Minnesota solar 101: must read before you buy solar panels

Last updated 12.01.21

Minnesota State 46 solar panels available

  • $2.24 / W Average gross price of a solar power system as of October 2023
  • 10 years Average system payback period
  • $39 937 Average savings from going solar in Minnesota
  • 8 ¢ / kWh Levelized cost of solar energy
  • 5.17 kW Recommended system size
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Solar laws, incentives and rebates in Minnesota you need to know

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.

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 additional $300 to $1,000 a year trading RECs

Renewable Energy Credits are certificates granted to any person or entity upon generation of each MWh 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 10 kW 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 up to $3,000 with solar rebate programs

Minnesota doesn’t have an initiative encompassing the whole state. However, some utility companies provide nice rebates for homeowners:

  • Dakota Electric Association allows you to claim $0.20 per watt of installed capacity, but no more than $4,000. The payment process is based on the production of your system as recorded by the company’s meter. You will get $0.08 for every kWh generated during the following ten years or until the rebate amount is exhausted.
  • Xcel Energy will pay its customers $0.07 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. The company will pay $0.56 for every kWh of estimated production in the first year, but no more than $10,000 or 60% of the system’s costs. To qualify for the program, your system must be installed by a NABCEP or UL-certified professional that must offer a 2 year workmanship warranty. The panels must have at least a 20 year performance warranty and the inverters at least 10. The funds are allocated on a first-come, first-served basis. The program begins applications 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 2 kW 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 these additional 6.875% 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

A solar PV system installed in a home increases its value by about 4%, says 2019 Zillow report. In Minnesota you don't have to pay any extra taxes. According to the 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.

Get a Fix-Up Loan at 4.99% interest rate 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 $50,000 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.

Install your solar panels in Minnesota with no worries

It is legal to install solar panels on your house in Minnesota. However, there is no statewide legislation that makes it unlawful to restrict installation of solar PV systems, so it’s best to contact your HOA or study its declaration and rules to find out more. You may have to submit your project for approval before changing the exterior of your house. The board may ask you to hide the system from view, reduce the number of panels or just reject your proposal.

Solar panels help Minnesota survive storms

Minnesota’s most frequent natural disasters include floods, wildfires and storms. These events inevitably damage the infrastructure, interfering with both generating plants and power lines. Your PV modules are designed to handle most hurricanes and hail, meaning you will have a supply of energy in case of a blackout. In 2013, weekend storms caused more than half a million power outages across the state. Often, it takes much more than a few hours to restore power. The Environmental Protection Agency says extreme weather events are becoming more frequent and powerful, adding to the list of reasons to go solar.

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