Solar incentives in Minnesota: Everything you need to know

Updated: Mar 04, 2025
10 min

Julia ZaraevaAuthor

Even in northern areas, solar panels can help you save money on your bills. To cut down on the upfront costs of a PV system, take advantage of solar incentives in Minnesota.

Key takeaways

Despite being a northern state and having less sunlight on average, Minnesota offers many financial incentives to encourage homeowners and businesses to install solar systems.
Like the rest of the US, Minnesota residents can claim a 30% federal tax credit on total solar system costs.
Minnesota offers a permanent sales tax exemption on solar energy systems, including all components.
Net metering is available through all Minnesota utilities, crediting excess generation at the full retail rate. Unused credits are reimbursed at the utility's avoided cost rate at year-end, except for electric cooperatives and municipal utilities, which expire unused credits.
RECs can be earned and sold, generating $300-$1,000 annually for a 10kW system. Requires approval from the Minnesota Public Utilities Commission and an M-RETS account.
Various utility companies offer rebates, including: Payment per kWh over a 10-year contract.
SolarSense rebate program with specific warranty requirements, flat $500 rebate.
100% of the added value from a solar PV system is exempt from property taxes.
Homeowners can access loans up to $75,000 for financing solar installations.
Solar easements can be established to protect access to sunlight.

Save 30% of your PV system cost with Federal Solar Tax Credit

The US government wants more people to go solar: it’s a modern and green way of getting energy. This is why the Solar Investment Tax Credit (ITC) program was developed. It allows American citizens to claim 30% of the cost of their installation as an income tax deduction. The cost here is not only solar panels, but also shipping, installation expenses and more. For example, if your system overall made you spend $10,000, the government returns you $3,000. To claim the ITC, complete all the necessary forms and submit them when filing your taxes. The incentive comes in two forms – Residential Renewable Energy Tax Credit for home systems and Business Energy Investment Tax Credit for commercial installations.

Buy without paying taxes

In Minnesota, solar energy systems purchased on or after August 1, 2005 are exempt from sales tax. The sales tax exemption covers all components of these systems, including panels, wiring, and racks. Buyers need to complete Minnesota Department of Revenue Form ST3, “Certificate of Exemption,” to claim the exemption. This exemption has no time limit.

Sell excess electricity with net metering program

Solar laws in Minnesota make net metering programs available to customers of all municipal and investor-owned utilities, as well as to those served by electric cooperatives. The program gives households an opportunity to send any excess electricity back to the grid instead of storing it with batteries.

When you sell your solar power to the utility, you receive credits that can be used to offset your next bills. In Minnesota, their value is equal to full retail electricity price. If you have any unused credits at the end of the calendar year, they will be reimbursed at the utility’s avoided cost rate. In case you are a client of an electric cooperative or a municipal utility, the credits will expire without any compensation.

Save up to $1,000 a year trading RECs

Renewable Energy Credits are certificates granted to any person or entity upon generation of each Megawatt-hour of clean electricity. Unlike with net metering, you don’t need to sell any electricity to get credits. The value of RECs is always changing, which makes them similar to stock market assets. Based on the available data, selling RECs could mean anywhere from $300 to $1,000 annually for a 10kW solar system. To participate, you have to apply for approval to the Minnesota Public Utilities Commission. After that, you can create a REC account with the Midwest Renewable Energy Tracking System (M-RETS) to begin storing and selling your credits.

Save extra with solar rebate programs

Some Minnesota utility companies provide nice rebates for homeowners. It’s always best to contact your electric provider and ask if they offer programs that you might be eligible for:

Xcel Energy will pay its customers a few cents for every kWh of energy during a 10-year contract term. The company will retain all RECs produced by the participating system. In most cases, the developer or installer will handle all paperwork on your behalf.

Minnesota Power offers the SolarSense rebate program. To qualify for the program, your system must be installed by a NABCEP or UL-certified professional who must offer a 2-year workmanship warranty. The panels must have at least a 20-year performance warranty and the inverters at least a 10-year one. The funds are allocated on a first-come, first-served basis. The program begins application processing on March 1 each year. All RECs produced by the system are retained by Minnesota Power.
Austin Utilities, Owatonna Public Utilities and Rochester Public Utilities each offer their customers a flat $500 rebate. All three have similar requirements: your PV system must be of at least 2kW or larger, an energy audit must be conducted prior to the system’s installation and the equipment must meet all relevant safety and performance standards.

