Xcel Reveals Solar Garden Power Costs Double Other Sources

The Minneapolis City Council’s recent approval of two more community solar gardens led to glowing coverage in The Journal, a community newspaper. But the report also appears to contain a bombshell from an Xcel Energy executive about the true cost of solar power, a disclosure that solar costs Minnesota ratepayers tens of millions of dollars more than conventional electricity.

At face value, the new community solar deal “saves” Minneapolis $28,000 a year on electric bills, while helping Xcel Energy meet the state mandate to produce 1.5 percent of Minnesota’s electricity through solar.

Community solar gardens allow utility customers in Minnesota to support solar energy and save money on their electricity bills. Customers typically “subscribe” to a portion of a solar garden and pay the garden’s operator for electricity their portion of the garden generates. Utilities hook up the gardens to their electric grids and credit the customers for the electricity generated by their portions of the gardens.

“There’s a spread between the credit and what you have to pay the garden operator,” said Brian Millberg, energy manager for the City of Minneapolis. “That’s how the subscribers make money.”

Meantime, up to 800 low-income households will also be eligible to cash in on solar savings of $300 to $400 annually.

Millberg said the city is trying to prove to the marketplace that low-income people can be trusted when it comes to these subscriptions. “We’re willing to take that risk, because we think the market is unfairly keeping these people out of saving some money,” he said.

Up to this point, it looks like a win-win for the city and the small percentage of low-income households involved. But then Xcel Energy senior director of customer solutions Lee Gabler opens up, acknowledging that solar power is anything but a winner for the vast majority of ratepayers at all income levels.

Community solar gardens aren’t cheap for Xcel, Gabler said. Solar energy from the gardens costs the company 12.5 cents per kilowatt-hour, almost twice as expensive as utility-scale electricity.

Give Xcel Energy credit. Utilities often avoid discussing the true costs of green energy. But Xcel provides long overdue transparency in revealing that solar power costs the utility virtually twice as much to provide as conventional power. And Gabler acknowledges the higher costs are borne by the vast majority of Minnesotans who’ve never heard of a community solar garden, much less signed up for one.

Xcel passes those additional costs onto all of its consumers by charging them more for fuel. For every 100 MW of community solar that comes online, it costs customers an additional $17 million, Gabler said.

Xcel Energy already has 140 MW of solar generating capacity on line as of October 1. At $17 million more per 100 MW, ratepayers across Xcel’s system already face an additional $24 million on their utility bills for community solar systems. The utility has another 475 MW of community solar power in the works, adding approximately $80 million more to ratepayers’ bills.

American Experiment recently reported that Minnesota has lost its longtime advantage of low retail electric prices. (See Energy Policy in Minnesota: The High Cost of Failure.)

Between 1990 and 2009, the state’s average retail price of electricity was 18.2 percent lower than the national average. But in the last seven years, the price advantage has disappeared with the average retail price of electricity in Minnesota rising above the U.S. price for the first time in February 2017.