Developers have flipped the switch on solar power projects in Carver County.
SunShare LLC of Denver, Colo., started transmitting electricity in late December from the solar array it developed on about 30 acres leased from Bongards Creameries along Highway 212, midway between Cologne and Norwood Young America.
SunShare’s 21,760 ground-mounted solar panels produce enough electricity to serve about 900 homes.
“We are very excited obviously about that,” said Al King, SunShare’s chief operations officer. “Minnesota is a wonderful market. There is a great community presence there. We look forward to continue to build additional projects there.”
Innovative Power Systems of Roseville followed in late February by activating 18,856 solar panels covering 25 acres along Tacoma Avenue north of Norwood Young America, producing enough electricity for about 873 homes.
“The one thing I wish was done is the vegetative screening, but we have to wait until spring to plant the trees,” said Evan Carlson, director of land and legal for Innovative Power Systems. “We really tried our hardest to make the project as aesthetically pleasing as possible.”
There is more to come.
Nine photovoltaic solar projects in Carver County were approved during the past two years, including eight community solar gardens permitted by the Carver County Board of Commissioners and a larger utility-scale project permitted by the Minnesota Public Utilities Commission.
“It’s certainly been a big part of my job,” said Steve Just, Carver County’s Land Management Department manager. “We worked hard in 2016. That was definitely the crest of the tide.”
The utility-scale Aurora project named “West Waconia” is the only other one in Carver County now under construction and is located south of Highway 5, northeast of Norwood Young America. It will produce enough electricity to power about 1,530 homes.
The owner and operator is Aurora Distributed Solar, LLC of Edina, which is a subsidiary of Enel Green Power North America, Inc. of Andover, Mass., which in turn is a subsidiary of global energy giant Enel S.p.A. of Rome, Italy.
The roughly $290 million Aurora project is unique because the Carver County site is one of 16 solar power plants being built simultaneously in 12 counties scattered throughout central and southern Minnesota. The combined total of more than 476,000 solar panels will produce enough electricity to serve more than 17,000 homes.
“Five of the 16 sites are substantially complete, meaning that all substantial construction activities have been completed, site restoration work is ongoing and, weather permitting, will resume in the spring,” Jacob Fehlen, Enel Green Power’s operations and maintenance supervisor for the Aurora project, wrote in an email.
“West Waconia is still under construction and all 16 Aurora sites are scheduled to reach commercial operation by mid-year,” Fehlen wrote. “West Waconia is the fourth largest of the 16 solar sites.”
Carver County’s six other approved projects are located in townships with Waconia, Watertown, New Germany or Mayer addresses. Most are expected to request and receive building permits from the county government this year, Just said. (Not all proposals are approved, the county recently denied a conditional-use permit for a solar garden in Watertown Township.)
All electricity from all nine Carver County projects is or will be sold under 25-year contracts to the state’s largest public utility, Xcel Energy, a provider of electricity and natural gas that also operates in Wisconsin, Michigan, North Dakota, South Dakota, Colorado, Texas and New Mexico. Xcel has more than 3.5 million electricity customers, including more than 1.23 million in its home base of Minnesota.
LOTS OF WATTS
Customers are familiar with watts, such as a 60-watt light bulb, but energy officials talk mostly about megawatts of electricity production and kilowatt hours of consumption. A megawatt is 1 million watts. A kilowatt is 1,000 watts.
The county’s eight approved community solar garden projects range in size from 1 megawatt to 5 megawatts and Aurora’s West Waconia site will generate 8.5 megawatts, raising the approved total to 37.6 megawatts.
Projects vary in technology and efficiency and therefore in electricity output, but the ballpark average is 1 megawatt produces enough electricity to power 180 homes, said Lee Gabler, Xcel’s senior director, customer strategy. If all nine Carver projects are constructed, that means the generated power would serve about 6,768 homes.
WHY SOLAR SURGED
When Ralph Jacobson, chief executive officer of Innovative Power Systems, started in the solar industry in 1991, he focused on selling residential rooftop solar panel systems to affluent customers who cared deeply about the environment and reducing their carbon footprint.
“It was wealthy people who wanted to make a difference, but it was unaffordable and therefore unavailable to most people,” Jacobson recalled.
“The price of it has come down so much,” he continued. “In 1991, it was $15 per watt. A 50-watt solar panel at $15 per watt was $750. Now the same panel at 50 cents per watt is $25. Even just five years ago, it cost $60,000 to $70,000 for a system for your house. Now it’s $12,000 to $15,000.”
