Court ruling in Minnesota recommends Xcel Energy purchase new capacity from Geronimo's planned solar farms
A judge in the United States has for the first time ruled that solar power supplied without subsidies is more cost effective than natural gas, in a move that could result in 20 solar farms being constructed in Minnesota, while also sending shockwaves through the US energy sector.
Xcel Energy, one of the state's biggest utilities, is expecting to add 500MW of new capacity to the grid by the end of the decade, and requested proposals from developers to identify the most suitable sources for the additional capacity.
But Minnesota's Public Utilities Commission is keen to ensure developers and utilities in the state compete on price and as such ordered a legal enquiry to ensure the right balance of investment is made by the company.
Last week, Judge Eric Lipman recommended that Xcel should invest in a series of solar arrays being developed by Geronimo, ruling it would be more economical and sustainable than the natural gas projects proposed by rival developers Calpine Cor and Invenergy.
The ruling must still be approved by the Minnesota Public Utilities Commission, with a final decision expected in March.
However, Geronimo vice president Betsy Engelking said the decision marked a turning point for the industry. "The judge decided that it was the best option for economic and environment reasons," Engelking told the Al Jazeera news agency. "Economically, the judge found that it was the lowest cost option offered."
Lipman favoured the scalability offered by Geronimo's proposal. It is planning to develop 20 photovoltaic plants over the course of the next two years at a cost of $250m. Each solar farm would be located near to electricity substations, reducing transmission costs, with the total portfolio expected to supply 130MW of new capacity.
He also concluded that the solar schemes would help Xcel meet a new target passed by Minnesota last year, demanding that all state-regulated utilities acquire 1.5 per cent of their power from solar by 2020.
"The most reasonable and prudent solution is to select scalable projects that meet Xcel's near-term shortfalls," the judge concluded. "Combining Geronimo's proposal with GRE's [proposed sale of capacity credits], represents the most reasonable and prudent alternative to meet Xcel's near-term needs."
However, it remains to be seen how the Public Utilities Commission will rule in March. Last month, the Department of Commerce reportedly advised Xcel not to take on new solar projects, warning that Geronimo's proposal would not be cost effective.
The ruling is the latest evidence that solar systems in favourable climates are increasingly able to compete with conventional grid power on cost - a tipping point that has long been predicted by advocates of solar power.
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