414 Nicollet Mall Minneapolis, MN 55401 2014-03-03آ  414 Nicollet Mall Minneapolis, MN 55401 February

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  • 414 Nicollet Mall Minneapolis, MN 55401

    February 28, 2014

    —Via Electronic Filing— Burl W. Haar Executive Secretary Minnesota Public Utilities Commission 121 7th Place East, Suite 350 St. Paul, MN 55101 RE: SOLAR RESOURCE ACQUISITION PLAN DOCKET NO. E002/M-14-162 Dear Dr. Haar: Northern States Power Company, doing business as Xcel Energy, submits this letter to provide an overview of how we plan to comply with the Solar Energy Standard. As part of that plan, we are informing the Commission and interested stakeholders of our intent to issue a Request for Proposals (RFP) for up to 150 MW of solar generation resources. With the scheduled reduction of the Investment Tax Credit (ITC) from 30 percent to 10 percent on January 1, 2017, we believe it is prudent to proceed now to acquire significant large-scale solar resources. We are excited about the opportunities presented in the 2013 Energy Omnibus Bill, which took several steps to advance solar energy in Minnesota. Among those steps was the introduction of a Solar Energy Standard, which requires 1.5 percent of a public utility’s 2020 retail sales, net of customer exclusions, to come from solar energy resources. Of the 1.5 percent Standard, 10 percent must come from systems with capacity less than 20 kW. We believe installations made through the Solar*Rewards and Made in Minnesota programs will satisfy and likely exceed the 20 kW requirement. We estimate that we will need a total of approximately 300 MW of solar capacity to meet the Standard. Our goal is to develop a solar compliance portfolio that maximizes customer value, offers new customer choices, and balances the interests of all customers. To deliver on these goals, we will leverage the economics of large-scale systems to keep the cost of compliance as low as possible for our

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    customers. As noted in Attachment A, large-scale solar allows us to capture the value of solar at a much lower cost than distributed generation. At the same time, we support our customers’ interest in distributed generation and will offer new programs and incentives contemplated by the solar legislation to help the solar industry develop in Minnesota. While there is some uncertainty in how our customers will respond to the distributed solar programs being offered, we believe it is reasonable at this time to expect up to one-third of the 2020 requirement or 100 MW to be met through new customer offerings and solar projects receiving funding through the Renewable Development Fund.1 The new program offerings include a Community Solar Gardens program, new Solar*Rewards program, and the Made in Minnesota program administered by the Department.2 These programs will allow customers to more directly participate in solar and increase the amount of solar generation in their personal resource mix beyond what we will add to the overall energy supply. The new Solar*Rewards program and Made in Minnesota program have a combined total budget of $100 million over the next five years to provide direct support to customers and solar installers. Community solar gardens are also able to receive incentives through these programs. Additionally, we will continue to explore other potential options to make solar available to our customers. Through these programs, we expect a sustainable rooftop industry to develop in Minnesota. To take advantage of the economies of scale offered by large-scale solar and to help mitigate compliance costs for our customers, we propose that a significant portion of the solar standard be met through what we expect to be the least cost solar option. Based on current estimates, we expect approximately two-thirds or roughly 200 MW of large-scale solar development by 2020. Consistent with the process used for our last wind RFP,3 we are informing the Commission of our intent to issue the first solar resource RFP by April 15, 2014 for up to 150 MW. We are targeting 150 MW in order to bring our total installed capacity by the end of 2016 to over 50 percent of our compliance total and thus provide customers

    1 Docket No. E002/M-12-1278 2 The new Solar*Rewards and solar gardens program proposals are currently pending before the Department and Commission in Docket Nos. 13-1015 and 13-867, respectively. 3 On February 4, 2013, in Docket No. E002/RP-10-825, the Company filed a letter detailing its intent to issue a wind RFP. The subsequent wind selections were filed with the Commission in Docket Nos. 13- 603 and 13-716.

