The complete list of Minnesota solar incentives and tax credits for 2023, plus how to take advantage.
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Minnesota gets less than average sun in the U.S. and has pretty average electricity costs, neither of which favor residential solar installations. However, there are some pretty incredible rebates available for Minnesotans who go solar at home, as well as the federal solar tax credit and exemptions for state sales and property taxes.
Minnesota State Solar Incentives
| Incentive | Description |
|---|---|
| Utility solar rebates in Minnesota | Several utilities offer significant rebates (some up to $12,000) for installing home solar |
| State sales tax exemption for solar | Minnesota exempts solar energy equipment from state sales tax, saving homeowners money upfront |
| State property tax exemption for solar | Residential solar arrays won’t increase your property taxes in Minnesota, even if they increase your home’s assessed value |
| Net metering in Minnesota | Mandated by law for all utilities, with annual payouts for some |
SRECs in Minnesota
Minnesota doesn’t have an active independent market for solar renewable energy certificates (SRECs), yet. There are, however, excellent opportunities for homeowners to earn money from SRECs in Minnesota. This is because the state’s Renewable Portofolio Standard requires electric utilities to generate 25% (26.5% for investor-owned utilities) of electricity from renewable sources by 2025 (or 31.5% for Xcel Energy).
The Minnesota RPS also stipulated that 1.5% of utilities’ electricity must be derived from solar by 2020, and that 10% of that had to be from sources under 20 kW. These objectives helped to incentivize utilities to offer rebates (see below) to homeowners and businesses installing solar.
These incentives likely won’t go away any time soon. That’s because the standard also calls for 10% of retail electric sales to come from solar by 2030. So far, Minnesota produces just 3.52% of its electricity from solar, according to the Solar Energy Industries Association (SEIA).
Utility solar rebates in Minnesota
Minnesota Power’s SolarSense program provides rebates to customers installing solar, with the program budget approved through 2024. The 2022 program is full, though customers can apply to be added to a waitlist prior to installing their system. The rebate is calculated using an estimate of annual energy production from PV Watts (a publicly available tool developed by the National Renewable Energy Laboratories). To calculate the SolarSense rebate, a PV system’s estimated energy output is multiplied by $0.52/kWh. The maximum rebate is $10,000, or 60% of installed costs, whichever is less.
Xcel Energy’s Solar Rewards Program offers performance-based incentives of $0.04/kWh for residential solar energy systems. However, the program budget has been fully allocated for 2022. You can still register and be added to the waitlist, with funding from cancelled projects being reallocated until December 30th, 2022, when the waitlist is dissolved and new applications must be submitted for the 2023 Solar*Rewards program. Income-qualified households are also eligible for up-front incentives of $2.00/Watt, which amounts to $12,000 for a 6 kW capacity solar array.
The cities of Austin, Owatonna, and Rochester public utilities offer a $500 rebate to residential and commercial customers who install photovoltaic (PV) systems with at least 2 kW DC capacity; eligible solar water heating systems can earn $15 per square foot of collector area. Recipients must agree to a net-metering and interconnection contract with one of the three city Public Utilities and submit the application within 30 days of connection. By accepting the rebate, customers transfer their rights to any and all Renewable Energy Credits (RECs) associated with the PV system.
Random aside: The City of Austin, Minnesota, also offers a $10 per tree rebate for planting up to five trees on your property. Just make sure you don’t plant trees that will shade your solar panels in years to come!
Customers of Dakota Electric Association can apply for a one-time $500 rebate for installing home solar. Applications must be submitted before your install your residential solar array, with installations requiring approval from the utility before interconnection.
Residents of St. Louis Park may be able to share the cost of installing home solar with the city. Under its Solar Sundown program, the City of St. Louis Park offers a base rate of 4% of the project’s cost. For properties located in census tract 223.02, the city offers a higher 6% Environmental justice rate. The program isn’t open to new builds or additions completed within the previous 12 months.
Residents of Shakopee who receive service from Shakopee Utilities can apply for a solar rebate of up to $1,000. Funding is limited and already fully subscribed for 2022, but you may be added to a waitlist in case any projects fail to come to fruition. Customers must sign an interconnection agreement with the utility and pay the interconnection application fee.
State sales tax exemptions in Minnesota
Minnesota offers a sales tax exemption for solar energy systems. The statute defines exempt solar energy systems as “a set of devices whose primary purpose is to collect solar energy and convert and store it for useful purposes including heating and cooling buildings or other energy-using processes, or to produce generated power by means of any combination of collecting, transferring, or converting solar-generated energy.”
For Minnesotans, this means savings of at least 6.875% on the upfront cost of a home solar energy system. Contractors should include this exemption on any quotes or estimates and on final invoices. If you see sales tax imposed on any part of your home energy system, ask the contractor for more information.
State property tax exemptions in Minnesota
Minnesota state offers an exemption on property tax associated with home solar installations. Specifically, Subd. 24. of the Minnesota tax code states that personal property where a solar energy generating system is located shall be assessed for tax without regard for the system assuming that the property is not primarily used to generate solar energy.
In other words, if you put solar panels on your roof, your home’s property taxes won’t go up as a result. But, if you own a piece of land and primarily use it to generate solar power, this will affect property taxes.
Net metering in Minnesota
Minnesota law has mandated net metering since 1983, making it one of the oldest net metering laws in the U.S. The mandate applies to all investor-owned utilities (IOUs), municipal utilities, and electric cooperatives, which is also a bit different to many states’ laws where only IOUs have to offer net metering.
Minnesota’s net metering law began providing for a value of solar tariff in place of net metering in 2014. So far, no utilities have switched customers to this method of compensation, however.
So, as it stands, Minnesotans can sign up for net metering with any utility and receive credits for net excess generation at the average retail utility energy rate. Some utilities offer monthly checks for unused bill credits while others carry the credits forward until the end of the calendar year. At that point, any remaining credits are reimbursed at the avoided cost rate for IOU customers. Credits expire annually for customers of municipal utilities and electric cooperatives, however. This may mean you design your home solar energy system a little differently depending on your service provider.
Final thoughts on state solar incentives in Minnesota
According to Minnesota Power, the utility’s average residential customer uses about 8,940 kilowatt-hours per year. That means most customers could meet 100% of their energy needs from a 5 kW array in Minnesota.
Such an array typically costs around $17,500 in the state, and with the federal solar tax credit saving 30%, and solar rebates of a few hundred or even thousands of dollars, Minnesotans can quickly recoup the cost of going solar. Add in net metering payouts and savings, and Minnesotans have plenty of reason to install residential solar arrays.