Minnesota Solar Incentives (Rebates, Tax Credits & More in 2024)

Below is a glance at some of the best solar incentives available in Minnesota. As you read on, you’ll learn more about each solar incentive and how to claim it.

Note: Most of these incentives are only available if you pay for your solar panels in cash (or finance them with a loan). If you rent your solar panels with a solar lease or power purchase agreement (PPA), you’ll be ineligible for most solar benefits.

What Do Minnesota Residents Need to Know About the Federal Solar Tax Credit?

The federal solar Investment Tax Credit (ITC) is the biggest solar incentive available to Minnesotans, worth 30% of the cost of your solar photovoltaic system. Because the average solar panel system costs $28,800, you can expect the ITC savings to be around $8,640.

Minnesota residents currently have access to a decent net metering program, as we’ll discuss later on. Customers with net metering often don’t benefit much from a financial perspective by installing batteries. However, net metering policies have been on the decline in the country, and we expect Minnesota to drop the incentive at some point in the future. If that happens, batteries will become more of a necessity. Luckily, the ITC also applies to batteries. With a typical cost between $10,000 and $20,000, installing batteries could bump up the average ITC value by between $3,300 and $6,600.

Unfortunately, the ITC doesn’t come as a check for you to deposit. Instead, it’s a tax credit value that you can use to deduct off of the federal taxes you owe starting the tax year after your system is installed. However, if you don’t owe as much as 30% of your solar investment cost in taxes, the ITC rolls over for up to five years.

Thanks to the passage of the Inflation Reduction Act in 2022, the ITC is available to Minnesotans — and all Americans who install solar — at the following rate schedule:

• 30% of your total system value for solar photovoltaic (PV) systems installed between 2022 and 2032
• 26% of your total system value for solar PV systems installed in 2033
• 22% of your total system value for solar PV systems installed in 2034
• Credit discontinued for systems installed starting in 2035, unless extended again by Congress

How to Claim the Federal ITC in Minnesota

We recommend working with one of the best solar companies in Minnesota, as well as a trusted tax professional, for guidance on how to claim the ITC. 

However, these are the steps to claim the ITC from the federal government’s website:

1. Download IRS Form 5695. This home solar tax credit form can be downloaded straight from the IRS.
2. Calculate your credit on Part I of the tax form (a standard solar energy system will be filed as “qualified solar electric property costs”). On line 1, enter your overall project costs as written in your contract, then complete the calculations on lines 6a and 6b.
3. If solar is your only renewable energy addition, and you don’t have any rollover credit from the previous year, skip down to line 13.
4. On line 14, calculate any tax liability limitations using the Residential Energy Efficient Property Credit Limit Worksheet (found here). Then, complete calculations on lines 15 and 16.
5. Be sure to enter the figure from line 15 on your Schedule 3 (Form 1040), line 5.

EcoWatch’s Opinion on the Federal ITC in Minnesota

The ITC is the biggest solar incentive in Minnesota, worth 30% of your total system cost. That comes out to $8,640 for the average-priced 8 kW system. If you also install batteries, which will likely become necessary in Minnesota in the future, that credit would come out to between $11,900 and $15,200.

The downside to the ITC is that it’s not going to be a valuable solar benefit for Minnesota taxpayers that don’t owe thousands of dollars in federal taxes over a five-year period. However, if you owe at least a fifth of the credit —an average of $1,728 without batteries or $2,628 with batteries — per year for five years following installation, you will get the full incentive.
Watch Below: How Well Will Your Solar Panels Still Work When Covered In Snow?

Solar Energy Sales Tax Exemption in Minnesota

Minnesota law exempts solar electric and solar heating systems from the state’s 6.875% sales tax. That could lead to tax savings of roughly $1,980 based on average solar system prices in Minnesota. Keep in mind that you’ll still likely need to pay local municipal or county taxes, but these should amount to less than the state tax would. Also, there’s a possibility that your municipality opts to waive their sales tax on solar PV equipment as well.

How to Claim Minnesota’s Solar Energy Sales Tax Exemption 

You don’t have to take any extra steps to claim the sales tax exemption on your solar power system in Minnesota. The solar company you’re purchasing your equipment from should already have taxes removed, so if you see any type of “sales tax” on your solar invoice, be sure to inquire about what it means.

EcoWatch’s Opinion on Minnesota’s Solar Energy Sales Tax Exemption

We think it’s awesome that Minnesota removes the sales tax from renewable energy systems. Considering that the state tax is nearly 7%, it leads to almost $2,000 in savings for home solar panels and far bigger solar savings for commercial solar panel installations. Plus, the savings are upfront and automatic.

Minnesota’s Wind and Solar-Electric (PV) Systems Property Tax Exemption

Your residential property taxes won’t increase after you install solar panels in Minnesota, even though solar increases the value of your home. Under normal circumstances, any home improvement that boosts your home value will also cause your property taxes to go up because your taxes are based on your home’s assessed value. Normally, solar equipment would lead to a pretty substantial bump in taxes — close to $300 annually in Minnesota.

