Solar Deemed More Cost Effective than Natural Gas in Minnesota
In 2013, Xcel issued its first competitive bidding process for new generation capacity. The Minnesota Public Utilities Commission (PUC) accepted five proposals including 430 MW of natural gas capacity from Xcel and 100 MW of distributed solar from Geronimo Energy. The PUC deemed the case a “contested case hearing” and sought a report and recommendation from an Administrative Law Judge (ALJ). Following an evidentiary hearing, the ALJ recommended the solar proposal as the most reasonable and prudent. The ALJ concluded solar offered the lowest cost on a per-MWh basis after accounting for additional attributes.
- The solar proposal was deemed the lowest cost after accounting for the following additional attributes: avoided energy costs, avoided capacity costs, avoided transmission costs, the impact of emissions, and the cost to Xcel from transmission lines losses
- While full project costs were not disclosed, the ALJ concluded these additional attributes reduced the net present value of societal costs by $46 million
- Xcel’s capacity needs have been revised downward in recent years; the current need is forecasted to be at least 71 MW before the end of 2019; so in addition to cost, the ALJ argued the solar proposal was the most reasonable and prudent because it coupled a scalable solution with uncertain future capacity needs
- The AJL also noted that the solar proposal would contribute to the recently passed Solar Energy Standard, which requires Xcel to acquire 1.5% of retail sales from solar by 2020. The PUC is expected to issue a final ruling in March 2014
Solar is becoming increasingly cost competitive with the support of the investment tax credit. In this instance, natural gas was the most cost competitive resource under traditional modeling scenarios. However, solar became the most cost-competitive resource once additional attributes were considered (i.e., avoided energy costs, etc.). While Minnesota is on the forefront, we see an emerging national trend toward the inclusion of a broader spectrum of attributes as stakeholders consider reforms to net metering. A prime example is a Minnesota law passed in 2013 allowing utilities to replace net metering with a Value of Solar (VOS) tariff. The ALJ recommendation incorporates many of the same attributes considered in the VOS tariff.
Regulatory Filing (Docket No. E-002/CN-12-1240): http://bit.ly/1l4ojHC
This report is part of the Clean Tech & Sustainability Minute series. To view all featured Minutes, please click here.
Welcome to ScottMadden!
Sussex Economic Advisors is now part of ScottMadden. We invite you to learn more about our expanded firm. Please use the Contact Us form to request additional information.