Others agree that, much like big-screen televisions, steady improvements in solar power technology and efficiency dramatically cut costs, which made it more affordable for more people and businesses, which created more demand, which resulted in more manufacturers making solar panels and companion hardware, which further lowered prices due to rising competition.
“Cost is a really important factor — the falling costs,” said Allen Gleckner, director of energy markets at Fresh Energy, an independent policy development nonprofit organization in St. Paul. “They have dropped over 80 percent in the past five years. Prices are falling so fast it’s almost hard to keep up with it.”
Gabler of Xcel echoes the major price declines in an even shorter period.
“It’s primarily due to panel prices,” Gabler said. “They are falling dramatically. It may be more than 50 percent in the last two years.”
The Solar Energy Industries Association cites the same trend, including a 64 percent price decline in Minnesota and 33 percent decline nationally since 2011.
“Rapidly falling prices have made solar more affordable than ever,” the association’s website explains.
Imports of large numbers of solar panels (sometimes called modules) and hardware manufactured in China, a global leader in solar technology, played a big role in prices plummeting the past decade.
“When China started putting a lot of modules on the market in 2007 or 2008, it kind of drove the prices down because they were coming in at lower pricing,” Jacobson said. “It forced other manufacturers to really start to trim their costs. If they wanted to keep their market share, they had to drop their prices and stretch out retiring their debt.
“The Chinese were pretty effective in bringing the price down, and they still are,” Jacobson said. “That is one of the things that made solar available to the middle class.”
“Lots of panels are produced in China. They may have been dumping them (in the United States),” Gabler said. “A lot of Chinese panels are coming on market in large quantities.”
“It isn’t just the cost. It’s also the result of legislation,” Gleckner said of the solar surge. “The two things work together, pushing our energy system to adopt new cost-effective technologies. Legislation pushed our monopoly utilities to innovate. It brought on new options that are best for customers.”
The Minnesota Legislature in 2013 passed a law requiring Xcel Energy and other large public utilities to get at least 1.5 percent of their electricity from solar power by the end of 2020. The law also cites a state government goal of having 10 percent of retail electric sales in Minnesota be generated by solar energy by 2030.
The 1.5 percent solar requirement does not apply to Chaska or others operating municipal electric utilities.
Xcel relied so little on solar power in Minnesota in 2015 that it was not listed in a pie chart showing the company’s reliance on coal, nuclear, natural gas and other energy sources for electricity sold in its “Upper Midwest” service area of Minnesota, Wisconsin, Michigan, North Dakota and South Dakota. A second pie chart shows Xcel intends to tap solar power for 8 percent of its electricity generated in those states in 2030 as part of its plan to slash use of coal and carbon dioxide emissions.
“I think we did have solar on line in 2015,” Gabler said. “That was more the rooftops, private solar owned by individuals or school districts. It was a very small amount, 10-15 megawatts in 2015.”
But that started changing in 2016, mostly due to two huge utility-scale solar projects becoming operational — a 100 megawatts project comprised of more than 440,000 solar panels spanning 1,000 acres near North Branch in Chisago County and a 62 megawatts project near Marshall in Lyon County in southwestern Minnesota.
Scheduled completion of construction and activation this year of the Aurora project, designed to deliver a combined maximum of 100 megawatts at the 16 sites, will help Xcel comply with the 1.5 percent solar power requirement by the end of 2017, three years ahead of the Legislature’s demand.
“We will be north of that number by the end of 2017,” Gabler said last month. “We have about 225 megawatts on line today (in Minnesota). That will be changing monthly as Aurora comes on line.”
When construction of the Aurora project started in May 2016, the Enel parent company in Italy proclaimed it the company’s largest solar power project in North America.
“The potential of solar power worldwide, with particular reference to photovoltaic energy, is huge,” Fehlen wrote in an email. “And that is no different here in Minnesota, where the state has committed to receiving 1.5 percent of its energy production from solar by 2020, which will result in 2,800 (megawatts) of new solar installed in the state.
“With this in mind, the (Aurora) project makes (Enel Green Power) an early mover in the Minnesota solar market, which is expected to see significant growth in the near future,” he wrote.
The 2013 Minnesota law also required Xcel Energy to create a community solar garden program, which resulted in the eight projects approved by Carver County commissioners. The first community solar garden to generate electricity in Minnesota for Xcel became operational near Kasota in September 2015.
