Minnesota’s PV Demand Credit, Explained

Minnesota’s PV Demand Credit, Explained

In Minnesota, the PV Demand Credit is of particular value to large energy users who have, or are interested in installing, an onsite solar system.

Does this sound like you? Read on for more information about how utilizing the PV Demand Credit could help you control your energy costs and participate in the clean energy transition of the Upper Midwest.

What is the PV Demand Credit?

The PV Demand Credit is an economic incentive available to Xcel Energy customers with an onsite solar/PV system. Participants in the program can generate additional cost savings associated with producing your own clean energy.

The technical name of this popular incentive is the PV Demand Credit Rider, but it is commonly called the “PV Demand Credit” or the “PV Rider.” The PV stands for photovoltaic, which simply references the conversion of light into electricity, as is done with solar systems or installations.

The PV Demand Credit functions in a similar fashion to a “standby-tariff,” which is a special electricity rate offered by utilities to demand-metered customers. Those customers agree to reduce their load on the grid when there are periods of peak demand. By limiting their own demand at times of peak usage on the grid, those large energy users are able to lower the grid peak demand curve, thereby allowing the utilities to better manage the electricity distribution for all of their customers without the need to build additional capacity.

This allows the utility to avoid the major undertaking of building additional infrastructure and facilities as well as the costs associated. It has also been economically advantageous for large energy users who are able and willing to modify their usage because the standby-tariff provides them with a lower rate for electricity and the ability to plan for and reduce a significant, variable cost.

In recent years, it has been established that onsite solar systems can provide a similar service for utilities and the electrical grid. Large energy users who have onsite, behind-the-meter solar systems can effectively reduce peak demand on the grid by generating their own electricity during the peak period, thereby saving the utilities from having to invest in additional new infrastructure.

This led to the development of the PV Demand Credit Rider, which was introduced into Xcel’s Ratebook in 2018 and updated in 2020 as its own rider for commercial use. The Ratebook contains all of the rate schedules, rules and regulations, contract and agreement forms.

Am I eligible to participate in the PV Demand Credit?

To participate in the PV Demand Credit you must be an Xcel Energy customer. You must have a solar system larger than 40kWAC that is interconnected via a single production meter and not subject to another incentive program. Also, your electricity rate must be demand-billed and you must not have any onsite electricity storage.

With a few exceptions, most energy users can take advantage of the PV Demand Credit. In particular, Xcel General Service and Time of Use (TOU) are eligible. Special rate classes like Peak Demand or Standby generally are not. Contact us or your Xcel Energy representative to confirm.

What are the compensation rates of the PV Demand Credit?

For new customers entering into the PV Demand Credit, the Standard rate compensates customers 6.96¢/kWh for electricity generated between the hours of 1pm and 7pm, year-round.

The Standard rate will likely increase with utility costs but that calculation is based on many factors. Be sure your clean energy developer is familiar with this, so that they can help you take into account a variety of potential outcomes. Xcel Energy engages in rate cases every three years, which are the only vehicle that can be used to change a rate in the Ratebook. Thus, a defacto three-year term for the PV Demand Credit is expected.

Summary of Key Points

Calculation of the credit is based per kWh of solar/PV generation during the peak period defined as the six hours between 1pm and 7pm, year-round.

The PV Demand Credit has two rates:

  • Closed rate (A85): 7.13¢/kWh
    – for projects that were deemed complete by February 14, 2020
  • Standard rate (A86): 6.96¢/kWh
    – for all other projects

Note: Both rates incur a monthly customer charge of $25.75 to participate.

Eligibility for the PV Demand Credit:

  • The onsite solar/PV system must be greater than 40kWAC and interconnected via a single production meter
  • Not subject to another incentive program (like Solar*Rewards)
  • Customer must be demand-billed
  • There must be no on-site energy storage system

The PV Demand Credit Rider is an important and meaningful incentive for large energy users with, or interested in installing, an onsite solar system. It presents an excellent opportunity for businesses, organizations and municipalities to benefit economically from the clean energy transition, while doing the good work of helping move toward a carbon-free future for all.

The details of navigating the changing energy landscape may seem complex, but working with a locally-focused clean energy developer will help you make sense of it all and achieve your most beneficial outcome.

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Nokomis Energy is a clean energy developer based in Minneapolis, Minnesota. Our mission is to identify opportunities to create clean, low-cost energy projects for our customers. We work directly with our customers and partners to implement and build clean energy solutions that work for your specific needs.