Free The Sun!

Free The Sun!

A state law that helped Minnesota get a jump-start on renewable energy is now restricting its development.

Last year, Cummins Power Generation, one of the world’s largest manufacturers of gas and diesel generators, installed solar-electric photovoltaic (PV) systems atop two buildings on its Fridley manufacturing campus. The installations were done to show the company’s commitment to sustainability, as well as demonstrate how its generators could be used to complement solar power.

Like almost all of Minnesota’s largest commercial solar PV installations, the systems’ capacities were limited to 40 kilowatts. That’s not due to a lack of sun or roof space, but because of a once-pioneering, now out-of-date state law that discourages larger systems from being built.

In 1983, Minnesota became the first state in the country to enact a so-called “net-metering” law. It says that utilities have to buy any unused electricity their customers produce from solar panels, wind turbines, or other generating sources at retail rates, as long as the customer’s system doesn’t exceed 40 kilowatts in capacity. For example, if a retailer’s solar panels produce electricity on a sunny Sunday afternoon when the store is closed, the utility must buy that power at the customer’s regular rate and start applying that credit when the lights go on Monday morning.

The alternative would be to force every owner of a solar panel or wind turbine to negotiate a purchase agreement for unused electricity. Net metering simplifies and standardizes the process for smaller projects, and also exempts net-metered customers from paying “standby” fees—charges levied by utilities for providing back-up power to customers that generate their own power only some of the time.

Minnesota’s net-metering law allowed farmers to put up a couple of small wind turbines on their property without penalty from their utility, and conceivably even generate a small refund if they generated more power than they consumed in a month.

Today, however, the same law that helped Minnesota get a jump-start on renewable energy is restricting development of wind, solar, and other innovative energy projects in the state.

“It is, I think, the biggest barrier we have to growing distributed generation in Minnesota,” says Wissam Balshe, energy and environment business manager for Cummins Power Generation. “Even those willing to pay the extra money up front to invest in solar and renewable energy really have no incentive to go beyond 40 kilowatts.”

Actually, it can create a disincentive, and not just for solar projects. Two wind turbine manufacturers now sell versions of their standard 50-kilowatt turbines in Minnesota that come with what’s essentially a built-in 10-kilowatt toaster. Whenever generation exceeds 40 kilowatts, the surplus electricity is diverted to a set of heat coils, which lets the turbines qualify for net-metered projects in Minnesota.

The Minnesota Department of Commerce hosted a series of workshops last fall to begin a dialogue on how to update the state’s net-metering law, which has since been leapfrogged by several other states.

How far has the state been bypassed? Wisconsin and North Dakota’s net-metering laws cover projects up to 100 kilowatts. Iowa’s? Up to 500. And of the 39 other states with net-metering laws, more than half allow projects greater than 1,000 kilowatts.

A typical residential solar system falls well below Minnesota’s net-metering ceiling, but commercial installers say they could be building larger systems if the cap were raised. Instead, the handful of solar arrays larger than 40 kilowatts have been hit with frustrating fees, and their owners don’t believe their benefits are accurately reflected in their utility bills, says Nathan Franzen, director of solar energy at Westwood.

“The scales are weighted in the utilities’ favor,” says Franzen, who has consulted on some of the state’s largest solar installations.

Utilities tend to oppose efforts to expand net-metering, and Minnesota utilities shared several concerns with Commerce Department staff after its net-metering workshops.

“Net metering is not the win-win solution to Minnesota’s energy challenges that promoters of distributed generation and metering technology claim,” wrote Greg Oxley, government relations director for the Minnesota Municipal Utilities Association.

Paul Lehman, Xcel Energy’s regulatory administration manager, says when customers install their own solar or wind generation, they still depend on their utility when the sun isn’t shining or the wind isn’t blowing. That’s where standby fees come in. “We’ve still got to have those poles and wires and power plants ready and waiting for them,” he says. “Those costs have to be covered by somebody.” In other words, Xcel says, those seeking more self-sufficiency become an electricity-grid freeloader, pushing those infrastructure costs onto other rate payers if Xcel can’t charge for them.

There is some truth to the argument. Utilities do have fixed costs regardless of whether your lights are on or off. The question is: What kind of fee is justified? After all, customer-generated power, especially solar, provides benefits to the grid, too, such as reducing the need to fire up expensive “peaking” power plants on hot summer days.

Cummins would like to generate more of its own power, Balshe says, but the standby fees proposed by Xcel make such plans uneconomical. He says that utilities need to be more reasonable and transparent about how they calculate standby fees, and he hopes more projects will be exempt from the fees altogether if the state updates its net-metering law.

It’s looking more likely that may happen. The Commerce Department’s workshops were aimed at finding some consensus for possible legislative or administrative proposals to be considered next year. Xcel says that a 60-kilowatt cap would be acceptable, but other participants argued for 1,000 or more. The department is conducting a cost-benefit analysis of net-metering policy.

Minnesota has accomplished much under the current cap, but it’s unlikely to realize our potential until the sky’s the limit. 

Dan Haugen is an energy journalism fellow with Midwest Energy News and a regular TCB contributor. Contact him at dan@danhaugen.com.

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