The federal government created a 30 percent solar investment tax credit for residential, commercial and utility investors in solar energy property when Congress passed the Energy Policy Act of 2005.
“Aurora qualifies for the federal investment tax credit,” Fehlen wrote.
The dollar-for-dollar reduction in income taxes owed by a person or company claiming the federal credit initially applied to solar projects becoming operational in 2006 or 2007, but a series of extensions keeps the 30 percent credit in place for solar projects that have started construction through 2019.
“The ITC (investment tax credit) has proven to be one of the most important federal policy mechanisms to incentivize the deployment of both rooftop and utility-scale solar energy in the United States,” the Solar Energy Industries Association wrote in a policy paper. “As a result of the multi-year extension of the credit enacted in late 2015, solar prices are expected to continue to fall while installation rates and technological efficiencies will continue to climb.”
But the pendulum is swinging.
“Incentives are going away. The industry is starting to stand on their own two feet,” said Martin Morud, president of TruNorth Solar LLC of Edina, a development partner in the approved 4.4 megawatts community solar garden at 10930 Highway 7, Watertown Township.
The 30 percent federal investment tax credit is scheduled to drop to 26 percent in 2020 and drop again to 22 percent in 2021. After that, the residential credit is slated to be abolished and the commercial and utility credit will drop to a permanent 10 percent, according to the Solar Energy Industries Association.
The Minnesota Legislature has funded $15 million per year since 2014 as grants to owners of residential and commercial properties installing rooftop systems using solar panels manufactured in Minnesota. But the House of Representatives voted last month to abolish the “Made in Minnesota” program that is scheduled to last through 2023. The House proposal has stalled in the Senate.
“One of the things going on in the Minnesota Legislature is Republicans are questioning the need for incentives that mostly go to wealthy people,” said Jacobson of Innovative Power Systems, who is a co-founder and current board member of the Minnesota Solar Energy Industries Association.
“We are discussing with key Senate members about a replacement program. I think we will come up with something. We need a replacement before it gets the ax,” Jacobson said. “It reminds me a lot of what is going on in Washington with Obamacare.”
The Legislature’s intent in authorizing community solar gardens was making solar power available to homeowners, businesses and public institutions who could not afford rooftop solar systems, did not want rooftop systems or could not benefit from rooftop systems because of limiting factors, such as having a heavily shaded roof due to nearby trees.
“In a nutshell, with the community solar program, you no longer have to put panels on your rooftop,” said Carlson of Innovative Power Systems. “When you subscribe to the garden, it’s like you have them on your rooftop. The point is to provide access to solar to people and institutions who otherwise would not be able to do it.”
There was rising public interest in solar energy and developers eager to offer it.
“Community solar gardens exist only when Xcel customers want to be subscribers,” said Gleckner of Fresh Energy. “Those only happen because they are customer-driven programs. Customers want it. Businesses want it — Target, Ecolab, General Mills. Public demand is there.”
“That has supported a significant amount of development,” Gabler of Xcel said about community solar gardens. “Because of the financial structure, that brought in a lot of in-state and large out-of-state developers into Minnesota.”
That financial structure is pretty complicated, but it boils down to this. The solar garden subscriber signs a long-term contract to buy a set amount of electricity from the solar garden operator and usually receives a larger credit on the subscriber’s monthly bill from Xcel Energy.
Contracts vary, partly based on whether the customer is a resident, business or institution and partly on how much electricity the subscriber buys from the solar garden. Contracts also can be structured so the subscriber saves more in early years or in later years, presuming Xcel rates continue rising.
Xcel signs 25-year contracts to buy electricity generated by community solar gardens.
“The way the relationship works is (the subscriber) signs up for a percentage of usage of output of the garden,” Gabler said. “You don’t pay up front; you pay as you go. The (solar garden operator) sets a price per kilowatt hour. In most cases, that price per kilowatt hour is lower than the kilowatt hour bill credit we provide to the customer. So many customers are receiving a savings.
“However, it is important to note that all our customers are paying for this energy,” Gabler explained. “So even though we are providing a bill credit (to subscribers), it’s really a pass through cost to all of our customers. It’s a fuel charge buying solar energy from community solar gardens. It could be up to 4 percent higher fuel costs because of solar gardens.
“Subscribers pay less per kilowatt hour than non-subscribers,” he said. “I would say based on what we’ve seen, and Xcel is not privy to the (solar garden operator’s) agreement with subscribers, but everything we have heard is they will receive savings on Day 1.”
