Minnesota Solar Rebates and Incentives

How Much Can You Save on Solar in Minnesota?

Key Details

• The Federal Solar Tax Credit in Minnesota allows solar buyers to claim a percentage of their system's total cost.
• Net Energy Metering in Minnesota provides customers with compensation credits or payments for excess energy generated by their PV systems.
• Solar energy systems installed in Minnesota are exempt from property taxes.
• The Solar Rewards Program from Xcel Energy provides customers with Renewable Energy Credits or payments for energy produced by their systems.

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.

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 Solar Tax and Incentives at a Glance

Renewable Energy in Minnesota

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.

Local Solar Rebates and Incentives

Residents of some cities throughout the state are eligible for some solar incentives and rebates:

• Minneapolis residents can earn 0.20 per kilowatt-hour for the electricity they generate through the Minneapolis Green Cost Share program
• Residents of St. Louis Park can take advantage of the Solar Sundown program, which can save them up to 6% off the overall cost of installation
• Chaska residents are eligible to participate in the Chaska Energy Rebate program, which provides qualified customers with a discount of up to $2,500 off the cost of solar panel installation.

Power Company Rebates and Incentives

In addition to the state government's rebates and incentives, certain power companies situated throughout the state offer these solar incentives:

• XCEL Energy provides an opportunity to greatly reduce the initial and ongoing costs of installing solar energy systems. Qualified individuals can earn $0.07 per kWh for any excess their system produces annually
• Minnesota Power's SolarSense program offers solar panel installation rebates depending on the system's size, total cost, and the number of residents who register for the program.

Federal Solar Tax Credit in Minnesota

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.

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.

Eligibility

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:

• They must purchase their PV system outright (with cash or with a solar loan, but not a solar lease)
• The solar PV system must be installed on the applicant's U.S. residential property
• They must own the property. Renters are not eligible
• The PV solar system is either brand-new or is being used for the first time.

How do I claim the Federal Solar Tax Credit in Minnesota?

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).

Net Energy Metering in Minnesota

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.

Additional Benefits of Net Metering

In general, net metering saves customers money by preventing them from paying more for electricity during off-peak hours. Other net-metering benefits include: \

• Enabling consumers to obtain the true value of the energy they generate without having to install a second meter or spend more money on additional energy storage
• Assisting owners of residential and commercial properties to reduce some of the stress on their infrastructure by producing their own electricity
• Using energy generated by one solar neighbor to provide electricity to nearby homes. This is possible because any extra electricity generated is distributed to nearby homes before being sent to the grid.
• Encouraging consumers to take an active role in producing renewable energy, which protects the environment.
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Minnesota Statute 216B.164 establishes the Net Energy Metering or Net Metering rules in Minnesota

How to Enroll for Net Energy metering 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:

• A commissioning test will be performed on the newly installed system
• Integrate the system with the utility grid
• Replace the customer's meter with bidirectional and production meters once system commissioning requirements have been met
• Adjust rates to reflect a net energy metering rate.

Some net metering enrollment resources for different utilities across the state include:

• Connexus Energy
• Dakota Electric
• Great River Energy
• Lake Region Electric Cooperative
• Minnesota Power
• Nobles Cooperative Electric
• Otter Tail Power Company
• PKM Electric Cooperative, Inc.
• South Central Electric Association
• Steele-Waseca Cooperative Electric
• Traverse Electric
• Xcel Energy

Minnesota Property Tax Exemption

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.

Minnesota Xcel Energy's Solar Rewards Program

The Solar Rewards Program from Xcel Energy is a performance-based incentive that gives residents with solar systems an annual payment based on the energy those systems produce.

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.

Eligibility

To be eligible for Solar*Rewards, interested businesses, and homeowners must meet these requirements:

• They must be current residential or commercial Xcel Energy customers
• They must own the structure, home, or property on which the solar array will be installed
• The applicant's identity, as it shows on the application, must match the name on the Xcel Energy account and bill
• The customer must sign a 10-year Solar Rewards contract with Xcel Energy and agree to connect their system to the Xcel Energy grid
• They must Install a device with a power production range of 0.5 to 20.00 kW
• Their personal liability insurance coverage must satisfy the minimum requirements of $300,000 for 40 kW AC or less.
• They must work with a reputable and professional solar installation firm
• The installation must take place within one year after the proposal is submitted
• Systems must be sized so that the expected generation (PV Watts estimate) does not surpass 120% of the historical electricity use (i.e., the previous 12 months at the time of application submission).

There is a limited reward budget, so interested parties must register as soon as possible to secure their spot.

Minnesota Power's SolarSense Program

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.

Qualifications

To be qualified for Minnesota Power's SolarSense solar electric refund, interested parties must meet these requirements:

• Own the photovoltaic (PV) system and the property or structure where it will be placed
• Be a Minnesota Power retail customer with a grid-connected solar energy system
• Obtain pre-approval before proceeding with the purchase and installation of any equipment
• Finish the installation within six months of receiving approval for the rebate. If the project is not completed within this period, customers must reapply, lose their reserved place in the rebate queue, and refund the rebate amount to SolarSense
• Completed an energy analysis within the last twenty-four months
• Install a system that cannot generate more than 120% of the premise's annual energy consumption.
• Employ a trained and certified technician (NABCEP or UL)
• The installer must submit system design specs for Minnesota Power to estimate the incentive amount.

How to apply

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:

• Select a professional and North American Board of Certified Energy Practitioners-certified installer (NABCEP).
• Send a completed interconnection application and a document for the SolarSense rebate with the installer's assistance. If a battery backup system would be included, the applicant must also complete the battery backup system addendum form
• Allow the utility company to conduct a preliminary review within 20 business days of getting an application for interconnection. The representative will identify any site-specific conditions that may affect the installation during this process
• Receive a rebate reservation number once their registration is accepted
• Make necessary upgrades required to meet current standards or guarantee the system's safe operation
• This information will be included in the applicants' approval papers
• Begin installation after receiving an approval document and a rebate reservation number
• Contact the utility for a commissioning test after installation is complete.

State Sales Tax Exemptions in Minnesota

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.