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Minnesota Solar

Minnesota, or the Land of 10,000 Lakes, is one of the northernmost states in the US. Much of Minnesota is prairie that has been turned into farmland. It is home to the city of Minneapolis-Saint Paul, where half of the state’s population lives. Other cities include Duluth, Mankato, Moorhead, and Rochester. Minnesota state government policies favor solar tax incentives. Despite relatively low energy prices, the tax incentives and encouraging utility policies make Minnesota a favorable place for businesses and residents to install solar panels and battery systems.

Let’s learn about some of those incentives, the utility policies associated with interconnection and setup, and special solar financing plans for solar panels and battery systems in Minnesota.

Minnesota Solar Incentives

Minnesota provides multiple solar energy rebates and incentives that help to reduce the overall cost of solar systems. Our EnergyPal Advisors can help you navigate all of the solar incentives available in Minnesota and also apply them to the available solar panel offerings.

In summary:

• Minnesota Power’s SolarSense program pays you back $0.56 per estimated kWh of solar energy produced in one year.
• XcelEnergy’s SolarRewards program pays a $0.07 per kWh performance incentive for any solar customer and a $2.00 per watt up-front incentive for income-qualified individuals. These incentives are paid out every year for 10 years.
• No Sales Tax on solar panels, systems and related equipment
• No property tax on any increase in property value from installing solar

Minnesota Rebates and Tax Breaks

Here are more details about the incentives available in Minnesota:

• If you have Minnesota Power, its SolarSense program pays you back $0.56 per estimated kWh of solar energy produced in one year up to the lesser of $10,000 or 60% of your costs. Budget is limited, so it’s first come, first served.
• If you have XcelEnergy, its SolarRewards program pays a $0.07 per kWh performance incentive for anyone and a $2.00 per watt up-front incentive for income-qualified individuals. These incentives are paid out every year for 10 years, and funds are limited.

• The state government in Minnesota provides a tax break where you don’t pay any sales tax on solar panels, systems or related equipment.

• The state government in Minnesota provides a tax break where you won’t pay additional property taxes if your property value increases when you add a solar system (and with solar, your property value does go up!).

Other Solar Energy Incentives

The US federal government helps residents and businesses pay for their solar systems. The federal investment tax credit (ITC) allows for a tax deduction of 30% of the cost of a solar system currently. Tax credits can be rolled over if you can’t use the whole credit this year. The ITC cannot be claimed for solar leases or power purchase agreements (PPAs) where the third party financier takes the credits themselves, but that is typically baked into a reduced lease/PPA monthly for you. For the actual US government bill, see 4908 of the HR 133 (It’s a giant file, so watch out!).

If you purchased a $20,000 system, your savings from the federal tax credit would look like this:

$20,000 X 0.26 = $5,200 savings

So if you spent $20,000 on that system, your cost would go down to $14,800. You can save even more by enrolling in the SolarRewards or SolarSense program.

Utility Policies

Utility policy factors determine what your utility provider pays you for the excess power you produce and what you save on your power bill by reducing electricity usage. Minnesota gets a high score for utility policies.

Net Metering and Interconnection Policy

One important policy for solar customers is called Net Metering. Net Metering is a billing mechanism that allows solar customers to push electricity to the grid for credit that can be used later, like at night when your solar panels aren’t generating power. This incentivizes people to go solar, provides clean energy for others to use and prevents waste. Some states have poorer net metering policies than others, meaning that credits may not be able to be rolled over to the next month or year, or that you don’t earn full watt-for-watt credit for your excess energy.

Minnesota’s Net Metering program is favorable. You are paid full retail credit for your excess energy up to 120% of your consumption amount. Credits can be carried over into the next month, but expire at the end of the year. Depending on your utility provider, you may be compensated at a lower rate for credits at the end of the year. You can connect a system up to 40 kW in size. The exact details depend on your electricity provider’s policies.

Solar Setup Fees

You must have a bi-directional meter (necessary for Net Metering), which you could be charged for.

Electricity Prices

Electricity prices in Minnesota are on the low end. Usually you don’t want high prices, but with solar, the higher the prices, the more you save, and the more economical a solar system becomes.

According to the US Energy Information Administration, the average total cost of electricity in Minnesota is $0.129 per kWh for residents. The national average for all states is $0.134 per kWh, ranging from $0.967 to $0.288 per kWh.

Rate Design

Rate designs are comprised of monthly fees and either a flat or tiered rate you pay for electricity. Good rate designs, which save you money when you conserve energy, are tiered and have low fixed monthly fees. Poor rate designs have flat rates and high fixed monthly fees. 

Minnesota is above average when it comes to the quality of its electricity bill rate design. It has tiered rate programs and low fixed fees (around $8–$10 per month).

You still pay fixed monthly fees when you go solar because you are still tied to the grid. Being tied to the grid is a good thing, because otherwise you might not have power at night or if your system stopped working suddenly. Even if you go off of the grid and rely on a battery source, the high cost of the battery would not outweigh the low monthly fee and the savings obtained from a net metering program.

PACE Programs

PACE stands for Property Assessed Clean Energy and is a financing program for solar projects that is tied to the home instead of the homeowner. A residential PACE program is not available in Minnesota.

Other Energy Financing

Solar systems can be financed by bank loans, solar installer financing, new home mortgages, energy loans and home equity loans or lines of credit. Cash works too. 

Talk to your EnergyPal Advisor about financing solar options in Minnesota. We regularly source the best deals and terms for our customers.