Xcel Energy plans to phase out Solar Rewards program in Minnesota

Xcel Energy wants to phase out its popular Solar Rewards program, which has provided rebates to more than 500 customers who installed solar electric systems in Minnesota since 2010.

Minneapolis-based Xcel said the program has met its goal of adding six megawatts of solar-powered electricity to its system and now it wants to devote more of its efforts to energy conservation for the next three years. The solar incentives would be reduced in 2013 and not offered after that.

Xcel announced its intentions in its 2013-2015 Conservation Improvement Program, filed with the state Department of Commerce Friday, June 1. The plan needs the approval of the department’s Division of Energy Resources.

The utility’s three-year conservation program proposes to spend $260 million on energy efficiency programs to meet the state’s goal of reducing electricity usage by 1.5 percent per year, or enough to power 155,000 homes for a year.

The Solar Rewards program, funded by ratepayers, offers one-time rebates to customers who install solar photovoltaic systems of up to 40 kilowatts. The average residential rebate is $12,000 this year for installations averaging 5.2 kilowatts, according to Xcel.

By the end of this year, Solar Rewards will have provided $15 million in subsidies to about 560 solar projects in Minnesota, Xcel officials said.

Most of the beneficiaries of the Solar Rewards program live in the Twin Cities and many are clustered around Xcel’s “Energy Innovation

Corridor” that surrounds University Avenue between St. Paul and Minneapolis, Xcel officials said.

As part of the proposed phase-out, the program will reduce the incentive by one-third from $2.25 per watt to $1.50 per watt starting next year, Xcel said.

The rebates would end after 2013, the company said.

A steep plunge in solar panel costs in recent years caused Xcel to re-evaluate the incentives for solar energy, officials said.

“It’s a very rich subsidy — well beyond what’s appropriate,” Xcel regional vice president Laura McCarten said of the current rate.

Even with the subsidies, though, solar remains more expensive than alternatives to coal power like wind or natural gas, McCarten said.

Furthermore, customer demand for power is nearly flat in Minnesota, so it made no economic sense to subsidize additional expensive solar power, McCarten said.

Solar Rewards’ money this year is fully subscribed, but the company expects to fund another 150 projects next year even with a reduced rebate, said Lee Gabler, Xcel’s director of demand management and renewable operations.

Xcel has to meet a state mandate to derive 30 percent of its energy from renewable resources, and so far solar makes up less than 1 percent of its portfolio, Gabler said. The mandate requires that 25 percent of the renewable energy come from wind.

Solar manufacturer tenKsolar in Bloomington doesn’t expect to feel much of an impact if Solar Rewards ends.

The state still offers its “Minnesota Bonus” program that offers a rebate on solar panels made in Minnesota through 2015, tenKsolar CEO Joel Cannon said.

The Minnesota Solar Energy Industry Association, of which Xcel is a member, is working with the utility and the Division of Energy Resources to develop new strategies to support the solar industry without using subsidies, said Lynn Hinkle, the trade association’s policy director.

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