Association for Public Policy Analysis & Management

Solar energy is rapidly growing in the United States due to declining costs and favorable policy incentives at the national, state, and local levels. However, many household and business electricity consumers do not have access to solar energy due to a lack of appropriate or available rooftop space. To broaden access to solar energy, fifteen states (and the District of Columbia) along with an increasing number of electric utilities, have developed policies to incentivize community solar programs. Traditionally, solar energy requires customers to own or finance single solar projects typically located on their own property. In contrast, community solar programs allow multiple electricity consumers to purchase shares or subscriptions to power generated by a single centralized solar project. Participants who finance the development of a community solar project receive bill credit for electricity generated by their share in the project. By expanding the market in this way, community solar programs potentially double the number of customers who can access solar energy.

Minnesota has long been on the forefront of community solar. In the early 2010s, several of Minnesota’s electric cooperatives and municipal utilities adopted community solar programs. In 2013, Minnesota mandated that the state’s largest electric utility, Xcel Energy, create a community solar program. This program drew initial applications for over 1.7 gigawatts of photovoltaic capacity, equivalent to more than 100-times the current annual solar installation in the state. Today, Xcel Energy’s community solar program in Minnesota is the largest in the country. To garner broad support, the Xcel Energy program was designed to achieve multiple goals: increase overall solar capacity, create jobs, increase access to renewable energy, and create a cost-effective incentive for renewable energy. Along with the ambiguity created by this multitude of goals, several reforms in the implementation of Xcel Energy’s community solar program have created uncertainty and greatly slowed development after an initial wave of enthusiasm.

In this paper, we quantify how shifting implementation rules have affected access to solar energy for residential and commerical Minnesota electricity customers. We study the effect on residential customers with a financial model of community solar uptake based on publicly available community solar contracts and apply this model to population and electricity consumption data in Minnesota. We also stratify our analysis of access to community solar by income bracket to understand the distributive impacts of the policy. Our results help illustrate how the implementation of community solar programs affects performance, offer lessons to better anticipate the potential downfalls in program design, and identify best practices to enhance equitable access to the market for solar energy.