Xcel Energy’s Solar Rewards program is expected to attract some commercial customers that might have otherwise considered larger systems if not for the size limit.

Minnesota solar developers say changes to an Xcel Energy incentive program could end up discouraging businesses from installing larger systems.

Xcel’s Solar Rewards program, which pays participants for every kilowatt hour generated, had been limited to projects up to 20 kW capacity and mostly used by residential and small business customers. State lawmakers this spring, however, raised eligibility for the program to 40 kW installations.

At that threshold, the program is expected to attract commercial customers that — unlike most residential and small business customers — might have otherwise considered larger systems if not for the program limit.

Xcel is seeking approval from state regulators for a new tariff agreement for Solar Rewards customers. The tariff would prohibits paying incentives on solar added after June 1, 2018 that lead to an aggregated output of 40 kW or more. Solar developers want regulators to allow customers to install more than 40 kW while continuing to participate in Solar Rewards program.

“Xcel’s proposed interpretation would have a detrimental impact across the commercial solar industry by disqualifying many solar customers that would like to participate,” said David Shaffer, executive director of the Minnesota Solar Energy Industries Association.

Xcel: program meant for small systems

The utility believes around 35 projects that have submitted applications to the Solar Rewards program would lose eligibility if regulators approve the 40 kW rule. Those customers would have an opportunity to decrease their project sizes to fit with program’s constraints.

A customer with an existing 5 kW installation in Solar Rewards can add 35 kW and receive an incentive for the combined system, Xcel said in a filing with the Minnesota Public Utilities Commission. Systems beyond 40 kW can participate in other incentive programs, but the utility does not want projects double dipping by receiving incentives from two or more programs.

Allowing 40 kW systems to serve as cornerstones for larger installations would fundamentally change the nature of the program, Xcel said. The intent of has been to lower costs for small systems and offer more homeowners and businesses access to solar, the utility has argued.

Solar Rewards payments would continue on contracts made prior to June 1 even if the customer surpassed the 40 kW after that cut-off date.  For example, a 10 kW Solar Rewards 2017 project would continue eligibility even if solar added later topped 40 kW.

Xcel spokesman Matt Lindstrom said in a statement that a 40 kW project is about the size of a tennis court, while a 100 kW matches that of a football field. “When installations start to look more like the size of a football field or larger, we believe they should not be eligible for small-solar incentives, which are paid for by all of our customers.”

In addition, Xcel argues large scale solar has become affordable without Solar Rewards’ incentives.  A 100 kW system with a 30 percent tax credit and depreciation of tax credits costs $2.50 an installed watt.  A homeowner building an 8 kW system even with Solar Rewards’ pays $3.59 an installed watt.

Net metering and an incentive program for bigger producers create a favorable marketplace unavailable to customers with smaller installations, Xcel said in a filing.  

Xcel reports that 10 megawatts of Solar Rewards installations have been built since 2010. More than 300 projects were completed last year, one of the busiest for the program. As of Sept. 5 the company had received 949 Solar*Rewards applications for 2018.

In addition to helping homeowners and small businesses pay for solar installations, the program helps Xcel meet goals set by the Legislature for creating more small-scale solar in Minnesota.

Solar customers would have to choose

Jon Kramer, CEO of Sundial Solar, said in a letter to the Minnesota Public Utilities Commission that it has several customers with significant rooftop solar potential who have asked about expanding to 40 kW and beyond.

“It is our expectation to have many more of these incentive clients come to us in the future hoping to expand on their system using the non-incentive PV Rider.”

Energy Concepts, another solar developer, said in a letter a handful of clients, based on Xcel’s advice,  built two parallel systems prior to June 1, 2018 One uses Solar Rewards and another was expected to advantage of the utility’s “PV Demand Credit Rider.” The rider offers incentive payments from 1 p.m. to 7 p.m. to large system owners.

“Under the current proposed Xcel plan, they would have to choose to either enroll the larger second systems under the PV Demand Credit Rider and lose Solar Rewards on that separate system or keep Solar Rewards and not garner the payback that was projected for the implementation of the much larger system using the PV Demand Credit Rider,” Energy Concepts wrote.

Braden Solum, vice president of business development at iDEAL Energies, said schools and cities often start small with pilot project, and Xcel’s interpretation of the rules will discourage significant expansion of successful projects, as well as cause confusion.

“The biggest frustration we have is we don’t have the certainty to do anything,” he said “We like to operate under certainty and not have things changing all the time.”

The Minnesota Public Utilities Commission is expected to make a decision later this year.