Xcel cautions customers on its website, www.xcelenergy.com, that Xcel does not guarantee that they will save money.
“You may or may not save money by participating in solar gardens — subscription agreements are between you and the garden operator,” the website explains. “And while we support and administer the program, we cannot advise you on the potential savings or other aspects of your solar garden subscription.”
Jacobson of Innovative Power Systems said subscribers enjoy significant savings.
“The equity person providing the capital (to build the solar garden) takes the tax credits and sells the power at a reduced rate,” Jacobson said. “Subscribers pay the developer of the garden 80-90 percent (of the normal rate). Without putting money down, you get a lower amount you pay for electricity from the first month on. The customer gets 10-20 percent of the savings and the rest goes to the developer, recouping their investment.”
Subscribers to the recently activated SunShare community solar garden consist of 697 residential customers and the host business, Bongards Creameries, according to King of SunShare. The city of Cologne initially expected to be a subscriber there, but it will instead become a subscriber at a future SunShare solar garden site.
“Cologne is slated for one of our future gardens,” King said. “The plan is to get them constructed this year in Scott or McLeod counties.”
The Cologne City Council signed a 25-year contract with SunShare in July 2015 to pay 11.75 cents per kilowatt hour for its share of solar garden electricity with no future price increases, City Administrator Jesse Dickson said. The city hopes for a $1.1 million savings over 25 years.
“Our solar garden shares will produce enough energy that we should get a bill from Xcel that would not include any charges for use,” Dickson said. “I think realistically it’s tough to expect that to happen. We are not gambling on it totally eliminating our Xcel bill.
“It’s something I’m eager to see happen,” Dickson continued. “After seeing actual savings for a couple years, then we will start looking at what we can do with this extra money. We have plenty of infrastructure and other projects we’d like to spend it on.”
Some solar garden developers concentrate subscriber recruitment efforts on cities and other public entities rather than residents.
“Our subscribers tend to be institutions and municipalities,” said Carlson of Innovative Power Systems. “We have a few schools; Annandale school district is one of them. We have a few cities, the city of Minnetonka is one. The reason we like institutional subscribers is you need to stay in Xcel’s service area. An individual homeowner might move away, but a city is not going anywhere.”
The Chanhassen City Council signed 25-year subscription contracts with two community solar garden developers, Oak Leaf Energy Partners LLC of Denver, Colo., and United States Solar Corp. of Norwalk, Conn., that jointly will provide the city discounts for nearly 30 percent of its electricity consumption.
“Between the two, the net value savings over 25 years is about $1 million in 2017 dollars,” said Greg Sticha, the city’s finance director.
Chanhassen is a subscriber to the 3 megawatts solar garden developed by Oak Leaf that became operational Dec. 19, 2016, at the Metropolitan Council regional planning agency’s Blue Lake wastewater treatment plant in Shakopee.
“We pay Oak Leaf 11.5 cents per kilowatt hour for our electricity and Xcel gives us a 12.5 cent credit per kilowatt hour on our bill for electricity we purchase from them,” Sticha said. “The first year we are saving only one penny per kilowatt hour, which amounts to $5,000 or $6,000.
“Where we experience significant savings is in future years,” Sticha explained. “We’re locking in our price (with Oak Leaf) for the next 25 years, but the credit that will come from Xcel will be based on their current rate. So as their rates increase, and historically they have been increasing 3-5 percent a year, our savings increase. For just Oak Leaf, the net present value in 2017 dollars will be saving almost a half million (dollars) over the next 25 years.”
Sticha said the United States Solar project “is a year or more away” from producing savings for Chanhassen because the developer has not built the solar garden yet.
“They haven’t told us exactly where it will be yet. They have multiple properties in the Twin Cities area,” Sticha said. “The problem we are running into is these solar gardens must be connected to the Xcel electrical grid. That process has been rather time consuming. Blue Lake was well ahead of the curve. A number of these other projects are having problems getting connected to the electrical grid.”
Sticha said Chanhassen councilors have not decided how to use future savings on city electric bills.
“We haven’t had any official discussion on it,” he said. “For meters at the water plant, those savings should go back to the water fund. With other meters, it would be up to the City Council. Most likely it would be going to the general fund and offset the general fund (property tax) levy unless the council directed the savings to go somewhere else.”
The Metropolitan Council, the regional planning organization for Carver and six other counties in the Twin Cities area, is widely recognized as an early leader in the Minnesota solar energy market.
