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Minnesota PUC Approves Value of Solar (VOS) Tariff Methodology

As the penetration of distributed PV has increased, concern over cross-subsidization has grown as fewer customers are available to pay for fixed infrastructure costs (e.g., transmission and distribution costs). In 2013, Minnesota passed legislation allowing investor-owned utilities to offer a Value of Solar (VOS) tariff as an alternative to net metering which compensates excess PV-generated electricity at full retail rates. On March 12, 2014, the Minnesota Public Utilities Commission voted 3-2 to approve the specific methodology for calculating the value of distributed solar generation.

Key Details

  • The VOS credit includes the following components: avoided fuel costs, avoided plant O&M cost, avoided generation capacity cost, avoided reserve capacity cost, avoided transmission capacity cost, avoided distribution capacity cost, and avoided environmental cost
  • Minnesota’s VOS legislation separates usage charges from credits received from the VOS tariff, thereby creating two separate transactions
  • This structure ensures infrastructure costs are recovered by the utilities, as designed in the applicable retail tariff
  • The methodology includes placeholders for the future inclusion of voltage control and integration costs
  • The VOS value will be recalculated each year; new customers will receive the new value while existing customers will have their first-year value adjusted annually using the Consumer Price Index


The VOS tariff is emerging as a potential replacement to net-metering policies. If successful, the VOS rate will create a rate that “will account for the real value of the PV-generated electricity, and the utility and its ratepayers [will] be indifferent to whether the electricity is supplied from customer-owned PV or from comparable conventional means.” Regulators, utilities, and the solar industry will be closely watching Minnesota’s implementation to understand the impact and effectiveness of VOS tariffs.

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This report is part of the Clean Tech & Sustainability Minute series. To view all featured Minutes, please click here.

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Contributing Authors

Paul Quinlan Clean Tech Manager

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