Minnesota had 14 MW of solar installed at the end of 2014.

Remarkably, it now has over 400 MW in its community solar queue today.

In December, Xcel Energy launched its Solar*Rewards Community for Minnesota. Based on a successful program in Colorado, Xcel Minnesota customers will be able to pay for solar energy-generated electricity from third-party developed central station arrays that is sent to the grid and get credit on their electricity bills for it.

“I am blown away by the response to the community solar program,” said John Farrell who, as one of the architects of Minnesota’s solar law, helped put the policy framework for this boom in place. “It is going to explode in 2015, driven by the many, many people getting into the game who previously would not have thought about solar, businesses, individuals, cities.”

Community solar is “a program through which individual members of a community have the opportunity to ‘buy in’ to a nearby solar installation…[and] receive a proportional share of the financial or energy output of the system,” according to Expanding Solar Access Through Utility-led Community Solar from the Solar Electric Power Association (SEPA). “Community solar programs may be offered by electric utilities or through third-parties or community groups.”

“Only 22% to 27% of residential rooftop area is suitable for hosting an on-site photovoltaic (PV) system,” according to the 2010 Guide to Community Shared Solar from the National Renewable Energy Laboratory. “Community solar options expand access to solar power for renters, those with shaded roofs, and those who choose not to install a residential system on their home for financial or other reasons.”

But, Farrell pointed out, “some utilities are looking at community solar as a way to poach people away from net metering and change the economics in their favor.”

“Larger solar developments – as compared to putting solar panels on individual roof-tops – usually cost less to install, which can make solar power more affordable and convenient,” said Xcel Energy VP Chris Clark in announcing the program.

Minnesota’s Community solar gardens bill, passed in 2013, was intentionally designed with no cap on capacity to prevent utilities from limiting distributed solar.

“We made sure community solar is value added in Minnesota,” Farrell explained. “It expands the opportunity for people to participate in solar but also allows traditional net metered distributed solar to continue to grow.”

Community solar business models

SunShare, the second biggest U.S. community solar developer, is moving aggressively to take advantage of the Minnesota opportunity.

“In 2014, our total capital activities exceeded $50 million, including investments from NRG Renew and others, and we expect to grow substantially in 2015 and 2016,” explained CEO David Amster-Olzewski.

 Clean Energy Collective (CEC) is the leading private sector community solar developer, with 37 megawatts of built capacity in 51 projects involving 19 separate utilities across 8 states. It just won what appears to be major backing from First Solar, one of the world’s biggest solar developers. CEC is currently focusing the bulk of its activity in Massachusetts.

CEC has succeeded using an up-front payment for panels business model. It always works with an active utility partner, which handles the billing.

SunShare’s automated system informs the utility of its array’s output and the percent of that output contracted for by each subscriber, Amster-Olszewski explained. Each subscriber gets a bill from the utility detailing usage, credits earned for the solar array’s output, and the various other utility charges.

Under Minnesota’s law, subscribers earn an applicable retail rate (residential: $0.12 per kWh, small commercial: $0.11 per kWh, large commercial: $0.09-plus per kWh) plus the $0.02 per kWh renewable energy credit fee from Xcel. That will make the remuneration for community solar comparable to the remuneration earned by net metered customers, Amster-Olszewski said.

Each subscriber also gets a bill from SunShare, based on a fixed 20-year per-kilowatt-hour contract rate and the month’s electricity usage, he explained. The rate is at or under the utility rate, with a 2% to 3% inflation escalator. It protects subscribers from the EIA-estimated 4% to 5% national average annual power price increase.

With its new SolarPerks model in Massachusetts, CEC is introducing a plan in which subscribers pay nothing upfront, contract with CEC for kilowatt-hours, are credited by the utility for their share of the array’s output, and pay 95% of that credit to CEC for owning and maintaining the array.

“The subscriber automatically gets a 5% reduction with no upfront cost,” a CEC spokesperson explained. “But as electricity goes up, the subscriber will never be victim to an increasing electricity bill.”

The SunShare-Mortenson deal

To anchor its Minnesota growth, SunShare formed a strategic partnership with Minnesota-based Mortenson Construction, one of the biggest U.S. energy project and renewables builders.

“We are always looking for the next market, the new market, and particularly we are looking for markets that will be strong in 2017 and beyond,” explained Mortenson Vice President and General Manager Trent Mostaert. “We saw community solar get started in Colorado and saw SunShare play a leading role. When they came to Minnesota, we decided to jump on board.”

In 2017, Mostaert noted, the federal investment tax credit (ITC) drops from 30% to zero for residential solar but will be 10% for commercial arrays. “Yet it is selling power to subscribers at close to the retail rate instead of trying to sell into the wholesale market,” he explained.

Mortenson will serve as Engineering, Procurement, and Construction (EPC) contractor on SunShare’s projects, Mostaert said. Both companies’ representatives acknowledged the builder is also acting as an informal bridge for SunShare to the Minnesota market.

Over 100 MWs of SunShare’s Minnesota pipeline has already won preliminary approval from Xcel, according to Amster-Olszewski. “That represents $250 million in projects to be developed mostly in 2015 but also in 2016, he said. “We are working with capital partners and expect to have announcements in the next 3 months.”

Interconnection issues on the horizon?

Interconnections could be a concern amid the boom, Mostaert said. “If we had more visibility into Xcel’s transmission capacity, it would make it a lot easier to plan our projects.”

With more data and information about the capacity of feeder lines earlier in the process, he explained, Mortenson and SunShare could identify land to target for development. Instead, they are “now locating at substations and major transmission lines and hoping there is capacity on those lines.”

Where poor planning allows feeder lines to become overloaded, as in Hawaii, development has become impeded and more costly. That could be happening now in Minnesota. Once the interconnection application is filed and the $1 million per 10 MW fee is paid, Xcel provides feeder capacity information, Mostaert said. But that could mean a developer discovers the feeder is overloaded after committing land and significant money.

Both Xcel and the Minnesota Public Utilities Commission are reportedly working on resolving the interconnection issues, Mostaert said.

"Even if only half the solar in the queue is built, that is still ten times more solar that was installed in this state before this year and it will only grow from there because electricity prices keep going up,” Farrell said. “The exploding growth will bring Xcel back to the commission with some reason it has to be slowed, capped, changed, or something, to keep their control of the grid. Community solar is going to call attention to that.”