Minnesota Solar Market Assessment
By Adam Smith, Staff Contributor
Minnesota’s 2013 solar legislation enabled one of the fastest growing solar markets in the country. The legislation provided requirements and incentives for solar energy production. Although Minnesota’s solar development continues to grow rapidly, recent solar development has been dominated by large scale projects with significant financing leaving both challenges and opportunities for smaller scale solar installations. Public schools and businesses have expressed an interest in smaller scale solar development, but Xcel and other Minnesota public utilities have been less aggressive towards smaller scale development including Commercial and Industrial (C&I) development. Accordingly, this article will discuss private investment opportunities for smaller scale developments by business and public schools in view of a market dominated by public utilities.
2013 Minnesota Solar Energy Legislation
Minnesota’s solar marketplace was stimulated by the 2013 pro-solar legislation. The legislation set Minnesota apart as a leader in solar development and indicates public interest in solar projects. Several incentives and requirements have proven particularly effective in stimulating solar development. The law required all public utilities in Minnesota to generate at least 20 percent of retail electricity from renewable sources by 2020 and 25 percent by 2025. Additionally, the law contained a solar carve-out requiring 1.5 percent of retail electricity sales to come from solar-generated energy. The statue also codified Minnesota’s community solar garden program allowing for individual Minnesotans to participate in solar development. A community solar garden may be owned by a utility or any other entity. All energy generated by a facility, whose capacity is limited to 1 megawatt, must be bought by the utility at the value of solar rate for distribution to ratepayers.
The 2013 legislation places higher standards on Minnesota’s largest public utility, Xcel Energy. Xcel must produce 25 percent of its retail electricity from renewable sources by 2020 and 30 percent by 2025. The legislation required Xcel Energy to submit a plan to create a solar garden program to the Minnesota Public Utility Commission and encouraged, without requiring, the remaining Minnesota public utilities to submit community solar garden plans.
Following the implementation of the 2013 solar energy legislation, Minnesota became the 17th state to enact a solar energy standard. Minnesota’s ambitious legislative objectives give the Minnesota solar industry an advantage over surrounding states. Due to the fact Xcel and Minnesota public utilities provide electivity across state lines, the legislation directly affects neighboring states. Although North Dakota possesses the most natural potential for solar generation of states surrounding the Dakotas, North Dakota legislators have not been supportive of solar energy.
Political support for solar energy in Minnesota has created a significant level of optimism across the state. In addition to environmental improvements, the Minnesota Solar Industries Association claimed the legislation would create and maintain 2,000 industry jobs.  Xcel noted that the 2013 rate per kilowatt/hour of solar was twice the residential retail rate, but expected the development of solar energy to “competitively” lower the price of solar energy production. Rep. Melissa Hortman, a sponsor of the 2013 solar legislation in the Minnesota House of Representatives, stated that the solar incentives and standards should create $15 million a year in new business that “will leverage private investment.” Additionally, the 2025 solar standards indicate pro-solar attitude of the Minnesota legislature. Investors should anticipate future long-term solar political support with cautious optimism.
Status of Current Solar Projects
After two years of the Minnesota Solar program, the 2013 legislation has proved to be a catalyst for multiple large, utility-scale projects and smaller C&I scale deals. In May, the largest solar power project was approved by the Minnesota Public Utilities Commission. When completed, the $250 million Aurora Solar Project by Geronimo Energy will increase Minnesota’s solar output sevenfold. Aurora will utilize solar projects ranging in size from 2 megawatts to 10 megawatts across 16 Minnesota counties at an estimated 25 separate sites. Xcel has signed agreements with Geronimo to receive all energy produced through the Aurora Project as well as the solar energy credit towards Xcel’s 1.5 percent solar energy requirement. Geronimo estimates a December 1, 2016 Commercial Operation Date for the Aurora Project.
In 2014, Xcel began an aggressive push for the creation of community solar gardens. Although most states limit the number of solar parks that can be built, Minnesota does not currently have a limit. Xcel currently employs 12 energy development firms building community solar gardens across the state with a goal of 100 megawatts of new solar capacity by the end of this year.
