Minn. judge tells Xcel Energy to pick solar over gas

Source: Daniel Cusick, E&E reporter • Posted: Wednesday, January 8, 2014

A state administrative law judge has given Minnesota’s nascent solar industry a huge competitive boost by finding that a 100-megawatt solar power project by renewable energy developer Geronimo Energy is a more economical and environmentally sound way to meet future electricity demand than the construction of natural gas-fired power plants.

In a 48-page opinion issued last week, Judge Eric Lipman of the Minnesota Office of Administrative Hearings told the state’s largest electric utility, Xcel Energy, that Geronimo Energy’s $250 million Aurora Solar Project would provide “the greatest value to Minnesota’s and Xcel’s ratepayers” over a handful of alternative proposals that called mostly for meeting future generation needs using gas turbines.

The recommendation, which must be adopted by Minnesota’s Public Utilities Commission to become binding, follows a state requirement that all new energy generation projects be subject to competitive bidding. And according to several observers, it is the first time a U.S. solar power project has been declared cost-competitive against natural gas when the two fuels were evaluated head to head.

Betsy Engelking, Geronimo Energy’s vice president for development, said the company was strongly encouraged by Lipman’s opinion, though she noted that the PUC could choose to accept, reject or modify the report based on new information presented by Xcel or other companies that bid to provide the future generation. A final decision on the future generation assets in Xcel’s service territory is expected in February or March.

If the PUC agrees with Lipman’s conclusions, it could usher in the construction of one of the Midwest’s largest solar projects, with expansive photovoltaic panels occupying 20 sites in southern and central Minnesota, where Xcel is seeing its largest load factors. The project would receive a 30 percent federal investment tax credit but would not otherwise benefit from government subsidies, Engelking said.

“We firmly believe that the Aurora project economically meets Xcel’s need for power over the next five to eight years,” she said. “It also meets other provisions in Minnesota law, including a requirement for more clean energy and for utilities to select resources that reduce greenhouse gas emissions.”

An ambitious state standard

Minnesota’s renewable portfolio standard, adopted in 2007, requires that 31.5 percent of Xcel Energy’s electricity sales come from renewable resources by 2020, while other utilities must meet a standard of between 25 and 26.5 percent by 2025. Last year, the state Legislature amended the 2007 law to include a 1.5 percent carve-out for solar generation by Xcel and other public utilities by their respective deadlines. The state also set a goal to generate 10 percent of all retail electricity using solar power by 2030.

In the near term, Xcel has told state regulators it expects to need anywhere from 25 to 500 additional megawatts of new generation capacity to be added to Minnesota’s grid by 2019, although the exact amount and timeline for such additions remain uncertain due to shifting economic conditions and other factors, including energy efficiency and net metering programs that are helping consumers reduce their energy demand.

Patti Nystuen, a spokeswoman for Minneapolis-based Xcel, said in an emailed statement that the utility disagreed “with some of the findings and recommendation adopted by the judge” and that Xcel will file a formal response to Lipman’s opinion before the commission as part of the standard review process.

Under an Xcel-backed proposal, the utility would have built new gas-fired generation capacity at its 538 MW Black Dog Generating Station in the Minneapolis-St. Paul suburbs, where the company currently burns coal and gas to power steam turbines. It also proposed adding 430 MW of gas-fired generation at an as-yet-undeveloped North Dakota site to be known as the Red River Valley Generating Station.

Two other proposals — from energy heavyweights Calpine Corp. and Invenergy LLC of Chicago — also called for expanding the state’s natural gas fleet in southern Minnesota, while a fourth proposal from Minnesota’s largest power cooperative supplier, Great River Energy, called for meeting Xcel’s future need using its own excess capacity.

In his report, Lipman expressed strong support for “scalable projects” that could be built in stages as Xcel works to meet near-term power shortfalls through 2017. The utility and PUC could then revisit the question of additional capacity requirements after 2019, when long-range forecasts become clearer.

Lipman, noting the state’s renewable energy requirements, added, “While Xcel’s overall need for additional capacity is uncertain, there is no uncertainty regarding Xcel’s need to add solar energy resources to its system.” He further stated that “selection of Geronimo’s proposal is in accord with Minnesota’s preferences for low-emission, renewable and distributed generation.”

Gopher State — a ‘hidden market’ for solar?

Geronimo’s Engelking said the company, headquartered in suburban Minneapolis, hoped the PUC would adopt the judge’s findings as part of its final ruling on generation assets. Doing so would provide Minnesotans with additional low-cost clean power, she said, as well as help raise solar power’s profile within Minnesota’s broader energy mix. While the state is recognized as a national leader in wind energy development, it is rarely mentioned as a place with significant solar potential.

But that is beginning to change. Last year, the consulting firm GTM Research identified Minnesota as one of five “hidden growth markets” for solar power, along with Georgia, Louisiana, Virginia and Washington, D.C.

Geronimo, which was founded in the early 2000s as an independent wind power developer, only recently expanded into solar generation, with its first projects coming online last year. Among those was the installation of rooftop solar arrays on 13 retail stores and other buildings owned by Minnesota-based Slumberland Furniture.

Engelking said the Aurora project would be Geronimo’s most ambitions solar development to date, involving multiple sites with arrays ranging in size from 1 to 10 MW. All of the generation sites are adjacent to existing Xcel distribution substations, meaning there would be little or no need to build new transmission infrastructure, she said.

“The idea is that these projects will feed directly into Xcel’s substations,” she said.

Most of the sites are located in rural areas, including on marginal farmland, but arrays could also be built on brownfield sites closer to urban areas.


Geronimo also has a growing suite of wind farms in the Midwest, including the planned 200 MW Prairie Rose facility in southwest Minnesota that is under contract to sell its output to Xcel. Xcel also will buy generation from two additional Geronimo wind farms that are under construction in Minnesota and North Dakota.