Xcel seeks approval for power deals with three Minnesota solar projects

The Minnesota Public Utilities Commission on Oct. 28 went out for comment, until Nov. 24, on a recent application by Northern States Power for approval of power purchase agreements with three solar projects for a total of 187 MW.

The comments are to be on issues like whether: the commission should determine that Xcel’s proposal, in total or in part, to acquire solar resources is a reasonable and prudent approach to meeting a portion of its obligation under Minnesota’s Solar Energy Standard?; Xcel’s proposal, in total or in part, to acquire solar resources is consistent with the public interest, including, but not limited to the prices of energy and the allocation of financial and operational risk?; and if the petition is approved, should the commission grant an exemption to the Certificate of Need if required for a selected project and, if so, under what statutory provision should this exemption be granted?

Northern States Power, a unit of Xcel Energy (NYSE: XEL), applied Oct. 24 for approval for these utility-scale, solar photovoltaic projects, which represent three of the most competitive bids received in response to a recent Solar Request For Proposal (RFP):

  • Marshall Solar is a 62.25-MW project near Marshall, Minnesota, that will consist of 30 degree fixed tilt configuration, photovoltaic modules. It will be developed, owned and operated by NextEra Energy Resources up through commercial operation. The power purchase agreement (PPA) is for 25 years, and similar to wind-related PPAs, the pricing is designed on a pay for production basis. Xcel expects the project to begin operating in late 2016.
  • MN Solar I is a 25-MW project near Tracy, Minnesota, that will be developed, owned and operated by juwi solar Inc. up through commercial operation. It will consist of a ground-mounted single-axis tracking system of multi-crystalline solar cells, and will interconnect at a new substation on the Tracy to Walnut Grove 69 kV line. The PPA is for 25 years, and similar to wind-related PPAs, the pricing is designed on a pay for production basis. Xcel expects the project to begin operating in late 2016.
  • North Star Solar is a 100-MW project located near North Branch, Minnesota, that will be developed, owned and operated by Community Energy Renewables LLC up through commercial operation. It will consist of single axis tracking panels, and will interconnect at the existing Chisago County Substation. The PPA is for 25 years, and similar to wind-related PPAs, the pricing is designed on a pay for production basis. Xcel expects the project to begin operating in late 2016.

“By contracting only for the output of the projects, we fully shifted the risks of development and construction to the developers,” Xcel noted. “Further, the parties have provided for pre- and post-Commercial Operation Date (COD) security funds, and we have provided for the payment of liquidated damages for each day the projects fail to meet their COD milestone.”

These projects help with Xcel’s renewable energy needs

The state of Minnesota recently enacted a law that requires the company to serve 1.5% of its retail customers with solar energy by the end of 2020, and sets out a goal for the state to meet a 10% solar energy standard by 2030. To help fulfill its obligations under this new law, the company initiated a Solar RFP for utility-scale solar resources in April of this year. It received over 100 proposals for over 2,100 MW of solar photovoltaic capacity from 36 developers.

Xcel said it recognizes that this request overlaps with the commission’s determination, in a separate docket, for Xcel to negotiate a contract from a Geronimo Energy utility-scale solar project proposal. “To be clear, we are not asking the Commission to merge its decision regarding the Geronimo project with its decision here. Rather, by holistic view, we mean that there are two alternative solar generation portfolios that can be crafted to meet the 150-200 MW range of needed utility-scale solar generation: (1) should the Commission decide to move forward with the Geronimo solar project, a 187 MW portfolio could consist of the Marshall Solar and MN Solar I PPAs, and the Geronimo solar project; (2) a 187 MW portfolio could consist of only the Marshall Solar, MN Solar I and North Star Solar PPAs.

“We appreciate that there may be a desire to add all four projects now since the Investment Tax Credit is scheduled to decline at the end of 2016. While we recognize the allure of doing so, we caution against it. As with the advent of new technology, we believe prices of solar projects will continue to go down as the industry gains more experience. We believe it would be beneficial for our customers to wait and see what savings emerge with further technological and experiential advancements. Furthermore, adding this amount of solar now gives us the opportunity to learn from the construction and performance of these projects and verify the capacity and energy values of utility scale solar in Minnesota before making a larger commitment.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.