Minnesota Solar Incentives and Rebates Guide
Key Takeaways
- Several local utilities offer Minnesota homeowners and businesses $500 rebates when they install solar panels.
- The Solar for Schools program allows North Star State schools to obtain grants to buy and install solar panels on their rooftops or on grounds adjacent to their school property.
- The federal solar tax credit offers residents of Minnesota a 30% tax credit on solar panels through the year 2032.
- Minnesota has net metering and other options to reduce solar-related costs.
Home of the Twin Cities, Minnesota recognizes that local, state, and federal solar incentives are important for residents and businesses looking to make solar their primary source of energy. Despite its cold winters, the state has an abundance of opportunities for those looking to purchase and install solar panels in Minnesota.
Many local electricity and energy providers offer options for customers to engage in programs such as net metering and solar installation cost rebates. The state also participates in the PACE Program, which provides loans for purchasing solar photovoltaic systems and other renewable energy technologies.
Making the switch to solar, however, may come with hesitation because the upfront costs of doing so can be steep. By exploring financial incentives, those looking to install solar panels can see how they might achieve a return on their investment sooner rather than later.
Let’s explore the Minnesota solar rebates and financial programs that are available to help make switching to solar power seamless and cost-efficient.
Minnesota Solar Incentives
Minnesota’s State Sales Tax Exemption
You will find that Minnesota has a total solar energy sales tax exemption listed in the Database of State Incentives for Renewables & Energy (DSIRE).
Commercial, industrial, and residential sectors can obtain 100% exemption for solar systems bought in or after 2005.
This exemption comes via the state Department of Revenue, as Minnesota works to achieve 100% carbon-free electricity by 2040.
Minnesota Property Tax Exemption
Minnesota’s property tax incentive allows for 100% property tax exemptions. This incentive was adjusted in 2015 to allow solar system owners to exempt their personal property that holds the system from taxation, but the real property (the land on which the solar energy generating system is located) is still subject to property tax.
There is a production tax for solar-generated electricity for systems larger than 1 megawatt, but many houses don’t require a system that large and can avoid that tax with a solar panel system of less than 1 megawatt.
Minnesota PACE Program
Minnesota PACE (MinnPACE) Financing helps those who are looking to obtain loans, including farms, nonprofit organizations, residential multifamily buildings, and commercial office buildings.
The program includes a loan at a fixed rate for 20 years with 100% financing; interest rates depend on the individual project.
According to DSIRE, the financing program applies to the cities of Cottage Grove, Northfield, Saint Paul, Hopkins, Eden Prairie, Minnetonka, Minneapolis, Duluth, and Mankato.
Rural Minnesota Energy Board PACE Program
The Rural Minnesota Energy Board PACE Program offers solar financing support for commercial, industrial, and agricultural businesses located in rural counties.
According to the Rural Minnesota Energy Board, PACE is a “financing tool” that helps offset the upfront initial funds required to purchase and install solar panel systems.
The program’s site states: “Costs for the improvements are paid back through a special assessment on their taxes. The increase in property taxes is offset by the decrease in energy costs so that the business sees no change in the bottom line.”
Solar for Schools Program
This grant program offered by the Department of Commerce has a budget of $14 million so that schools can get a 100% reimbursement for their solar system costs.
This program is set to expire in 2032. Schools can take advantage of this grant program for solar panel installation either directly on the school building or adjacent to the school property.
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Local Solar Incentives
Dakota Electric Association – Residential Energy Efficiency Rebate Program
The Dakota Electric Association will pay its members a one-time rebate of $500 for their solar installation.
The rebate is a result of a partnership with solar company Energy Wise and comes with installation and equipment requirements.
Energy Wise provides other rebates for energy efficiency improvements that can save you money on appliances, heating and cooling, lighting, and more.
Owatonna and Austin Public Utilities – Residential Conserve and Save Rebate Program
This financial incentive offered by Owatonna Public Utilities and Austin Utilities offers a $500 rebate for installing solar panels and $15 per square foot when customers install a solar hot water system.
Customers must sign a utility interconnection agreement with either one of these utility companies.
Offered through the Conserve and Save program, this solar incentive includes equipment requirements that you can find in the application details.
Rochester Public Utilities – Solar Rebate Program
Like the Dakota Electric Association, Rochester Public Utilities (RPU) offers a one-time rebate of $500 for new solar photovoltaic installations on homes and businesses.
Customers must agree to net metering terms and an energy audit with RPU.
