimited development. A 2023 policy (HF 2310) has expanded the program, while also introducing new rules and limitations. Community solar is still only available to customers of Xcel and will be administered by the Minnesota Department of Commerce.
Under the new rules, a qualifying community solar garden may have no more than five megawatts of generation capacity, must have at least 25 subscribers per megawatt, and no consumer may subscribe to over 40 percent of a garden’s capacity. A new set aside requires that 30 percent of each garden’s generation capacity be subscribed by low- to moderate-income (LMI) households. A total of 55 percent of each garden’s capacity, including the 30 percent LMI carveout, must be subscribed by LMI households, affordable housing, and ‘public interest’ groups (such as nonprofits and libraries). The compensation subscribers receive on their bill is tiered based on customer class and defined subscriber types, with the maximum compensation set at the customer’s average retail rate.
The 2023 policy also introduced annual growth caps: 100 megawatts in 2024, 2025, and 2026; 80 megawatts in 2027, 2028, 2029, and 2030; and 60 megawatts in 2031 and each year thereafter. Minnesota’s program stimulated over 800 megawatts of community solar in its first eight years.
The Minnesota Public Utilities Commission will allocate capacity to solar developers who meet the program requirements.
What’s In It For Subscribers?
Xcel Energy customers who subscribe to community solar will sign a contract with the owner of the solar garden for a certain monthly rate. The electric utility will then credit the subscriber’s monthly bill with an amount proportional to their share in the solar garden minus the subscription rate, which goes to the solar garden owner. Including both the subscription fee and bill credits on the same bill is called ‘consolidated billing’ and is a best practice for equitable community solar and a positive subscriber experience.
The bill credit paid by the utility will be a certain rate per kilowatt-hour — a rate that depends on subscriber type (see table below). The maximum credit, 100 percent of the average retail rate, will go to LMI subscribers. The 2023 residential retail rate was $0.13979 per kilowatt hour, for reference.
The idea is that community solar developers, especially given new federal incentives, can install solar economically and offer subscriptions at prices that will save subscribers money on their utility bill. The 2023 amendment requires that LMI subscribers save at least 10 percent between their bill credits and the subscription rate.
There is an additional rate specific to ‘backup subscribers,’ or entities that temporarily subscribe to a solar garden (or increase their existing subscription) when a different subscriber cancels. This has been an important backstop for projects with many residential subscribers.
Community solar gardens approved before January 1, 2024 are grandfathered into Minnesota’s ‘Value of Solar’ rate. Minnesota developed the Value of Solar as a more comprehensive estimate of solar’s benefits than traditional net metering — but the Value of Solar was only used for community solar. From 2014 to 2023, the Value of Solar was calculated by adding the many components in community solar’s “value stack,” including its avoided environmental cost and the utility’s avoided generation capacity and fuel costs.
Minnesota Adopts Long-Sought Equity Provisions
As written in 2013, Minnesota’s policy lacked consideration for groups that have traditionally been left out of the solar energy transition, including low-income residential subscribers and historically burdened or frontline communities. The 2023 community solar amendment introduces specific opportunities to advance equity. In addition to the tiered compensation rates, which will distribute more benefits to the most energy burdened, 30 percent of each solar garden’s capacity must be set aside for low- and moderate-income (LMI) subscribers (LMI is defined as 150 percent or less of the area’s median household income).
Beginning in 2024, 55 percent of each community solar garden’s capacity must be reserved for LMI households, public interest subscribers, or affordable housing providers. A public interest subscriber can be a municipal or Tribal subscriber, school, non-profit organization, house of worship, or other public service provider. Developers must have a plan to meet these carve-outs to secure Commission approval and, crucially, may not check credit scores when seeking subscriptions.
Minnesota’s 2023 community solar amendment also requires that developers pay installers prevailing wages if the community solar garden has more than one megawatt of generation capacity.
