How Much Can You Save on Solar in Minnesota?
Minnesota has ambitious Renewable Energy Portfolio Standard (RPS) objectives. The RPS mandates that state electricity providers produce at least 25% of their retail electricity sales from eligible renewable sources by 2025.
The goal is to have solar energy make up 10% of all retail electricity sales in the North Star State by 2030. By 2018, the state's utilities had already met the 25% minimum requirement.
|State||Number of solar Installations||MW Installed||Average cost for grid power (2021)( cents per kWh)||Average cost per watt|
As of 2023, Minnesota has enough solar energy to power 233,645 homes, with 1,763 megawatts of solar-generated energy produced by 14 solar installations across the state.
According to the US Energy Information Administration, in 2020, Minnesota's overall energy usage per resident was 303.4 Million Btu. The industrial sector accounted for almost a third of energy consumption, with 101.1 million BTU.
In comparison, the transportation sector used 70.9 million BTU and the residential sector used 72.0 million BTU.
Minnesota's commercial sector used the least amount of energy, with only 59.4 million Btu.
Minnesota Solar Tax and Incentives at a Glance
|Minnesota Solar Incentives||State or Federal||Program Overview|
|Federal Solar Tax Credit||Federal||The ITC credit provides eligible homeowners up to 30% of the system's total cost.|
|Minnesota Property Tax Exemption||State||Property taxes in Minnesota are not increased with the installation of solar energy systems.|
|Sales tax exemption||State||Solar equipment is exempt from sales tax in Minnesota, saving residents up to $1,500.|
|The Property Assessed Clean Energy (PACE) program||State||The PACE program offers financial help to purchase various energy-saving appliances and systems, such as solar energy systems and ventilation systems.
|USDA REAP Grant||Federal||This initiative offers loans for clean energy systems to agricultural producers and small businesses to help them transition to renewable energy.|
Minnesota has no indigenous fossil fuel deposits, so the state's electricity demand must be met by outside sources. As a result, approximately one-fifth of the state's annual electricity consumption is met by sources located in other states and Canada via the regional electric grid.
Minnesota has several sustainable energy sources, such as wind, solar, and bio-based energy and these account for a steadily rising portion of the state's overall energy supply.
Over the last few decades, the state has significantly contributed to developing a thriving solar industry. Because of its dedication, the state has climbed to sixteenth place in the Solar Energy Industries Association (SEIA)'s national rankings, having installed more than 1,000 megawatts (MW) of solar.
The state's solar capacity increases yearly because peak sun hours favor solar energy production, particularly in the summer. Minnesota receives roughly 2,700 hours of sunlight annually, with 5.43 hours of peak sun per day in the summer and 3.53 hours in the winter.
Residents of some cities throughout the state are eligible for some solar incentives and rebates:
In addition to the state government's rebates and incentives, certain power companies situated throughout the state offer these solar incentives:
The Federal Solar Tax Credit allows solar buyers in Minnesota to invest in solar panels and effectively recover 30% of the total cost of their solar systems.
While homeowners and small business owners are still responsible for the original price of their solar energy system, they will receive a tax credit equivalent to thirty percent of that initial payment as part of their tax return.
This reflects a 30% savings from the system's total cost, including equipment, personnel, and permits. For example, eligible customers can claim a $6,000 credit on a $20,000 solar energy system.
|State||Cost of installing a 6kw system||Federal tax credit value 2023 (30%)|
According to the Office of Energy Efficiency and Renewable Energy, the tax credit covers the cost of panels, battery backups, labor costs for assembly and installation, permit fees, inspection fees, and sales tax on certain expenses.
The one-time credit is available for all solar energy systems installed after January 1, 2006.
The credit was expanded and extended in 2022 due to the Inflation Reduction Act(IRA); its value of 30% will be preserved until 2032.
In 2033, it will be reduced to 26%, then 22% in 2034, and finally completely removed in 2035. In the IRA, the credit is presently referred to as the residential clean energy credit.
Solar customers who want to see if they are eligible for this benefit or any other credits that may be available should speak with a tax expert. Overall, they must satisfy these basic requirements:
To be eligible for the solar tax credit, residents must file IRS Form 5695 and their yearly federal tax return.
