Minnesota bill could 'all but stop' rural small-scale solar installs

Yahoo

25-04-2025

This story was originally published by Minnesota Reformer.
The Minnesota Senate earlier this month advanced a bill, sponsored by lawmakers from the Democratic-Farmer-Labor Party, that would sunset the state's pathbreaking community solar program in 2028 and significantly reduce the financial benefits of onsite solar for utility customers in small towns, rural areas, and exurban communities across the state.
The bill would also sunset Minnesota's Renewable Development Account, which uses millions in annual nuclear waste storage fees paid by Xcel Energy to subsidize residential solar panel installations.
Environmental and clean energy advocates assailed the bill in a press conference at the Capitol last week.
'This bill is a betrayal of Minnesota's climate promises' and the product of 'backroom deals [that] are handing our future to polluters,' said Steve Morse, executive director of the Minnesota Environmental Partnership.
The package represents a stark change in state energy policy from 2023, when lawmakers passed sweeping legislation that expanded the community solar program, boosted solar incentives for low-income customers, and mandated that Minnesota generate 100% of its electricity from carbon-free sources by 2040.
'Community solar gardens power 30,000 Minnesotans, create local jobs, and save people money, especially renters, low-income households, and public interest institutions like schools, hospitals, and counties. All of this makes it the largest and most equitable form of solar in the state,' said Pouya Najmaie, policy and regulatory director for Cooperative Energy Futures, a solar nonprofit.
Other provisions in the bill could weaken Minnesota's clean electricity standard by defining some power plants that burn wood waste and biodiesel as carbon-free, advocates said. The bill would also define new, larger hydroelectric dams as potential sources of carbon-free electricity, a change from the 2023 law.
The Senate bill has enthusiastic support from the Minnesota Rural Electric Association, which represents 50 nonprofit rural electric cooperatives serving 1.7 million Minnesotans.
For more than 40 years, Minnesota customers with their own solar arrays have been eligible to receive a credit on their bill for electricity they contribute to the grid, under a framework known as net metering. The Senate bill would eliminate that option for systems in electric cooperative and municipal utility territories that apply for grid connections after Dec. 31, 2026, and instead set compensation using a less generous 'avoided cost' standard.
Existing solar installations in electric co-op and municipal utility territories would not be affected. Nor would existing or future systems in territories served by public utilities like Xcel Energy or Minnesota Power. But any co-op or municipal utility customer who wants to install solar after next year would be compensated at the new, lower rate.
The change could encourage smaller Minnesota power companies to speed up deployment of larger solar facilities ahead of the 2040 deadline, the Rural Electric Association said earlier this month.
'Utilities can purchase the same energy at about half the cost by buying or building systems at utility scale. And that means we can get twice as much carbon reduction for the same price,' MREA CEO Darrick Moe said in an April 7 statement.
In an interview this week, Moe said the net metering change is MREA's biggest legislative priority this session. From MREA's perspective, the state needs to get out in front of a potential rapid rise in demand for smaller, less cost-effective solar systems, he said. In other words, without a change, MREA says, the good deal offered to those rooftop solar consumers would push costs up for everyone else.
Sunny California is the poster child for this 'cost-shift,' according to Moe. He cited a University of California analysis that blamed residential rooftop solar — which produces about 20% of the electricity consumed by residential customers of its three major public utilities — for shifting $4 billion to other customers' bills. That works out to between 9% and 22% of the retail electricity price, depending on the utility.
John Farrell of the Institute for Local Self-Reliance, Najmaie of Cooperative Energy Futures, and more than a dozen other environmental and energy equity advocates disputed the concept of cost-shifting in an April 4 letter to Minnesota legislators.
Retail-rate compensation 'is a fair and straightforward policy since the power delivered to the grid is used by their neighbor and that neighbor is then charged retail for that power by the utility. The utility then credits the solar owner who provided the power that same amount. There is no cost shift,' they wrote.
The Senate bill wouldn't deter electric co-op and municipal utility customers from installing solar to meet their own energy needs, but rather disincentivize 'oversized systems' designed to benefit from the current net metering framework, Moe said. In other words, some customers set up systems that produce far more power than they need with the intent of selling electricity back to the utility.
'What we're looking for here is really a modest change,' Moe said.
One rural net metering beneficiary had a different take at the Capitol press conference.
'There's no way I would have even considered [solar] had I thought net metering was going to be history,' said Carmen Fernholz, who spent $160,000 to add solar last year on his 450-acre organic farm in western Minnesota.
If the net metering change passes, 'solar in rural and small town Minnesota would all but stop,' said Bobby King, Solar United Neighbors Minnesota director, in an email.
With about a month left to go in this year's legislative session, the energy omnibus bill likely isn't yet in final form, so the fate of the net metering change, community solar sunset, and other individual items remains uncertain. And House Democrats, who share control of the lower chamber, may be less supportive of those provisions, Moe said.
But 'being in the Senate omnibus means [the net metering provision] is a live bipartisan issue for end-of-session negotiation,' he said.