In October 2014, construction began on the largest solar generation site in Minnesota. The $25.4 million solar project will culminate in a 3 megawatt solar installation on top of the Terminal 1 parking garages at Minneapolis-St. Paul International Airport (MSP). Ameresco leads the MSP solar project in partnership with a number of Minnesota-based entities including Tenksolar, Thrivent Financial, Cooper Lighting/Eaton Corporation and Hunt Electric. Xcel Energy was also a key contributor, with a $2 million grant from Xcel’s Renewable Development Fund. By the end of 2014, following the initial development of the MSP solar project and several smaller renewable energy projects, the Clean Energy Economy Profile noted that employment in Minnesota’s clean energy sectors reached 15,300.
Most Minnesota projects are on a larger scale due to the investment advantage of public utilities including a Minnesota law giving public utilities the default authority to override local politics when necessary. However, the state has seen an increase in C&I scale deals specifically with Minnesota public schools. The largest school renewable energy project in the state uses a Power Purchase Agreement to generate 750 kilowatts at Pipestone High School. Other schools, including Transfiguration School in Oakdale, have signed leases for smaller rooftop solar electric systems. The National Renewable Energy Laboratory and the Minnesota Department of Commerce noted that barriers still exist for public schools to use third party financing, but as the practice becomes increasingly common, standard practices are set for both solar investment and construction.
Ultimately, investors should be strategic when investing in solar in Minnesota. While overwhelming solar energy sector growth following the 2013 legislation has largely occurred with state incentives and public utility funds, opportunities certainly exist for smaller scale private investment. Currently, public schools have provided the best opportunity for private investment, but the political support for solar energy and limited competition in the market should provide lucrative opportunities for future C&I scale investments in Minnesota’s solar industry.
 David Shaffer, New Minnesota Solar Mandate Law Will Give Power Companies a Jolt, Star Tribune (May 28, 2013), http://www.startribune.com/new-minnesota-solar-mandate-law-will-give-power-companies-a-jolt/208915221/ (last visited September 30, 2015).
 Minn. Stat. § 216B.1691 (2013).
 Shaffer, supra note 1.
 North Dakota Profile Analysis, U.S. Energy Information Administration (December 18, 2014), http://www.eia.gov/state/analysis.cfm?sid=ND&CFID=8003166&CFTOKEN=2c6c4c5a1ed80364-3BB8594D-5056-A727-5942F1900D1FF098&jsessionid=8430328b4d017366a56de364a4b1e4255f27 (last visited September 30, 2015).
 Shaffer, supra note 1.
 David Shaffer, Regulators Give Green Light to Largest Minnesota Solar Energy Project (May 29, 2015), http://www.startribune.com/regulators-give-green-light-to-largest-minnesota-solar-energy-project/305357571/ (last accessed September 30, 2015).
 Utility-Scale Distributed Solar Generation Projects, Geronimo Energy, http://www.geronimoenergy.com/wp-content/uploads/2015/02/Utility-Scale-Distributed-Solar-Generation-White-Paper-email.pdf (last accessed September 30, 2015).
 David Shaffer, Xcel Opens Door for Community Solar Gardens, Star Tribune (December 19, 2014), http://www.startribune.com/xcel-opens-door-for-community-solar-gardens/285570021/
(last visited September 30, 2015).
 Largest Solar Energy project Begins at Minneapolis-St. Paul International Airport, Ameresco (October 2, 2014), http://www.ameresco.com/news/construction-minnesota%E2%80%99s-largest-solar-energy-project-begins-minneapolis-st-paul-international-a (last accessed September 30, 2015).
 Minnesota Clean Energy Economy Profile, Minnesota Department of Commerce (October 2014) http://mn.gov/commerce/energy/images/MNVCleanEnergyEconomyProfile.pdf (last accessed September 30, 2015).
 Minn. Stat. § 428.08 (2014).
 Renewable Energy and Schools, Minnesota Renewable Energy Society (June 2011), http://mn.gov/commerce/energy/images/RenewableEnergySchoolsGuide.pdf (last accessed September 30, 2015).