Residents can use the credit to pay off any unpaid taxes. Furthermore, if they do not have a tax liability in the first year equal to the full amount of the tax credit, they can carry the credit over to subsequent years and use it to pay any tax debt accrued in those years. (for as long as the ITC is in effect).
Minnesota's Net Energy Metering program compensates homeowners for any excess solar-generated energy that's sent back to the grid for distribution.
Compensations may come as energy credits or monetary payment. Homeowners can use the energy credits to pay for the electricity they draw from the grid when their panels do not generate enough. This initiative lowers the beneficiary's monthly electric bill even further.
Minnesota net metering laws were enacted in 1983 and apply to all utilities in the state. State laws require that utility companies provide net metering for all solar energy systems with less than 40 kW capacity.
The 40-kW limit typically encompasses almost all residential solar systems that produce between 5 and 10 kW for a single-family dwelling.
In general, net metering saves customers money by preventing them from paying more for electricity during off-peak hours. Other net-metering benefits include: \
Minnesota Statute 216B.164 establishes the Net Energy Metering or Net Metering rules in Minnesota
According to Minnesota's net metering regulations, all energy providers, including investor-owned utilities, municipal utilities, and electric cooperatives, must provide some sort of net metering.
However, the specifics of each utility provider's net metering approach differ slightly from one company to the next. As a result, based on the utility company a solar customer uses, enrolling for net metering in Minnesota will look different.
Overall, most enrollment processes involve:
Some net metering enrollment resources for different utilities across the state include:
Under Minnesota Statutes section 272.02, subdivision 24, photovoltaic installations are exempt from property tax. Property taxes typically rise along with most home improvements that increase a property's worth. However, homeowners are exempted from paying property tax for any increased value caused by the installation of a solar energy system.
When a solar energy system produces more power than a home or company needs, the surplus is transferred to Xcel Energy's grid. The owner is eligible to receive Renewable Energy Credits. (REC).
For residential solar systems, the incentive pays out RECs at a rate of $0.04 per kWh; for commercial solar systems, it pays out at a rate of $0.03. Customers are then given their RECs via check, either monthly or yearly.
To be eligible for Solar*Rewards, interested businesses, and homeowners must meet these requirements:
There is a limited reward budget, so interested parties must register as soon as possible to secure their spot.
The SolarSense program is a lottery-based rebate that will cover up to 60% of the installation cost for any lucky recipient who comes under the purview of the Minnesota Power utility.
The rebate is proportional to the quantity of energy that a customer's photovoltaic (PV) system is expected to generate over ten years after installation; thus, the more energy the systems produce, the more rebate the owners receive.
The rebate is calculated using the design of the solar system, including its tilt, orientation, and shading profile, and an estimate of the yearly energy output from PV Watts. PV Watts is a publically available tool created by the National Renewable Energy Laboratories (NREL).
It is used to estimate the quantity of energy that PV systems can generate while considering specific aspects of where the systems are located. In the first year of operation, rebates are worth $0.29 per kWh of expected production.
To be qualified for Minnesota Power's SolarSense solar electric refund, interested parties must meet these requirements:
The application period for this program officially begins on March 1, and applications will be accepted between March 1 and March 3, 2023.
Consumers who want to participate in the SolarSense initiative must go through Minnesota Power's Interconnection process. This process allows the utility company to assess site-specific conditions that may affect the system and notify the customer before it is installed.
Hence applicants must:
Minnesota residents who put solar panels on their homes are exempt from paying state sales tax. Solar energy systems bought on or after August 1, 2005, are exempt from state sales tax under Subdivision 29 of Section 297A.67 of the Minnesota Statutes.
Solar energy systems are defined in these statutes as devices whose primary purpose is to collect, convert, and store solar energy for useful purposes such as heating and cooling buildings or other energy-using processes.
As of 2023, the purchase of a solar power system in Minnesota is completely exempt from sales tax, resulting in instant savings of up to 7%.
This exemption applies to solar photovoltaic (PV), water-heating, and space-heating systems. It also applies to all system components, including panels, wiring, pipelines, pumps, and racks. To file an exemption claim, interested parties must complete the "Certificate of Exemption" portion of Minnesota Department of Revenue Form ST3.