Property owners will save about $293 a year based on the average cost of a solar panel system in Minnesota and the statewide property tax increase rate of 1.02%.¹ Over your system’s lifespan, that’s a total savings of around $5,875. Keep in mind that actual savings will be lower because your system depreciates in value as it ages.

How to Claim Minnesota’s Solar Property Tax Exemption

Just like the sales tax exemption, claiming the solar system property tax exemption in Minnesota is automatic — you won’t have to do anything. The tax assessor will know not to include your solar panels when determining property value, so you automatically won’t see a bump in your tax bill.

EcoWatch’s Opinion on Minnesota’s Solar Property Tax Exemption

Most home upgrades that increase your property value also increase your property taxes, so we love to see Minnesota encourage homeowners to install solar by taking away the tax increase.

Not every state offers a property tax exemption for solar systems, and some only offer the exemption for a set number of years (usually around five). Without this perk, going solar comes with an additional downside. Even though solar is a touch more affordable in Minnesota than it is in most other states, we still love to see any incentive that makes converting to clean energy and easier decision. So we think this is a great solar benefit specifically for Minnesotans.

Net Metering in Minnesota

Net metering is a process in which you earn energy credits or, in some cases, compensation for the excess energy your solar panels produce and send back to the grid.

You can then use those energy credits to pay for the electricity you use from the grid when your panels aren’t producing, further lowering your electric bill. Or, depending on your utility, you can get a cash payout for your energy contribution.

Minnesota has one of the oldest net metering laws in the U.S., enacted way back in 1983. As the law stands, all energy companies (investor-owned utilities, or IOUs), municipal utilities and electric cooperatives) have to offer some form of net metering. That’s already an improvement compared to other states that only force IOUs to offer it.²

In Minnesota, a utility will either compensate or credit you for your solar energy,  depending on what type of contract you sign. The rate at which you’re paid for your electricity depends on the following factors:

• The size of your solar panel system
• The specific costs and retail rate of your utility company (updated annually)
• The type of utility in your service area (cooperative, municipal or public)³

If your utility is an IOU, you’ll earn credits for your solar energy at the utilities “avoided cost rate.” If you have a municipal or cooperative, you’ll have a year to use or cash out your credits before they expire.

In 2013, Minnesota passed a law that instead allows IOUs to apply a Value of Solar (VOS) tariff to “quantify the value of distributed PV electricity.”⁴ However, as of January 2024, no Minnesota utility has chosen to implement it.

We should mention that net metering policies are in decline throughout the country. Most recently, California rolled out NEM 3.0, which cut the credit rate in the state by about 75%. This was a huge blow to the local solar industry in California, especially since the state is consider #1 in the country for incentives and solar adoption.

We expect the future to bring a similar fate for Minnesotans. In the coming years, we wouldn’t be surprised if the credit rate was cut or even if the program was abandoned altogether. If that happens, most solar customers will need to install batteries alongside their panels if they want to see a fast solar payback period and savings anywhere close to the current lifetime average — $24,141. Batteries provide effective one-to-one net metering, so, while they’re more of a luxury now, they’re likely to become a necessity in the future.

To be clear, there are no plans to cut net metering in Minnesota currently, but we do believe now is the best time to convert to solar in the state because you can get grandfathered in to the current policy and avoid spending an additional $10,000 to $20,000 on solar batteries.

How to Enroll in Net Metering in Minnesota

The process of enrolling in net metering in Minnesota will look different depending on your utility company. But don’t worry, if you work with one of the best solar companies in Minnesota, the installers will help you with the process of grid interconnection.

Below are some helpful net metering enrollment resources based on your utility:

• 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

EcoWatch’s Opinion on Net Metering in Minnesota

Net metering laws in Minnesota are far more beneficial compared to a lot of states, making going solar far more worth it in the North Star State. We love that MN forces all energy companies to offer net metering and, as of January 2024, all utilities credit solar users at a clear, predetermined rate.

We’re concerned that the perk will disappear in the near future, so we believe converting to solar now and locking in the current net metering rate is the best course of action for residents in Minnesota.

Local Solar Incentives in Minnesota

Depending on where you live in Minnesota and who your utility provider is, you might be eligible for additional local solar incentives and solar financing options. Below are some additional local incentives for which you might qualify:

