Minnesota's Value of Solar: Can a Northern State’s New Solar Policy Defuse Distributed Generation Battles?

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In March 2014, Minnesota became the first state to adopt a “value of solar” policy. It may fundamentally change the financial relationship between electric utilities and their energy-producing customers. It may also serve as a precedent for setting a transparent, market-based price for solar energy. This presentation explains the origins of value of solar, the compromises made to get the policy adopted in Minnesota, and the potential impact on utilities and solar energy producers.

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Minnesota's Value of Solar: Can a Northern State’s New Solar Policy Defuse Distributed Generation Battles?

  1. 1. MINNESOTA’S VALUE OF SOLAR C A N A N O R T H E R N S TA T E ’ S N E W S O L A R P O L I C Y D E F U S E D I S T R I B U T E D G E N E R A T I O N B A T T L E S ? John Farrell Director of Democratic Energy April 9, 2014
  2. 2. VA L U E O F S O L A R
  3. 3. C O N C E P T A transparent and market- based price for solar energy
  4. 4. VA L U E FA C T O R S • Avoiding the purchase of dirty energy • Avoiding the need to build additional power plant capacity • Providing energy for decades at a fixed price • Reducing wear and tear on the electric grid, including power lines, substations, and power plants
  5. 5. $0.00 $0.03 $0.06 $0.08 $0.11 $0.14 Brown energy replacement Avoided transmission losses Environmental (RPS compliance) Avoided transmission access Local capacity value (per kWh) Minnesota Value of SolarUtilities value DG 14.5¢* *preliminary
  6. 6. N E T M E T E R I N G C O M PA R I S O N T O
  7. 7. N E T M E T E R I N G VA L U E O F S O L A R C U S T O M E R E A R N S B I L L C R E D I T S C U S T O M E R E A R N S B I L L C R E D I T S C R E D I T VA L U E = R E TA I L E L E C T R I C I T Y R AT E C R E D I T VA L U E = VA L U E O F S O L A R R AT E C R E D I T VA L U E F L U C T U AT E S W I T H R E TA I L P R I C E VA L U E O F S O L A R L O C K E D I N O N 2 5 - Y E A R C O N T R A C T S O L A R P R O D U C T I O N C A N N O T E X C E E D 1 2 0 % O F O N - S I T E A N N U A L C O N S U M P T I O N S O L A R P R O D U C T I O N C A N N O T E X C E E D 1 2 0 % O F O N - S I T E A N N U A L C O N S U M P T I O N N E T E X C E S S G E N E R AT I O N PA I D AT R E TA I L R AT E ( F O R < 4 0 K W ) O R AV O I D E D C O S T R AT E ( F O R < 1 M W ) N E T E X C E S S G E N E R AT I O N F O R F E I T T O U T I L I T Y A S I M P L E M E N T E D I N M I N N E S O TA
  8. 8. I M P O R TA N T N O T E Minnesota will allow utilities to replace net metering with value of solar I T C O U L D H A V E B E E N A N O P T I O N
  9. 9. W H AT I S V S . W H AT M I G H T H AV E B E E N
  10. 10. A D O P T E D P R O P O S E D C U S T O M E R E A R N S B I L L C R E D I T S C U S T O M E R I S PA I D F O R S O L A R E N E R G Y I N A S E PA R AT E T R A N S A C T I O N S O L A R P R O D U C T I O N C A N N O T E X C E E D 1 2 0 % O F A N N U A L O N - S I T E C O N S U M P T I O N S O L A R P R O D U C T I O N I S N O T L I M I T E D B Y O N S I T E C O N S U M P T I O N N E T E X C E S S G E N E R AT I O N I S F O R F E I T T O U T I L I T Y C U S T O M E R I S PA I D F O R A L L S O L A R E N E R G Y P R O D U C T I O N , R E G A R D L E S S O F O N - S I T E E L E C T R I C I T Y U S E U T I L I T Y C H O O S E S W H E T H E R T O A D O P T VA L U E O F S O L A R O R K E E P N E T M E T E R I N G U T I L I T Y M U S T O F F E R VA L U E O F S O L A R , B U T C U S T O M E R M AY C H O O S E B E T W E E N I T A N D N E T M E T E R I N G U T I L I T Y A U T O M AT I C A L LY O B TA I N S S R E C , W I T H Z E R O C O M P E N S AT I O N T O C U S T O M E R S O L A R C U S T O M E R R E TA I N S S O L A R R E N E WA B L E E N E R G Y C R E D I T ( S R E C )
  11. 11. 0¢ 4¢ 8¢ 12¢ 16¢ 2014 2016 2018 2020 2022 2024 2026 2028 2030 Market-based value of solar Production-based incentive P R O P O S E D : S O L A R F E E D - I N TA R I F F N O T A D O P T E D A D O P T E D
  12. 12. W I L L I T W O R K ? F O R S O L A R P R O D U C E R S
  13. 13. I S VA L U E O F S O L A R E N O U G H ? 0¢ 5¢ 10¢ 15¢ 20¢ 25¢ 30¢ (preliminary) MN Value of Solar Residential - $4/W Commercial - $3/W With 30% ITC No subsidy 2 5 - Y E A R L E V E L I Z E D C O S T ¢ per kWh
  14. 14. W I L L I T W O R K ? F O R C U S T O M E R S
  15. 15. Jane and John Doe Golden Valley, MN ! ELECTRICITY USE Monthly usage (kWh): 2,000 Cost per kWh: $0.115 Total cost of electricity consumption: $230 ! ! SOLAR PRODUCTION (5 kW) Monthly solar production (kWh): 542 Value of solar rate: $0.145 Total value of solar compensation: $79 ! ! Net electricity bill: $151 Jane and John Doe Golden Valley, MN ! NET ELECTRICITY USE Monthly usage (kWh): 2,000 Cost per kWh: $0.115 ! ! ! SOLAR PRODUCTION (5 kW) Monthly solar production (kWh): 542 Net usage (kWh): 1,458 Cost of net electricity consumption: $168 ! ! Net electricity bill: $168 N E T M E T E R I N GVA L U E O F S O L A R
  16. 16. W I L L I T W O R K ? F O R U T I L I T I E S
  17. 17. A N N U A L B I L L C R E D I T PAYA B L E $0 $250 $500 $750 $1,000 (preliminary) MN Value of Solar Net Metering $932 $748 $943 2014 2019
  18. 18. P R O J E C T E D R AT E S $0.00 $0.10 $0.20 $0.30 $0.40 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 Retail (net metering) Rate VOST Escalated VOST Flat U T I L I T Y S A V I N G S Z O N E
  19. 19. C A N I T H E L P ?
  20. 20. F R E E D O M T O G E N E R AT E U N D E R F I R E States facing challenges to distributed generation Sources: Renewable Energy World, Greentech Media, IREC, Vote Solar and many more 3/19/14
  21. 21. www.ilsr.org D O W N L O A D T H E F U L L R E P O R T

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