The Minnesota Public Utilities Commission on Thursday determined that a 100-megawatt solar project should proceed to help Xcel Energy meet extra demand for electricity in the coming years.

The Geronimo Energy Aurora project, which will be built on 20 different sites next to Xcel substations, will give the state about eight times the solar energy output currently produced. One hundred megawatts is enough electricity to power about 20,000 homes, Geronimo officials said.

• More: Strong solar power demand outstripping Minnesota subsidy program

Renewable energy advocates lauded the decision.

"It's awesome," said Kevin Reuther, legal director for the Minnesota Center for Environmental Advocacy, which intervened in the case on behalf of several groups. "I think it's a signal of really good things that are on the horizon. This solar bid is going to really make a big difference in terms of supporting this growing industry here in Minnesota."

Reuther said the decision will give the solar industry a shot in the arm. He said it's gotten a slow start in the state, likely because of Minnesota's cold reputation.

"People are moving in this direction," he said.

Xcel officials had argued to regulators that extra power capacity was needed during peak times, such as during hot summer days when a lot of people are running their air conditioners. The company proposed meeting that demand by adding natural gas generators to already existing power plants.

But an administrative law judge who reviewed the case concluded that in this specific circumstance, Geronimo's solar project was a better deal for Xcel's rate payers than natural gas.

PUC members concluded that Xcel will need more capacity to ensure reliability and that both solar and natural gas projects should meet those needs. The specific natural gas project to move forward will be determined later.

It's the first time solar has competed head-to-head with natural gas, and the PUC's decision demonstrates that solar can be as good or better in meeting the state's electricity needs, said Geronimo Vice President Betsy Engelking.

"It's an important decision," she said. "You can't make a blanket statement that solar is better than gas or solar is equal to gas, but it does actually show that we can bring non-conventional resources online like solar and like the wind that Xcel put on their system last summer and not be increasing costs to Minnesota consumers."

Engelking said the large solar installations will be placed throughout the state, which means cloudy weather over one installation won't sink the whole system. And transmission costs will be avoided by placing panels next to Xcel substations, she said. Construction would begin next year and be completed by the end of 2016.

Geronimo's project had not been part of Xcel's plans to fulfill a new state requirement for solar, but the project could end up accounting for a third of the 300 megawatts Xcel must produce by 2020. The new law also calls for smaller community arrays and panels on rooftops.

Xcel officials said they were happy the Public Utilities Commission acknowledged the need for more generation capacity and said they look forward to working with Geronimo on a power purchase agreement.

"We think this is a good step in the process to help ensure that we have an adequate power supply for our customers," said Jim Alders, who directs regulatory issues for Xcel.

The commission was divided evenly between DFL and Republican appointees because the newest commissioner, Dan Lipschultz, recused himself. Commissioner Betsy Wergin, a former GOP state senator, had reservations about the decision and noted the commission still has to sign off on the project's details.

"The only part I'm really grateful for is that it does still give us the opportunity to closely scrutinize the [power purchase agreement] from Geronimo, because I don't think it's a clear pass. It's a clear pass if it's in the public interest," Wergin said.