Minnesota’s Solar Garden Program Helps Small Businesses

(3BL Media/Justmeans) - Solar and wind installations were on the rise last year, thanks in part to the gradual introduction of the federal Clean Energy Plan, which was formally unveiled last year. Areas like the Pacific region and the New England states saw the greatest gain in new construction in 2014, according to the 2015 Sustainable Energy Business Factbook (Bloomberg New Energy Finance and the Business Council for Sustainable Energy), which points out that while utility-grade construction has helped to create this uptick, the value of small-scale solar construction is now being realized as well.

Nowhere is this more evident than in Minnesota, which has set one of the highest renewable energy goals in the country. By 2050 it aims to garner more than 16 percent of its renewable energy from an ambitious mix of solar energy (photovoltaic, residential rooftop, commercial/government rooftop and concentrated solar) installations.

How it plans to accomplish its renewable energy goal (which would represent 31 percent of its total energy production) speaks to Minnesota’s attitude toward sustainable energy.  

In 2014, the state’s solar legislation, Statute 216B.164, took effect, with several provisions directed at encouraging private solar power investment. The most unusual of all may be its “community solar garden” program, which calls on Minnesota’s largest power provider, Xcel Energy, to create a program by which small businesses and residential owners can actually invest in small-scale solar power generation.

What is interesting is the framework that was used to ensure small businesses and residents could participate. As the name implies, the “garden” is designed to be small, with a maximum size of one megawatt. The provision also requires that:

  • there is a minimum of five subscribers per garden, each with no more than 40 percent interest
  • the “anchor tenant” can be a utility or other entity that sells shares to other subscribers
  • subscribers can invest in more than one garden
  • the gardens can be set up side by side and can be in the investor's county, or an adjacent county.
  • each garden must have its own limited liability corporation partnership, irrespective of the number of gardens established by the anchor tenant and subscribers

This past December, Xcel launched its prototype, which it called its Solar *Rewards Community program. The company says it has received an unprecedented response – enough applications to support more than 400 megawatts of solar power to date.  Not surprisingly, many of those initial applications have been submitted by large companies that have the collateral to start a new solar project.

In January, the energy, hygiene and water technology pioneer Ecolab made headlines when it announced that its Minnesota offices, which employs a staff of 2,500 would offset its electrical usage with 100 percent solar power. Solar energy developer SunEdison will oversee the construction, which will be spread over several gardens in the Twin City area. SunEdison plans to construct about 20 solar gardens that would provide a total of 200 MW of power, thereby enticing other businesses to invest in the projects. After they are built, the solar gardens will be managed by a third company, TerraForm Power, which is based in Bethesda, Md.

Ecolab is the largest company to take advantage of the Xcel Energy initiative, and demonstrates the advantage of the anchor-tenant scheme, in which a large company that has the funding or the portfolio to secure a loan for the sizable investment.

Michael Noble, who serves as the executive director of the Minnesota renewable energy advocacy group Fresh Energy, likened the structure to a large shopping mall, in which large box stores serve as the anchor tenant that helps fund the construction. Small businesses that may feature a niche product but may not have the funding to support the construction of large infrastructure, not only gain from this relationship, but make it possible for the mall to operate economically as a whole.

“We call these [solar investment] deals mall developments because you can’t build a shopping mall without there being an anchor tenant. And school districts and Fortune 500 corporations and people with Blue Chip credit are serving as the anchor tenants,” said Noble.

Earlier this month, Xcel Energy filed comments with Minnesota’s Public Utility Commission highlighting the fact that the utility company was concerned about the size of most of the companies that were applying to the program. It noted that “the majority of the solar garden projects (approximately 96 percent) are equal or greater than one MW” and that 58 percent were 10 MW or greater. It called attention to a feature that the legislation permits, which is the option of investing in more than one solar garden and having them side-by-side.

“While we recognize the Commission has provided guidance to allow for solar gardens to be sited near each other in order to share distribution infrastructure, we believe the types of projects currently in the queue are not consistent with the expectations underlying and supporting the Commission’s guidance for several reasons,” said Xcel.

But Noble said this was actually the genius of the community solar garden program: it provided a mechanism and an incentive for investors with a wide spectrum of portfolios work together. In the case of Ecolab, it also gives them the ability to convert to solar power, thereby supporting the state’s renewable energy goals.

While the provision has admittedly been a boon for larger companies that see an advantage in going solar, it’s also garnered the attention of smaller companies, some of which may have had an earlier interest in green power.

Such is the story of the cheese and meat company owned by Ed Eichten in the Center City/Chisago area, northeast of Minneapolis. Eichten’s solar garden, which was actually installed prior to the December 2014 application period, is located in the middle of Minnesota’s farming area, supporting the idea that community solar installations can work for residential neighbors and small businesses, as well as commercial investors. Notably, Eichten’s own enthusiastic support for solar and neighborhood networking has helped spread the word even further about the state’s solar program.

The memberships at Eichten’s dairy farm have also been hugely popular and were reportedly sold our last fall within weeks of becoming available. They are not only supported by local investors, but support local businesses and households, who are credited for energy generation according to the size of their investment. And to get around the age-old conflict of how much a utility company reimburses a solar provider (which in many states is set by the utility company), the flat rate is set ahead of time under the legislation so the subscriber knows what he or she will earn back based on approximate usage. 

While it is unclear whether there may be some future adjustments to the state’s community solar program to meet Xcel’s concerns, Eichten’s and Ecolab’s solar gardens are evidence that there is a benefit to residential-based partnerships that can support not only state mandates, but the growth of local small business development.