Oak Leaf was a co-developer for installing nearly 5,000 solar panels in 2015 to produce 1.25 megawatts of electricity for use at the Blue Lake wastewater treatment plant and an on-site fertilizer company’s facility that heat-dries wastewater sludge for sale to farmers. The project was partly financed by a $2 million renewable energy development grant from Xcel.
That solar system became operational in January 2016 and provides about 10 percent of the Blue Lake treatment plant’s annual energy needs, according to Bonnie Kollodge, a Metropolitan Council communications manager.
The Metropolitan Council also activated a second community solar garden project in December 2016. A 5 megawatts garden opened at the Empire wastewater treatment plant in Empire Township in Dakota County.
Minnesota Lt. Gov. Tina Smith praised the Blue Lake and Empire projects in a Metropolitan Council press release.
“These projects will significantly increase Minnesota’s solar garden capacity while providing reliable, affordable, clean energy for local customers,” Smith said. “I thank Xcel Energy and the Metropolitan Council for their continued commitment to developing our renewable energy resources.”
But not everyone likes community solar gardens, at least not in their backyard.
Officials involved in the permitting process witnessed widely different reactions from neighbors of proposed sites for community solar gardens.
“They went the whole gamut from virtually no opposition and potentially support to a lot of opposition and a fairly heated public hearing process,” said Just, the Carver County Land Management Department manager. “It’s a mixture depending on the (project) size, neighborhood location, whether neighbors can view it and how vocal they are.”
Just and Brad Davis, planning manager for Scott County government, agreed that smaller solar garden projects located in more remote areas received a more positive public response than larger projects surrounded by residents.
“The 1 megawatt project was much less controversial,” Just said of the project along Yancy Avenue near New Germany. “The larger projects have been fairly controversial.”
Neighbors unhappy about the approved 4.4 megawatts project along Highway 7 in Watertown Township filed a lawsuit, hoping to overturn the conditional-use permit approved by Carver County commissioners. Just said the court case is in the preliminary stage with assembling and transcription of records compiled during the permit review process last year.
The Scott County Board approved three community solar gardens projects in 2016, a 4.7 megawatts project and a nearby 3 megawatts project in Sand Creek Township and a 2 megawatts project in more rural Helena Township, Davis said. None have started construction, but Davis anticipates work will begin this spring.
“The one in Helena Township had very little public comment. No one was speaking in opposition to it. It was approved unanimously on the (board’s) consent agenda,” Davis said.
“The two in Sand Creek garnered a lot of public opposition and a lot of public comment,” Davis said. “The objections were to visual impacts and impacts to neighboring property values; those were the two prevailing issues. I think it was because the sites were so close, the visual impact appeared to be much greater. And the terrain, a lot of residents would be looking down on those solar gardens.”
Davis said Scott County commissioners amended a county ordinance March 7 to require a two-mile separation between permitted or proposed community solar gardens. Once the amended ordinance is published soon, Davis said the separation requirement will apply to future permit applications but not be retroactive to the three approved permits or three additional permit applications already received and under review.
The Belle Plaine City Council in Scott County in October 2016 unanimously approved its first solar gardens application for a 5 megawatts facility on 43 acres to be annexed from Blakeley Township into city limits. The permit approval is contingent upon annexation approval by the Minnesota Office of Administrative Hearings and receipt of a bluff standards variance from the county government.
“The concept was embraced by the township and the city,” said Belle Plaine Development Director Cynthia Smith Strack. “We worked together to approve the annexation because of the benefits of solar energy long-term.
“It wasn’t controversial,” Smith Strack said. “The site is tucked away on a hill and you can’t see it from adjacent roadways or anything. At the public hearing, we had two people speak. One was an adjacent property owner who wanted vegetation screening, and we accommodated that.”
Developers concentrate on locating solar projects in rural areas where land is cheaper than in large cities. Although Carver County has more approved projects than Scott County, the interest in Carver is not considered unusual.
“Carver is pretty average for a metro county,” said Gleckner of Fresh Energy.
As a whole, Minnesota is not a national leader in solar power.
Minnesota ranks 16th among the 50 states in solar energy production, according to the Solar Energy Industries Association. It lists the state’s percentage of electricity generated from solar power at 0.06 percent.
Minnesota now produces more than 372 megawatts of solar power, including adding nearly 340 megawatts in 2016, according to the association. It projects Minnesota will add 1,201 megawatts of solar power during the next five years, ranking 19th in the nation.