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    with the benefit of the 30 percent ITC.4 We propose a second round of acquisition in 2017 or 2018 to acquire the necessary remaining solar resources to ensure compliance with the standard by 2020. This phased approach will also help promote sustainable growth in the industry and mitigate boom-and-bust cycles. Because we have the flexibility to adjust the amount of capacity we seek in a second RFP, it also allows for additional expansion of distributed solar should there be significant customer interest. For this first RFP, we will accept proposals of differing sizes at various locations, which will allow us the flexibility to add the requested capacity through a combination of projects. Similarly, we will accept proposals with varying ownership structures, including C-BED projects. Additionally, to ensure that diverse ownership options are fully explored, we invite parties to propose partnership arrangements with the Company. Consistent with the Track 1 process, we will make the appropriate filings with the Commission for approval of selected projects. We believe the following timeline provides the opportunity to meet the ITC milestone to achieve commercial operation by December 31, 2016, assuming a conservative total project implementation timeline of approximately two years.

    Issue Solar RFP April 15, 2014

    Proposals Due June 1, 2014

    Evaluations Conducted June – July 2014

    Contract Negotiations August – September 2014

    Selections filed with Commission October 2014

    The Company will not directly compete in this RFP, but, as noted above, may seek to participate through partnership with a third party. At this time, differences in ITC tax treatment between third-party developers and investor-owned utilities result in a significant total cost disadvantage for utilities. We may explore options

    4 The actual amount selected will depend on the prices offered; the ease of interconnection prior to expiration of the 30% ITC; and the Commission’s decision in our ongoing Competitive Resource Acquisition Docket.

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    to participate directly at some time in the future. For example, we are considering utility-owned projects as part of a special community-based option. Solar is one part of a diverse energy portfolio that is designed to meet customers’ energy needs in a way that is cost-effective, reliable, safe and clean. Xcel Energy is among the nation’s leaders in delivering competitively priced, clean energy from renewable sources. We have aggressively pursued wind energy for our customers and are the nation’s number one wind provider. We are approaching solar in a similar way. Currently, Xcel Energy is ranked in the top ten among United States utilities for solar electric capacity. We look forward to working with solar project developers through the RFP process and building on our past successes. We are available to answer any questions the Commission or stakeholders may have at this time. We have electronically filed this document with the Minnesota Public Utilities Commission, and copies have been served on the parties on the attached service list. Please contact me at james.r.alders@xcelenergy.com or (612) 330-6732 if you have any questions regarding this filing. Sincerely, /s/ JAMES R. ALDERS STRATEGY CONSULTANT REGULATORY AFFAIRS Enclosures c: Service Lists

  • Northern States Power Company Docket No. E002/M-14-162 Attachment A

    Page 1 of 1 Cost Comparison by Market Segment Source: U.S. Solar Market Insight Report, Q3 2013 (GTM Research)

    Average Installed Price by Market Segment. Q3 2011-Q3 2013

    Average Installed Cost per Watt by Market Segment. Q3 2013

    $4.72

    $3.96

    $2.04

    $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00

    Residential Non-Residential Utility

  • CERTIFICATE OF SERVICE I, SaGonna Thompson, hereby certify that I have this day served copies of the foregoing document or a summary thereof on the attached lists of persons:

    xx by depositing a true and correct copy or summary thereof, properly enveloped with postage paid, in the United States Mail at Minneapolis, Minnesota; or

    xx via electronic filing

    DOCKET NO. E002/M-14-162 Dated this 28th day of February 2014 /s/ _______________________________ SaGonna Thompson Records Analyst

  • First Name Last Name Email Company Name Address Delivery Method View Trade Secret Service List Name

    Christopher Anderson canderson@allete.com Minnesota Power 30 W Superior St Duluth, MN 558022191

    Electronic Service No GEN_SL_Northern States Power Company dba Xcel Energy-Elec_Xcel Miscl Electric

    Julia Anderson Julia.Anderson@ag.state.m n.us

    Office of the Attorney General-DOC

    1800 BRM Tower 445 Minnesota St St. Paul,