Minnesota Finds Net Metering Undervalues Rooftop Solar

Utilities should be paying more for their customers' surplus solar power generation according to a solar pricing scheme approved by Minnesota's Public Utility Commission last month and expected to be finalized in early April.  Minnesota's move marks the first state-level application of the 'value of solar' approach, which sets a price by accounting for rooftop solar power's net benefits, pioneered by the municipal utility in Austin, TX.

Minnesota is one of 43 U.S. states that requires utilities to pay retail rates for surplus solar power that their customers put on the grid.  Utilities across the U.S. are fighting such net metering rules, arguing that they fail to compensate the utility for services that their grid provides to the distributed generator.  So last year pro-solar activists and politicians in Minnesota called the utilities' bluff, passing legislation tasking the state's Department of Commerce with calculating the true value of rooftop solar power.

Now the verdict is in, and the state's 'value of solar' formula -- affirmed by the PUC -- finds that distributed solar generation is actually worth more than its retail power price according to John Farrell, an economist and senior researcher at the Institute for Local Self-Reliance, a Minneapolis-based economic think tank, and the principal architect of last year's solar legislation.

What put solar's benefits over the top was the state's decision to adopt the U.S. EPA's value for avoided carbon emissions -- the social cost of carbon in EPA's lingo.  At $37 per metric ton of carbon this is worth almost 3 cents for every kilowatt-hour of natural-gas fired generation displaced by rooftop solar power in Minnesota, according to a preliminary analysis of the PUC's formula by Xcel Energy, the state's largest utility.

Minnesota Finds Net Metering Undervalues Rooftop Solar