Buy solar equipment tax free and save 6.8% or more

In Minnesota, solar equipment is exempt from the state’s sales tax, meaning that an additional 6.88% and all applicable local rates stay in your pocket. Solar equipment includes any device used to convert sunlight into energy. Anything needed to prepare the energy for storage or put it to use is also subject to the exemption, even the racks. Thus, everything you need to build a PV system of any scale can be bought in Minnesota tax-free. To claim the exemption, buyers must complete Form ST3.

Freeze your property tax with Renewable Energy Systems Tax Exemption

In Minnesota, you don't have to pay any extra taxes for having solar panels. According to state laws, 100% of the value added as a result of acquiring a solar PV system shall be exempt from taxation. To claim the exemption, contact your local tax assessor.

this is how much solar panels increase the value of your house

Get a Fix-Up Loan to finance going solar

The Fix-Up program allows homeowners in Minnesota to take a loan to cover costs associated with acquiring a PV system. The loan amount is limited to $75,000 and the maximum term length is 20 years. You can finance an already-started project and hire a contractor yourself. There is no prepayment penalty.

Protect your solar panels from shade with Solar Easements

A solar easement contract is a written agreement between two property owners, for example, you and your neighbor. This type of contract helps to maintain a stable supply of sunlight for your PV modules. A solar easement guards your panels from potential impairments, such as vegetation and structures. It is voluntary and must contain the description of protected space, a list of restrictions and a clause on revision or termination of the contract. Once signed, it is tied to the land, not the owner. Any such agreement must be created in written form and must meet the general requirements for easements on real property.

Incentive/ Program	Description	Benefits	Eligibility/ Requirements	Notes
Federal ITC (30%)	30% tax credit on the total cost of solar system installation.	Reduces overall system cost, accelerates payback period.	Must own the system, meet IRS guidelines.	Applies to installation, equipment, and other associated costs.
MN Sales Tax Exemption	Exemption from state sales tax on all solar system components.	Reduces upfront costs.	Purchase of solar energy systems. Form ST3 completion.	Permanent exemption.
Net Metering	Allows homeowners to sell excess solar energy back to the grid for credits.	Reduces or eliminates electricity bills.	Customers of all MN utilities.	Credits at full retail rate. Unused credits reimbursed at avoided cost, except for co-ops/municipal utilities.
RECs	Renewable Energy Credits earned for generating clean energy.	Provides additional income through the sale of certificates.	Approval from MN Public Utilities Commission, M-RETS account.	Value fluctuates.
Utility Rebates	Rebates offered by individual utility companies.	Reduces upfront costs.	Varies by utility (Xcel Energy, Minnesota Power, etc.).	Specific requirements and availability vary.
Property Tax Exemption	100% exemption on added property value from solar.	No increase in property taxes due to solar.	Contact local tax assessor.
Fix-Up Loan	Loan program for solar installation financing.	Provides accessible financing.	Homeowners in Minnesota.	Up to $75,000 loan, 20-year max term.
Solar Easements	Legal agreements to protect access to sunlight.	Ensures optimal solar panel performance.	Negotiated between property owners.	Written agreement required.

What are solar incentives, and why do they exist?

Making the leap to solar power can seem daunting, but a range of incentives are in place to ease the financial burden and make it a practical choice for homeowners and businesses alike. These programs, which include tax credits, rebates, and feed-in tariffs, are designed to significantly reduce the upfront costs and accelerate the return on investment for solar installations.

The existence of these incentives stems from a recognition that transitioning to renewable energy is crucial for a sustainable future. By offsetting the initial expenses, these programs make solar energy more accessible, encouraging wider adoption. For individuals, this translates to lower monthly energy bills and increased property value. For businesses, it means reduced operating costs and enhanced environmental credentials.

Beyond the immediate financial benefits, solar incentives are a strategic investment in long-term energy independence. By generating their own clean power, individuals and businesses can reduce their reliance on traditional energy grids, providing a buffer against fluctuating energy prices and potential disruptions.

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Julia Zaraeva

Author

Years of experience in translation and a love of nature help Julia find the right words to encourage going solar. She joined the team in 2023 and is happy to make her contribution to a greener future.