Federal Incentives
Federal Solar Tax Credit
The Inflation Reduction Act of 2022 modifies and extends the federal solar tax credit, also called the investment tax credit (ITC), which offers a 30% tax credit on systems installed from 2022 through the end of 2032.
Everyone from businesses and local nonprofit organizations to homeowners who purchase solar energy systems can benefit from this federal tax credit. Qualified low-income residential projects can receive additional tax credits. Ultimately, rates vary depending on the year of construction, project status, and scope of the labor.
If you install a solar panel system after 2032, you will be eligible for a 26% tax credit. For installations in 2034, solar system owners will be eligible for a 22% tax credit.
Large installation projects can see valuable savings since this program does not have a financial cap, unlike some smaller programs.
Federal Solar Investment Tax Credit
| Through 2032 | 30% |
|---|---|
| 2033 | 26% |
| 2034 | 22% |
Net Metering in Minnesota
Thanks to interconnection laws, Minnesota residents can take advantage of net metering, which allows them to sell excess energy their solar panels generate back to the power grid.
For example, during the sunnier hours, your solar system may generate more energy than you consume. Electric companies will not charge you for any energy produced during this time. When you can no longer generate power from the sun, like at nighttime or on cloudy days, you are charged at your regular energy rate. The excess energy that was produced during the day would then be kicked back to you in the form of a credit.
Net metering can help with energy bills across multiple sectors, including commercial, industrial, nonprofit, residential, schools, agricultural, and institutional.
Similarly, homes and businesses that install a solar panel system can receive Renewable Energy Credits (RECs) through the Xcel Energy Solar*Rewards program.
The Solar Payback Period
A common question for new owners of a solar panel system is how long will it take to get a return on their investment. The amount of time it takes for savings to be generated by the investment to match the total system cost is called a payback period.
An average solar panel installation payback period of 10 years may seem lengthy, but taking advantage of all the incentives that the state of Minnesota has to offer can help speed things up.
Ultimately, payback periods vary and depend on the size of the solar system installation and the local electricity rates.
| Typical 6kW solar system installation cost | $17,700 |
|---|---|
| 30% Federal Tax Credit | $5,310 |
| Total Cost After Incentives Total Cost After Incentives Not including local incentives, which vary | $12,390 |
| Assumed Electricity Produced by a 6kW Solar System in Illinois | 8,488 kWh |
| Annual Electricity Cost Reduced or Offset Assuming 100% utilization by the home | $1,280 |
| Sample Payback Period | 10 years |
Sources: https://www.nrel.gov/docs/fy22osti/83586.pdf, https://globalsolaratlas.info/map (Minneapolis); https://www.eia.gov/electricity/monthly/epm_table_grapher.php
Conclusion
Solar panels increase home values and lower electric bills, so getting solar panels in Minnesota is a worthy investment.
There are a plethora of local rebate options offered through electricity providers, in addition to the federal tax credit, state programs, and net metering.
Whether you are a homeowner, a business owner in a rural county, or a school looking to cut back on your energy costs and contribute to clean energy efforts, Minnesota has numerous financial incentives to help with the costs of solar equipment and switching to solar energy.
FAQs
Does Minnesota have solar rebates?
Yes, Minnesota solar incentives include plenty of rebate options to help customers finance their solar panel installation. You can typically find these solar incentives through a local utility company.
Do solar panels work in Minnesota winter?
While snow on top of panels would indeed block the sun from reaching the panels to create energy, Minnesota residents with solar panels can ensure their solar panel system generates power by having a qualified solar installer arrange their solar panels at an angle so that the snow slides off them as it melts. Snow can even benefit solar power production.
Based on my location, what can I expect when it comes to switching to the solar energy system in Minnesota?
The University of Minnesota created a Minnesota Sustainability Analysis App that allows you to search for your area and see how much electricity your solar panels should ideally produce over the course of their lifetime.
FAQs
Does Minnesota have solar rebates?
Yes, Minnesota solar incentives include plenty of rebate options to help customers finance their solar panel installation. You can typically find these solar incentives through a local utility company.
Do solar panels work in Minnesota winter?
While snow on top of panels would indeed block the sun from reaching the panels to create energy, Minnesota residents with solar panels can ensure their solar panel system generates power by having a qualified solar installer arrange their solar panels at an angle so that the snow slides off them as it melts. Snow can even benefit solar power production.
Based on my location, what can I expect when it comes to switching to the solar energy system in Minnesota?
The University of Minnesota created a Minnesota Sustainability Analysis App that allows you to search for your area and see how much electricity your solar panels should ideally produce over the course of their lifetime.