Distributed solar+storage should qualify for Minnesota utility energy efficiency programs

While retiring old units and replacing them with new and efficient units is rewarding both to the utility investors and the customers, it is coming at the expense of distributed solar.

Due to interconnection delays, Minnesota utilities plan to replace their fossil fuel generators with utility-scale solar in Integrated Resource Plans. The strategy is to keep their existing MISO interconnection rights at the retiring unit locations. But that diminishes distributed scale solar prospects. Even though each investor-owned utility is different, if all utilities move in this direction, distributed solar would be at a disadvantage to access energy market benefits outlined in Federal Energy Regulatory Commission (FERC) Order 2222 because of delays in the MISO generator interconnection queue.

An alternative for state and federal energy policymakers is to insist that utilities bring distributed solar and storage under the energy efficiency definition. As a result, distributed energy resources can access existing energy efficiency incentives since they provide efficiencies by reducing utility-scale solar curtailment risk and transmission charges for the customers while providing grid benefits.

Background – MISO interconnection rules

Minnesota utilities are utilizing Generator Replacement Process (MISO Business Practices Manual BPM-015 Section 6.7.2) to hold on to their current transmission reservations at locations where fossil fuel units are generating. While retiring old units and replacing them with new and efficient units is rewarding both to the utility investors and the customers, it is coming at the expense of distributed solar.

MISO’s generator replacement process is not a slam dunk for utilities either. MISO conducts two studies when they receive a replacement request (designated with “R” in the queue) – replacement impact study and reliability assessment study for a $60,000 study deposit. If no adverse impacts are found in both studies, which could take six months, things proceed quickly for an interconnection agreement. However, utilities must start a new interconnection application if adverse impacts are found.

MISO’s generator replacement process should not be confused with the generator modification process because the latter is solely for generators modifying a technology that has no impact on the nameplate capacity. An example of a generator replacement is replacing a retiring coal unit with solar. However, an example of a generator modification process is modifying Eaton Power Xpert Solar 1670 kW inverters with Toshiba Mitsubishi-Electric Industrial Systems Corporation (TMEIC) PVL-L1833GRQ-EG 1666 kW inverters.

Xcel Energy, Minnesota Power & Otter Tail Power have big solar plans in their long-range resource plans

All three investor-owned utilities in Minnesota have resource plans before the state Public Utilities Commission (PUC). Utility-scale solar figures prominently in these resource plans, keeping with the renewable energy trend in the rest of the U.S. States like New Jersey are exploring offshore wind technology for job growth, and states like Minnesota are transitioning from onshore wind to solar energy for the same reason.

While regulated Minnesota utilities are similar in waiting for PUC’s approval, their circumstances and reasons vary slightly. Xcel Energy, with the most residential customers, plans to replace Sherco coal outside the Twin Cities with a 460 MW solar facility. Vote Solar and others have proposed an alternative plan with distributed solar. On the other hand, Minnesota Power, with the most industrial customers located in the Duluth area, plans to replace their Boswell facility with multiple solar projects spread across their service area for equity purposes.

Otter Tail Power (OTP) is also unique because half of their service area is in Minnesota, where externalities like carbon emissions are modeled in the resource plans, and the other half is in the Dakotas, where externalities are not modeled. Added to this complication, OTP has jointly owned units that are dispatched by both MISO and SPP operators. OTP’s Hoot Lake is in the MISO generator replacement queue. Neither of the units mentioned from Xcel and Minnesota Power is in the MISO queue at this time.

Distributed solar offers multiple benefits

Utility-scale solar runs the risk of MISO operator curtailments due to its size, similar to what happens with the wind right now. Hence a hedge against utility solar curtailment risk is distributed solar because small community solar and rooftop solar are less likely to be curtailed by the operator due to system emergencies. California ISO (CAISO) is a prime example of where this curtailment occurs (“On March 11, 2017, the ISO observed solar curtailment exceeding 30 percent of the solar production for an hour”).

In addition to reduced curtailments, distributed solar offers reduced transmission charges for customers. When customers can generate their energy with the help of rooftop PV, most wonder why they continue to pay current transmission charges? Replacing fossil fuel generators with renewable energy at the same location misses the point that more tools are available today to retail customers to reduce their energy usage using technology such as smart thermostats.

Additionally, utility customers are aware of the potential for aggregated solar to play a role in the energy market via new rules and regulations such as the FERC Order 2222.

The solution is expanding energy efficiency definition to include distributed solar and storage

The recently-passed Energy Conservation and Optimization Act of 2021 (ECO Act) in Minnesota missed an opportunity to include distributed solar and storage. Minnesota has long prided itself on energy efficiency measures and consistently budgeted for Conservation Improvement Programs (CIP).

This statement says it all, “The Conservation Improvement Program (CIP) helps Minnesota households and businesses use electricity and natural gas more efficiently — conserving energy, reducing carbon dioxide emissions, and lessening the need for new utility infrastructure.”. If we think about distributed solar and storage, they provide the same benefits for conserving energy, reducing emissions, and the need for additional grid enhancements.

Minnesota should follow Massachusett’s example of defining energy storage as an energy-efficient resource. There is also the possibility of Minnesota moving up from the current 9th rank in the American Council for an Energy-Efficient Economy (ACEEE) Annual State Energy Efficiency Scorecard. Hence, new technologies like distributed solar and storage should qualify for CIP in Minnesota to offset utility-scale solar in resource plans.

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