Value of Solar Tariff

Note: No utility in Minnesota has yet adopted the Value of Solar Tariff in lieu of net metering.

Enacted in 2013, H.F. 729 required the Minnesota Department of Commerce (DOC) to develop a distributed solar value methodology. Minnesota investor-owned utilities are permitted to use the approved methodology in applications for a Value of Solar Tariff (VOST) that would be used in lieu of a net metering billing mechanism. Under a VOST, customers are billed for all electricity usage under their existing applicable tariff and are credited for the solar electricity they produce under the approved VOST.

Methodology

The DOC was required to consult with stakeholders in order to develop the methodology for calculating a VOST. DOC was required to take into account the value of energy and its delivery, generation capacity, transmission capacity, transmission and distribution line losses, and environmental value. The DOC was also permitted to consider the cost or benefit of solar operation to the utility, credit for locally manufactured or assembled energy systems, and systems installed at high-value locations on the grid.

The DOC’s final report is available here. The Minnesota Public Utilities Commission (MPUC) approved the DOC’s methodology in April 2014 (link to Docket). 

Implementation

Investor-owned utilities may to apply to MPUC for a VOST as an alternative to net metering; however, no eligible utility has voluntarily implemented a VOST as of November 2015.

If a utility chooses to offer a VOST, it is required to recalculate the VOST on an annual cycle and file the recalculated VOST with MPUC for approval. The VOST rate cannot be less than the retail rate used for net metering until 3 years after the MPUC approves the utility tariff. A utility must enter into a contract with an owner of a photovoltaic system for a term of at least 20 years. The owner will be compensated at the same rate per kilowatt-hour for the duration of the contract. Excess credits accumulated during a monthly billing period carry forward and expire on the last day of February each year. Customers entering into a VOST must still meet interconnection requirements and existing net metering size limitations apply.

Community Solar Gardens

A utility that offers a community solar garden (CSG) program (see Minnesota’s net metering entry for more details) must compensate systems at the VOST rate if a VOST rate is approved for that utility. However, MPUC approved Xcel Energy’s request to use the applicable retail rates instead of a VOST for its CSG program. Under the approved retail rates, plus an adder for solar renewable energy certificates, subscribers will receive approximately $0.11-$0.15/kWh for electricity produced by the CSG.