Minn. solar power outlook sunny; Xcel forecast uncertain
Elizabeth Dickinson and Christopher Childs insist they are not early adopters of solar energy. They put solar panels on their home in 2007 — years after Dickinson's parents installed a solar hot water system on their home in the 1970s.
Still, the investment into their 1911 home on St. Paul's west side would make most Minnesota homeowners gape: Six years ago they paid $18,000 for a system of solar panels they bought second-hand, and that's after $2,000 in tax credits.
So far, they have saved roughly $2,700 on electricity. At this rate, the pay-off point won't come for another 34 years.
"If we had only done it for financial reasons, then I'd be concerned," Childs said. "But we had so many other considerations."
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The couple care deeply about the environment. Besides cost savings, the inverter box on their solar energy system calculates how many tons of carbon dioxide emissions they have avoided: 12.5 tons.
"That may be the biggest figure of all," Childs said.
Today, he said, a system of solar panels slightly better than theirs would cost about $5,000, and prices are expected to continue dropping. The trend could lead more homeowners and businesses to consider investing in solar at the same time the state's largest utilities work toward a new law requiring them to generate 1.5 percent of their electricity from solar by the end of 2020. The utilities now generate almost no electricity from solar sources.
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The utilities won't be able to rely on individual homeowners installing solar panels to reach the standard, because about three-quarters of Minnesota homes aren't ideal for solar. Homes need a south-facing, sloped roof that isn't shaded by trees or buildings.
But the solar industry and others who advocated for the new law are confident that more Minnesotans are willing to invest in renewable energy, so they are excited about a section of the law that allows for community solar installations. There aren't any yet in Minnesota, but several are in development already.
COMMUNITY SOLAR
The idea is to allow electricity ratepayers to buy or lease solar panels on a larger solar array developed on the roof of a large warehouse or on vacant land.
One such project being constructed in Rockford, west of the Twin Cities, allows those who receive their electricity as members of the Wright-Hennepin Cooperative Electric Association to buy a solar panel for $869. The member is then credited for the electricity the panel produces, said Rod Nikula, the co-op's vice president of power supply.
Cooperative utilities are exempt from the new solar law, but Nikula said community solar projects are a good opportunity for the state's investor-owned utilities to harness consumer interest in solar energy.
"Our members are interested in renewable energy," he said. "This lets them try solar without having to make the full commitment to it. It's a very good model."
Apartment dwellers and homeowners whose properties are not oriented correctly for solar are good candidates for the community projects, Nikula said. The other advantage to community solar projects is that residents keep their solar energy if they move, he said.
More than a dozen other states have a solar energy standard, and some have tried community solar, including Colorado and New Mexico.
One Minnesota start-up, Applied Energy Innovations, has been installing solar panels on homes and businesses for the past couple years. The new solar law is giving the company a chance to expand to work on larger community projects.
Nearly all of the company's 20 or so workers were unemployed during the recession, including owner Dustin Denison. Now the company is working with cities, nonprofits and the owners of large buildings to develop several projects, including a community solar array on the roof of a building on Lake Street in Minneapolis.
COSTS OF SOLAR
Denison said by giving more people the chance to invest in solar, the price will keep coming down.
"That's truly going to be a tipping point in the industry where we want to see the cost per watt get below $5 per watt, $4 per watt, and really make this affordable for anyone who wants the opportunity. This is solar for everyone," he said.
Denison expects consumers leasing panels on Applied's community projects to pay about $1,800 upfront. He said he thinks there is enough consumer and business interest in solar to make community solar projects a big part of how Xcel Energy and the other utilities meet the standard.
But the utilities are not so sure. In Colorado, where Xcel also does business, solar developers in just 30 minutes snatched up all of the 4.5 megawatts of community solar projects the utility initially offered to add to the grid.
"I think our biggest hurdle or roadblock might be just in the window of projects that Xcel opens for the program," Denison said. "This is going to help Xcel meet its solar energy standard. Why put the brakes on?"
Xcel officials contend that solar power is still more expensive, so it makes sense to move cautiously.
"The current law gives us some flexibility in how quickly we add the solar. It really just requires us to hit that 1.5 percent solar by the year 2020," Xcel Regional Vice President Laura McCarten said. "It's doable, and our concern will be to do it in a way that we think makes the best sense for our customers."
McCarten said Xcel expects solar to become cheaper, just as wind has.
"Today it's a very cost competitive resource for our customers. Over time, we could see the same thing with solar," she said.
SMALL-SCALE VS. LARGE-SCALE SOLAR
Even as prices drop, Xcel will also have to decide the best way to reach the solar standard. Small community solar arrays and incentives to install panels on homes and businesses are just two ways of adding solar to the grid. McCarten said giant solar arrays might be more efficient.
"You can get a lot more megawatts by developing utility-scale solar for the same amount of money, but what's the right mix?" she said.
Xcel and the other utilities subject to the law — Otter Tail Power, Minnesota Power and Interstate Power & Light — are working on plans to achieve the standard. They must report their progress to the Minnesota Public Utilities Commission once a year starting in July 2014.
One advantage for utilities to develop large-scale arrays is they are better able to control or predict when they get electricity from the panels, said Greg Nemet, a professor at the University of Wisconsin-Madison who studies energy analysis and policy. On the other hand, he said, having smaller solar installations dispersed throughout a state could help minimize the impact of a thunderstorm or other weather event that leads to low solar energy output.
"There's really benefits and downsides of both," Nemet said. "But that there is a mix and not just a small amount on either side I think is a really healthy thing, because there's a lot to learn about how these systems work, and there's probably a more robust solution if we have both types of installations out there."
Nemet said there is also evidence of new technologies catching on by word-of-mouth. Dickinson and Childs, the St. Paul homeowners with solar panels, said people often ask questions about their system. Cost has held a lot of people back, but it is becoming less of a factor, Dickinson said.
"I think a lot of people will start to consider it," she said. "There's a lot of good reasons why solar can work in Minnesota."