Learning From A Decade Of Program Negotiation
Minnesota’s community solar program has come up against many hurdles and barriers. These challenges — including an annual battle over the value of solar — have been worked out in a regulatory docket started in 2013: Docket No. E002/M-13-867. A Commission-facilitated working group also discusses various problems as they arise in Minnesota’s distributed solar landscape more broadly.
Minnesota’s failure to reach residential solar subscribers was a widely-known flaw — the 2013 policy provided no mandate or incentive for developers to do the extra work. As a remedy, the Minnesota Public Utilities Commission introduced a 2018 Residential Adder. The adder boosted compensation rates for residential subscribers by 1.5 cents per kilowatt-hour for projects started in 2019 or 2020. The Commission later extended the adder (at the same rate) through 2022.
Beyond the policy itself, many of the program’s troubles boil down to Xcel Energy’s hostility toward community solar. As ILSR cautioned the Minnesota Public Utilities Commission in a 2021 filing, “the distribution system operator has a financial interest in preserving its own market share.” The utility’s profit motive is fundamentally misaligned with community solar, which the company views as competition to stifle. The program’s devastating interconnection delays are a symptom of this condition, including a frustrating ‘on hold’ status that the company implemented without limit. The Commission ended up charging Xcel a one million dollar fine for the interconnection delays (significant in that it happened, but insignificant by comparison to the company’s annual revenue).
The utility has (predictably) petitioned each year for a lower value of solar and made claims that non-subscribing customers are subsidizing the community solar program. ILSR analysis, meanwhile, found that Minnesota community solar saved all utility customers money, including non-subscribing customers. Still, legislators were moved by the cost-shift argument and implemented program caps in the 2023 amendment. They will revisit the program and its costs in 2030.
Finally, Minnesota’s community solar program has suffered from a lack of transparent data regarding grid hosting capacity. Xcel Energy has improved its data reporting in recent years, but where the data shows that capacity is limited, there are not good options for resolving it. Distributed solar stakeholders have advocated for measures like interconnection queue transparency and sharing grid upgrade costs among multiple community solar projects. The 2023 community solar amendment may ease some of congestion, as it removes the rule that community solar gardens must be in counties adjacent to their subscribers, but many areas are still constrained.
Participation And Impact To Date
As Xcel Energy publishes data on the mix of subscribers, we can report that more than 24,861 residential customers (93% of all subscribers) are saving money with a shared solar subscription. Most of the program’s total capacity serves commercial customers (82%), but much of that capacity may serve public entities. These public entities include schools, colleges, hospitals, and county and local governments, as outlined in Xcel Energy’s 2018 Annual Operations Report (April 2019). In other words, community solar helps broaden those who benefit from solar by enabling individuals and public institutions to save money with solar!
As the impacts of the 2023 community solar amendment begin to show, we’ll report them on our National Community Solar Programs Tracker page.
For more on community solar in Minnesota, check out these ILSR resources:
- What Is the Value of Solar? — Episode 148 of Local Energy Rules (2022)
- Targeting Subscriber Inequities in Minnesota’s Community Solar Program (2021)
- Minnesota Regulators Give Boost to Residential Community Solar (2018)
- Small Minnesota Community Faces David v. Goliath Negotiation for Community Solar — Episode 69 of Local Energy Rules Podcast (2019)
- Minnesota Community Solar Saves All Utility Customers Money (2019)
- Why Does One Minnesota Utility Have a Love / Hate Relationship with Community Solar? (2019)
- Community Solar With an Equity Lens: Generating Electricity and Jobs in North Minneapolis — Episode 57 of Local Energy Rules Podcast (2018)
- Minnesota Has the Best Community Solar Program — Here’s Why (2017)
- Sunshine and Ownership: A Cooperative Solar Garden Blooms in North Minneapolis – Episode 34 of Local Energy Rules Podcast (2016)
- Why (Else) is Xcel Energy Trying to Axe Minnesota’s Community Solar program? (2015)
- Community Solar Gardens Sprouting in Minnesota (2014)
- A Deep Dive on Value of Solar and the Future of Solar Energy – Episode 22 of Local Energy Rules Podcast (2014)