In 2013, MnSEIA played an instrumental role in the passage of “Value of Solar,” a first-of-its-kind rate designed to be equivalent to the direct benefit that the solar facility provides the utility, its ratepayers, and society generally.
While the Value of Solar Rate (VOS) is generally optional for Minnesota's utilities to adopt, both Xcel Energy and Minnesota Power have calculated and published it. Both have published rates that are similar or higher than their general electric retail rates. The VOS is currently only used in the context of Community Solar Gardens in Xcel Energy's service territory, where it is the general rate paid to Community Solar Garden projects that were deemed complete in 2017 or later.
The rate’s methodology strives to make it value neutral, which is to say compensate solar providers only for the value added to the grid—no more, no less. To that end, the Minnesota Public Utilities Commission oversees that calculation of the VOS based on eight different components. Each year’s calculation is referred to as a “vintage.” Every year, MnSEIA represents the industry at the Commission to ensure that the VOS is accurately calculated.
MnSEIA reviews Xcel’s calculations of the VOS, which has eight components over three basic categories: 1) the avoided costs to the utility, 2) the benefits that solar's distributed nature provide, and 3) the benefits to the environment.
One of those eight components, the distribution capacity component has been the most controversial as of late. In October 2019, MnSEIA staff successfully argued for a change to Xcel Energy’s distribution capacity component that would have reduced the valuation by 50%.
Going forward there is a conversation hosted by the Minnesota Department of Commerce around a possible shift away from a system-wide distribution capacity component and toward a new location-specific valuation. This proposal would divide the state into different geographical sectors, and calculate the value of distributed energy resources in each sector—thereby producing many, slightly different VOS rates. MnSEIA found that the first attempt at shifting the distribution capacity component toward the more granular locational component produced inconsistent results that devalued the VOS. Our testimony to that effect steered the Commission back toward the distribution capacity component as it is today, but the conversation around location-specific valuation continues.
In the regulatory discussion of the 2021 vintage VOS during the Fall and Winter of 2020 and 2021, MnSEIA and other stakeholders pressed the conversation on the PV Fleet Shape, a component of the VOS that should be based on real-world data. The Commission declined to make changes for the 2021 vintage, but directed Xcel and other stakeholders to address the issue for the 2022 vintage.
The 2021 vintage VOS fell by .48¢/kWh levelized compared to the 2020 VOS, to 11.04¢/kWh.
From preliminary reports regarding the 2022 vintage, Xcel has taken into account real-world data for the PV fleet shape. The inclusion of that data, plus rising spot prices for natural gas futures in the Spring of 2021, seems to have pushed the preliminary rate for the 2022 vintage up about .8¢/kWh relative to the 2021 VOS. These changes represent real accumulated value from the work MnSEIA has done.
MnSEIA’s continuing oversight of this very complex set of calculations that goes into the VOS has resulted in better rate outcomes for the industry.