The ink is hardly dry on the Minnesota Public Utilities Commission’s (PUC’s) decision on the methodology to calculate a value-of-solar tariff—a first for the U.S. Solar advocates have fought for such a rule across the nation because such tariffs or fees that utilities will have to pay to customers with solar electric arrays account not just for the power that they produce and put back on the grid, but also account for the social and economic value that solar power produces over fossil fuel-based electricity. Now the nation will watch how this northern state implements the voluntary alternative to net-metering.
Fresh Energy explained that the tariff essentially stacks up all the values that solar adds to Minnesota’s grid. In addition to the solar energy produced and put on the grid the homeowners’ solar arrays will be valued for the avoided additional transmission infrastructure needed for new large-scale generation sources, the capacity and peak demand value of solar, the fuel-free fixed price of solar generation and, of course, the avoided emissions value.
The move was hailed by solar advocates. The decision is, “a solid foundation toward a long-term, sustainable solar market in the Midwest. I am thrilled to see Minnesota be a leader toward a brighter future,” said SimpleRay President Geoff Stenrick.
“Yesterday, Minnesota utility regulators decided what solar power is really worth, and it turns out to be worth more than what producers have been credited for in the past,” said Michael Noble, Fresh Energy executive director. While the final value-of-solar tariff hasn’t yet been established, many think the rates offered through it could be higher than those offered by net-metering rates in many cases. As such, he contended, “When utilities credit people’s bills fairly for the solar electricity they produce, soon everyone who wants solar can have it.”
The decision is a result of a more than two-year process and the Solar Energy Jobs Act signed into law by Gov. Mark Dayton (D) last year (2013) that required the commission to establish how electricity from solar systems on homes and businesses should be valued. The commission studied three options, largely based on the theme of carbon emission costs. The options were a two-decade old state established externality value, a more recent state-established planning value and the recently established social cost of carbon figures tallied by the Environmental Protection Agency, according Midwest Energy News’ Dan Augen, who has tracked the progress of the tariff.
Ultimately the commission agreed to adopt the EPA’s valuation of carbon emissions. However, that number is hotly debated. “The SCC is meant to be a comprehensive estimate of climate change damages and includes, but is not limited to, changes in net agricultural productivity, human health, and property damages from increased flood risk,” EPA said. However, even the EPA admits that it’s determination is limited and that many organizations are contesting it’s methodology. On March 13, for instance, a new report out from the Cost of Carbon Project said the social cost of carbon emissions set by the EPA at $37 a ton for 2015 is too low.
It still may be the best methodology established by a U.S. regulatory body yet though. Apparently the majority of Minnesota’s PUC agreed. The PUC approved the statewide formula for conducting the calculation on a 3 to 2 vote, according to Fresh Energy.
Under the law Minnesota’s public utilities aren’t required to offer the tariff as an alternative to their net-metering policy at this point. “Investor-owned utilities will now have the voluntary option of applying to use the value-of-solar formula instead of the retail electricity rate when crediting customers for unused electricity they generate from solar panels,” Haugen wrote.Tweet