Minnesota Solar Incentives, Tax Credits & Rebates (2024 Guide)
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Most people associate solar energy with hot and humid regions, but Minnesota’s large, open skies and state legislation make it an excellent place to go solar. The state also has several solar tax rebates and incentives to make the process more affordable and increase your energy savings. We’ve compiled the key programs in this guide. Any of the best solar companies should be able to help you determine which ones you qualify for and guide you through the process.
What Are the Available Minnesota Solar Tax Credits and Rebates?
Minnesota’s solar incentives rival those of popular states for solar, such as Texas. Some of its incentives are linked to the popular home energy company Xcel, and one of its solar rebate programs is a unique lottery-style incentive. Learn about each solar incentive below.
Solar Energy Sales Tax Exemption
Minnesota’s state sales tax exemption prevents you from paying sales taxes on your solar energy system and equipment. This extends to solar water-heating and space-heating systems. Complete the Minnesota Department of Revenue Form ST3 “Certificate of Exemption” to apply.
More resources: Certificate of Exemption
SolarSense
Minnesota Power’s SolarSense program provides tax rebates to reduce your up-front solar panel installation costs. The program is available to all Minnesota residents. Funds are awarded to customers on a lottery basis, so you must submit a SolarSense application to be considered.
The program opens for applications on March 1 each year. Applications are accepted for three calendar days. Some homeowners are placed on a waitlist if more applications are received than available funds. Visit the program’s website to understand its current funding and availability better.
More resources: Minnesota Power SolarSense
Xcel Energy’s Solar Rewards Program
Minnesota Xcel customers can take advantage of the company’s Solar Rewards Program, backed by the Minnesota Renewable Development Fund. Xcel pays homeowners $0.07 per kilowatt-hour (kWh) of solar power production annually for up to 10 years. However, you may have to go on a waitlist depending on the program’s current funding. Projects on the waitlist are not guaranteed to receive funding.
Xcel Low-Income Solar Program
Income-qualified Xcel customers who receive benefits under the Low-Income Heating Assistance Program (LIEAP) or Weatherization Assistance Program (WAP) can receive a $2,000 per kilowatt (kW) solar rebate from Xcel. You must meet the following criteria to qualify:
- Make $52,000 or less for a family of four.
- Have a system sized to a maximum of 120% of your usage.
An average-sized 6 kW system would receive a $12,000 rebate based on this criteria.
More resources: Xcel Solar Rewards page
How Does the Federal Solar Tax Credit Work?
In addition to the incentives above, Minnesota homeowners can use the federal solar tax credit, also known as the solar Investment Tax Credit (ITC). This incentive reduces your federal government taxes by up to 30% of your total solar panel installation costs. The policy was introduced as part of the Energy Policy Act of 2005 and was initially set to expire in 2007, but Congress has extended it multiple times. It’s currently set to run through 2034, though the rate will begin to reduce in 2033.
Does Minnesota Offer Net Metering?
Minnesota is one of several states with net metering laws, also called interconnection laws.
These laws allow you to sell excess energy your solar panel system generates back to the power grid. Minnesota residents can choose to receive a standard compensation rate per kW or a credit applied to future electricity bills.
How Much Do Solar Panels Cost in Minnesota?
It costs an average of $17,150 to install a standard 5-kW solar panel system in Minnesota.* This aligns with the national average cost of solar panels. A solar installer will most likely charge based on the wattage, with the average price being $3.43 per watt. Using the federal tax credit would reduce this price by $5,145.
It’s important to note that your selected payment method impacts your total price. We researched and analyzed every solar financing option to help you make the best choice for your budget and needs.
- Cash purchase: An up-front payment is the most cost-effective option. Paying in full eliminates the need for interest rates, credit checks, and extra fees. This payment option also gives you full system ownership, qualifying you for all solar incentives.
- Solar loan: This is the second-best payment option. It eliminates high up-front costs, instead requiring monthly payments toward system ownership. You’ll also qualify for solar incentives to help reduce your investment, though you’ll pay more in the long run due to interest rates.
- Solar lease: A solar lease is the best financing option for homeowners who don’t qualify for loans or can’t afford a large cash payment. Be aware that a solar lease disqualifies you from using solar incentives because the solar company remains the system’s owner. You should also know that a leased system does not increase your home’s value like a cash purchase or loan.
- Power purchase agreement (PPA): You can think of a PPA as if you’re still paying your regular electricity bill but for solar energy instead of grid-tied power. A contract outlines your expected rate, which will be lower than the standard electricity rate. Many solar companies include maintenance and repairs with PPAs. However, you don’t own the system and are thus disqualified from using solar rebates or other incentives.
*Cost figures are based on a 2023 report from EnergySage.
Is Going Solar Worth it?
Yes, going solar is worth it in Minnesota due to its net-metering laws, local rewards programs, and tax incentives. These benefits will help you to save long-term on your energy bills in addition to reducing your environmental impact by generating clean energy. Solar panels typically have a payback period between six and 10 years, meaning the time it takes for the system to pay for itself. Minnesotans can also expect solar panels to increase their home’s value by an average of $15,000.
Our Conclusion
Minnesota is an excellent state to go solar. The state’s solar panel system cost is in line with the national average, and it provides several incentive programs to make going solar more affordable. This guide covers Minnesota’s most significant incentives, but there are smaller city- and municipality-specific options worth exploring. We recommend checking the Database of State Incentives for Renewables and Efficiency (DSIRE) for more information.
Once you feel ready, we recommend reading our guide to the best solar panel brands to narrow down your choices. You can use our tool below to connect with reputable solar installers nearby.
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FAQ About Solar Tax Incentives in Minnesota
How long does it take for solar panels to pay for themselves in Minnesota?
It should take about six to 10 years for solar panels to pay for themselves in Minnesota, which aligns with the national average. Where your payback period falls within this range greatly depends on the type of solar panels and upgrades you install. We recommend selecting panels that provide optimal energy production and energy efficiency, such as monocrystalline panels.
Can HOAs prevent solar panels in Minnesota?
A Homeowners Association (HOA) can prevent you from installing solar panels in Minnesota. However, Minnesota’s state legislature has introduced bill HF1262, which would limit community or homeowners associations’ from blocking their neighbors from installing solar panels.
How big of a solar system do I need in Minnesota?
Various factors determine what system size you need, such as your average electricity consumption, your roof’s layout, and the surrounding area. Most homeowners purchase systems around 6 kW, but we recommend consulting a solar installation company to determine the right fit for your home.
Is there a limit to how many solar panels you can have?
There is no limit to how many solar panels you can have. However, having too many solar panels may be impractical. We suggest consulting a solar energy professional to determine the appropriate number of solar panels for your home.
Our Rating Methodology
We are committed to providing comprehensive and unbiased reviews to our readers. After over a thousand hours of research on solar companies, interviews with experts, and common customer needs, we’ve created a detailed rating system for solar providers based on six factors:
- Solar equipment, installation, and services (25%)
- Warranty and performance guarantees (25%)
- Brand reputation and certifications (15%)
- Financing options (15%)
- Experience (10%)
- Availability (10%)
Total scores are divided by 20 for a final 5-point rating scale.
To share feedback or ask a question about this article, send a note to our Reviews team at reviews@thisoldhousereviews.com.