• Minnesota Power’s SolarSense program: SolarSense offers rebates to homeowners who install solar panels. Program funds are awarded on a lottery basis, and you must apply for the rebate between March 1-3, 2024. If you’re chosen, you’ll receive a rebate worth $0.56 cents per kilowatt-hour (kWh) of estimated solar energy output, which varies based on your system size, tilt, angle and location, but most can expect a rebate between $4,000 and $5,000. The rebate is capped at $5,000 or 60% of installation costs, whichever is cheaper.
• Austin Utilities: If you live in Austin, MN, you can earn a $500 solar electric rebate or $15 per square foot net (up to $1,200) rebate for a solar water heater installation.
• Minneapolis Green Cost Share program: If you live in Minneapolis, you can get help paying for your solar installation with the Green Cost Share program. The program incentives clean energy alternatives with a minimum $0.20 per kWh to qualifying applicants. Single-family homes only qualify if they use a “group buy,” but multi-family properties, commercial office buildings and nonprofits (community solar projects) can apply openly.
• Dakota Electric Association: If you’re a customer of Dakota Electric Association, you can take advantage of a $500 solar commissioning rebate. This rebate is offered to all customers who install new PV equipment and put it into commission. The company also provides help with solar financing.
• Rochester Public Utilities: RPU’s Conserve & Save® Solar Rebate program serving the Rochester, MN area, provides solar electric rebates of $500 for newly installed solar panel systems that are 2 kW or larger. Given the average system size of 8 kW in Minnesota, most RPU customers will be eligible for this rebate. 
• Owatonna Public Utilities: OPU also offers the Conserve and Save® rebate program on a first-come first-served basis. The city does not specify how much the rebate will be.
• Xcel Energy: Xcel energy solar incentives are offered through its Solar*Rewards program for homes or businesses, which works similarly to net metering. You can earn performance-based incentives in the form of Renewable Energy Credits (RECs) of $0.04 per kWh for home solar systems or $0.03 per kWh for commercial solar systems. You’ll receive an annual payout for your solar power for 10 years which, on average, comes out to $500 a year or $5,000 over the program’s duration. Income-qualified households can also receive up-front incentives of $2.00 per watt installed, which would be a whopping $16,000 for the average-sized solar system.

Don’t see your utility provider on this list? Reach out to your local utility company to see what solar and energy efficiency incentives are available for your Minnesota home.

Which Tax Incentives Are the Best In Minnesota?

At this point we covered all the incentives, here are our top-ranked incentives…

• Federal solar tax credit: This is the greatest incentive available to all Minnesotans who install solar — no matter where they live or how much solar they install. It’s worth a whopping 30% of your total system cost, with an average tax credit value of $8,640.

• Net metering: Minnesota has one of the most generous net metering policies in the country, allowing Minnesotans to greatly reduce (and possibly eliminate in some cases) their electricity bills.

• Local incentives and rebates: While these incentives vary greatly depending on where you live, Minnesota utilities are definitely some of the most solar-friendly in the nation, offering lots of financial help to Minnesotans who install solar panels.

• Solar energy sales tax exemption: While this is an automatic saving, you’ll save roughly $2,000 on your solar panel installation cost thanks to Minnesota’s solar sales tax exemption. Plus, you won’t have to fill out any applications to claim this incentive.

What Minnesota Residents Need To Know About SRECs

Minnesota is sort of a funny state when it comes to Renewable Energy Credits (RECs) and Solar Renewable Energy Credits (SRECs). While the state does not have an independent SREC market, Minnesotans can still earn and sell these credits in the state.

If you’re unfamiliar with SRECs, here’s how they works: to meet renewable portfolio standards (RPS), some states allow solar users to earn SRECs for every megawatt-hour of energy their panels produce. Utilities can buy those credits from the solar homeowner to meet their renewable energy benchmarks. Typically, one REC or SREC is equal to one megawatt-hour (1,000 kWh) of energy production.

In Minnesota, the customer owns the RECs or SRECs generated by their solar system unless they have agreed to sell or assign it to someone else. Some Minnesota utility incentive programs — like that offered by Xcel Energy — include a transfer of these SRECs when set up for solar interconnection.

SRECs allow utilities to meet Minnesota’s RPS goals, which are pretty lofty at the moment (we’ll discuss in the next section).

Are SRECs Taxable in Minnesota?

Yes, SRECs are taxable both on federal and state returns. However, because Minnesota doesn’t have an active SREC market, we highly recommend working with a trusted tax professional to properly assess your SREC tax payments.

What’s The Near Term Outlook For More Incentives In Minnesota?

While Minnesota isn’t exactly known for its abundance of sunshine, the state has some pretty ambitious RPS goals which have encouraged its utilities to offer solar-friendly policies.

Currently, Minnesota’s RPS goals require meeting the following percentages by 2025:

• Electric utilities: 25% renewable energy
• Investor-owned utilities (IOUs): 26.5% renewable energy
• Xcel Energy: 31.5% renewable energy

The standard also requires 10% of retail electric sales to come from solar by 2030. As of mid-2022 that percentage was only at 3.6%, so Minnesota certainly has its work cut out for it.⁵

With that said, we don’t anticipate Minnesota will lose any of its solar incentives or rebates anytime soon. The only exception, potentially, is net metering. There are no plans to eradicate the perk, but we expect it will get downgraded or abandoned in the coming years, as it has in many other states.

There also could be a major change in Minnesota solar incentives come 2030, or even earlier in the case of net metering. To get the most out of your solar panel investment in Minnesota and capitalize on all of its generous benefits, we recommend installing solar panels as soon as possible.

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The cost information presented in this article is derived from a comprehensive analysis, incorporating data from multiple industry sources. The average cost per watt per state was calculated based on figures from Consumer Affairs, Energy Sage, and Berkeley Lab’s Electricity Markets & Policy Department. Additionally, monthly energy consumption and the average monthly cost of electricity were sourced from the U.S. Energy Information Administration, ensuring a well-rounded and accurate representation of the information presented.