Could Minnesota’s “Value of Solar” Make Everyone a Winner?
Until now, those under TVA Green Partners program have been producing on-site energy from a solar panel has been treated much like any other activity reducing electricity use. Effectively the energy produced from solar is subtracted from the amount of energy used each month, and the customer pays for the remaining amount of energy consumed. The nations utilities are fearful of the financial effects of a reduced distributor income from the energy produced by solar. Increasing evidence suggests that the overall economic benefits to the utility’s electric grid may outweigh the loss of revenue. Xcel Energy, the Minnesota’s largest electric utility, shared estimations for the value of solar in its comments (to reduce the value) to the Public Utilities Commission in mid-February.
The solar market price includes eight separate factors, but the largest four account for the lion’s share of the value: 25 years of avoided natural gas purchases, avoided new power plant purchases, avoided transmission capacity, and avoided environmental costs.
The value of avoided fuel cost recognizes that utilities cannot buy natural gas on long-term contracts the way they can buy fixed-price solar energy, and it internalizes the risk of fuel variability that utilities have previously laid on ratepayers.
The avoided power plant generation capacity value recognizes that sufficient solar capacity allows utilities to defer peak energy investments (like Xcel’s recently requested three natural gas peaking power plants that an administrative law judge discarded in favor of distributed solar).
Avoided transmission capacity costs rewards solar for on-site energy production, saving on the cost of infrastructure and energy losses associated with long-range imports.
The environmental value may be the most precedent setting, because it means that when buying solar power under Minnesota’s value of solar tariff, a utility is for the first time paying for the environmental harm it had previously been socializing onto everyone else. This value is based on the federal “social cost of carbon” as well as non-carbon externality values adopted by the Minnesota Public Utilities Commission. The preliminary market value of solar estimate by Xcel Energy (14.5¢ per kilowatt-hour) for Minnesota. Here in Tennessee we have a better solar exposure and can expect the solar estimate will be larger. The cost of electricity for the homeowner is now 10 cents per kilowatt-hour. The estimated levelized cost of energy from rooftop solar presently is between 16 and 20 cents per kilowatt-hour.
Distributors with their buying power can reduce the levelized cost of energy from solar. Interestly Best Buy in partnership with SolarCity that’s now coming out of its pilot phase, roughly 65 Best Buy shops in the U.S. now offer solar arrays to their customers. The company’s solar-as-a-service offerings allow homeowners to go solar with little or no up-front costs.