Minnesota’s largest utility this spring will offer businesses and ratepayers the opportunity to buy shares of power directly from two renewable energy sources.
However, critics of the program say it could siphon customers away from the state’s growing community solar market.
The Public Utilities Commission approved a pilot for the program, known as Renewable Connect, in January. The pilot allows Xcel Energy to apportion 50 megawatts of wind generated from the 200 MW Odell Wind Farm in southwest Minnesota to the program.
Another 25 MW has been added to the program from the North Star Solar Project in Chisago County, according to Laura McCarten, Xcel’s regional vice president.
“I’m thinking we’ll get the whole thing subscribed, but we’ll find out once the subscription period opens,” she said.
Xcel set up Renewable Connect “because this is something our customers want from us,” McCarten said.
“A lot of customers – large customers and individual customers – have strong sustainability goals or have personal values (related to sustainability), and Renewable Connect allows them to get a product that provides them as much renewable energy as they chose – 100 percent, or less than that.”
In addition, a Renewable Connect Government program allotted an additional 3.3 MW to cover roughly 33 percent of electricity powering the Minnesota State Capitol.
The program is part the growing “green tariff” movement by utilities to serve corporate customers interested in buying large scale clean energy at fixed rates. The World Resources Institute reported that 10 green tariff programs existed in 2016, double the year before. One of those was Xcel’s Solar Connect program in Colorado.
How it’s different from community solar
Although the Renewable Connect program hews somewhat closely to how community solar gardens operate, it has some distinct differences. For one, the contracts for consumers and businesses have greater flexibility, ranging from month-to-month to five and 10 year terms, McCarten said.
Secondly, customers will own “renewable energy certificates” (RECs) for the energy they purchase. For corporations seeking to fulfill sustainability goals having RECs offer proof of their support for distributed generation is extremely important. It is not a feature community solar gardens offer subscribers.
“What’s unique about this and why customers have been looking for this product is they retain the RECs,” she said. “Having those RECs allows them to demonstrate their achievement of a sustainability plan.”
Finally, the limitations on how much energy a customer can purchase is far greater than community solar gardens. Under the pilot plan, no one subscriber can purchase more than 10 percent of the first “tranche” offered, or 7.5 MWs.
In contrast, large community solar subscribers can purchase 40 percent of each garden. But solar gardens are limited to 1 MW each, so companies would have to subscribe to several gardens to achieve the level offered by Renewable Connect.
When community solar developers began co-locating many 1 MW gardens together to gain economies of scale Xcel successfully argued for a 5 MW cap. Today no community garden can exceed 1 MW.
The ability to buy a large quantity of clean energy was a priority of the Minnesota Sustainable Growth Coalition, a 32-member organization that includes 3M, Andersen Corporation, Ecolab, Medtronic and other large companies.
The Environmental Initiative convenes the group, which is dedicated to creating “circular economy” built on less waste, cleaner water and more clean energy.
Many members have a goal to someday power their businesses with 100 percent clean energy, said executive director Mike Harley.
Some have invested in community solar, he said, but they would like the opportunity to buy even more clean energy. “Many have made public commitments to increasing renewables,” he said. “They need more power than a community solar garden can provide. Five to 10 percent of their energy demand is not enough.”
Pricing and subscription options
Customers will pay a “premium” initially for subscribing to the program, she said. The portion of the bill known as the “fuel clause,” the cost of electricity, would be replaced with a slightly higher cost for the renewable energy.
“As of today the cost of this product is a slight premium over the fuel cost, so you pay a little more,” she said. Over time, however, the fixed cost of solar and wind – combined with a fixed escalator cost common to community solar contracts – could offer a better deal than a traditional contract with the utility, she said.
A cost escalator is a predetermined charge – generally from two to five percent – that is accessed by utilities or community solar developers on the bills of renewable energy customers. In many cases the escalator rate can be less than the typical increase in electricity costs.
Those subscribers opting for longer contracts may end up with a better deal because costs will be fairly predictable, said Amy Liberkowski is director, regulatory pricing & analysis. “For longer term contracts it’s slightly better pricing,” she said.
The Renewable Connect initiative cannot be combined with Xcel’s oldest and biggest green pricing initiative, Windsource. That program allows customers to offset energy use through the purchase of wind energy, to as much as 100 percent.
The application process, McCarten, will be online and simple to understand. “We’re building on success with renewable energy and bringing something to the market that customers really want to see,” she said.
The PUC also asked Xcel to study the idea of Renewable Connect for low income customers, which will be announced later this year, McCarten said.
Criticism of the program
Dean Leischow, CEO of Sunrise Energy Ventures, believes the program could hurt community solar gardens.
“It’s in direct competition with community solar,” he said. “I’m not surprised. All the arguments Xcel had about community solar is that they weren’t 100 percent in charge of it.”
Now the utility will be in charge of a community solar-like program which he said “is pretty anti-competitive, it’s driving out as much competition as it can.”
Leischow pointed out Xcel can offer corporate clients much more power through the Renewable Connect program than can a community solar garden.
Nor does Xcel have the geographic constrictions placed on community solar, he said, which prohibits recruiting customers outside of counties directly adjacent to county in which the garden is located.
“If we could put the plant anywhere in Xcel’s territory and subscribe anywhere, that would be a whole game changer,” Leischow said. “It’s absurd the PUC allowed them to do it.”
Many of Leischow’s arguments were raised by Energy Freedom Coalition of America, an organization in Denver that includes several solar developers. Xcel’s program encroaches upon “a competitive industry” and represents “a distinct departure from the traditional regulated monopoly model in Minnesota.”
Xcel would have a marketing advantage in promoting Renewable Connect, and its subscribers may end up with better rates than other Xcel clients, which would be in opposition to state law.
Finally, the coalition points out that Xcel has a similar offering in Colorado but with more restrictions.
GreenMark solar developer Mark Andrew said he did not know that much about Xcel’s program but he did say some of his potential clients were considering Renewable Connect.
They believe Xcel should build new renewable sources to power clients in the program and not rely on existing options.
Beth Soholt, executive director of Wind on the Wires, likes Xcel’s program and said it’s a “big step forward in meeting the needs of businesses who have expressed an interest in renewable energy.”
However, she wants to make sure the renewable energy generated is allocated accurately toward meeting Xcel’s state mandates for solar energy and the renewable energy standard. “We want to make sure we can track all this,” she said.
(Customers cannot combine Renewable Connect and Windsource, as first reported.)