Your 2019 guide to getting solar panels for your home in Minnesota
This page is a complete guide to the complicated and sometimes confusing process of installing solar panels on your Minnesota home. Since there's a lot to consider, we've separated the page into sections to help you find what you are looking for. If you find this page useful, please share it with someone who might also find it interesting!
** What's new for 2019 **
Some unhappy campers have said that Minnesota has only two seasons: winter and road construction. However, that’s not quite true. The state has four distinct seasons, even though it isn’t uncommon to see snowfall during three of them. Nevertheless, Minnesota still gets a pretty fair amount of sunlight, even when it’s 20° below outside. Heck, these days, even the big energy companies are getting into solar in a big way, but residential customers still have the catbird’s seat.
Minnesota has a strong Renewables Portfolio standard, guaranteeing a commitment to renewable energy into the future. Solar panels here are tax exempt and there are even some rebates to help pay for them. On top of that Xcel will pay you a little extra for every kilowatt-hour of solar electricity you send their way.
Recently, Minnsota has been trying out community solar, after a 2013 law that specifically directed utility companies to set up ways for non-homeowners to invest in solar.
All told, the North Star State loves the sun, and going solar here can be a great financial decision, too! Read on to learn more about the ins and outs of solar in Minnesota.
Questions? Our network of solar experts are on call to assist you! Simply sign up for personalized solar help. You can get discounted pricing as low as $4,500/kW! This is paired with the strong Minnesota solar panel incentives below.
The Solar Strategy section is focused on the 3 ways of paying for solar in Minnesota, so you can decide which is best for you. We've created a tool that asks you a few questions and recommends whether you should pursue a solar lease, loan, or outright purchase. Then, we provide detailed analysis of how each works.
The Policy Information section contains all our latest research on the rules set by lawmakers and the Public Utilities Commission, which determine how easy it is to go solar in Minnesota. These policies and rules govern everything from renewable energy mandates to interconnection, and have a huge effect on the viability of solar.
Finally, the Solar Incentives section includes information about money-back rebates and grants, tax credits, and tax exemptions for going solar in Minnesota.
Click any of the boxes below to go to that section of the page, or scroll down to read the page in order.
|Your Minnesota Solar Strategy|
|Comparing Solar Investment Options|
|Paying Cash for Solar in Minnesota|
|Solar Loans in Minnesota|
|Solar PPAs in Minnesota|
|Solar Purchase Payback Time in Minnesota|
|Minnesota Solar Policy Information|
|Renewable Portfolio Standard (RPS)|
|RPS Solar Carve-Out|
Your Solar Strategy in Minnesota
Figuring out the best way to go solar in Minnesota can be a little daunting. From loans and leases to power-purchase agreements, there are a lot of options out there. To help you pick the one that might be best, we've created the handy decision tool below.
We'll ask you a few simple questions about you and your home. Once you're done, we'll recommend a good option. Further down this page, we provide cost estimates and example return-on-investment calculations for all the various options:
How to pay for solar panels in Minnesota
The chart above shows the 25-year returns for an investment in solar whether you choose to purchase a system with cash or pay over time with a loan or lease. As you can see, the purchase option leads to the highest dollar-amount returns over time, but look a little closer. Taking a solar loan or Home Equity Line of Credit (the orange bars) and paying for the system over time means you'll actually put down less of your own money, while reaping a big financial benefit in year 1.
That's because you're paying over time for the system, but you still get a 30% federal tax credit based on the entire cost. You'll start out ahead, so your payments over 15 years will have less impact on you than plunking down a big pile of money up front. All you need is equity or great credit.
The option with the smallest savings is for a solar Power-Purchase Agreement, or PPA, which means you put $0 down on a rooftop solar system and pay monthly while you accumulate electricity bill savings over time. PPAs are an excellent option if you don't have any equity or cash to put down, and they still save you money.
Read more below about each of three very good options for solar in Minnesota!
Option 1: Paying cash for solar
An outright purchase used to be the only way to get solar, and it's still the option that provides the "biggest" financial returns. The reason we put "biggest" in quotes here is because it's technically true, but based on percent return for the money, a loan is a better option.
If you have equity in your home or can get a large loan with an interest rate of around 4%, that's the option to go with. It's like being able to start a business that is sure to succeed, just by having a roof. Read about loans below.
If you've got cash and you prefer to pay up front, you'll have to plunk down $18,750. But by the end of year 1, incentives and energy savings will erase a bunch of it. Over 25 years, your system will have produced about $18,750 in income, after your system cost is paid back. The reason this works is that solar offsets your electricity costs—enough to save you about $750 in year 1, and it just goes up from there. As the electric company raises rates, you save more and more, and more...
Here’s how the numbers pencil out for a 5-kW rooftop solar system in Xcel's service territory:
- Installing a typical 5kW solar system should start at about $18,750. That's cheaper than solar has ever been, but it still might seem like a big investment. Don’t worry, because after tax breaks and energy savings, your first-year costs will be considerably less than that.
- The Feds calculate their incentive based on actual out of pocket costs, so take 30% of $20,000, for a tax credit of $5,625.
- After the tax credit we subtract your first year’s energy savings, which we estimate to be $749. That reduces your cost after the first year to only $12,376.
- But wait, there's more! On top of the electric bill savings, Xcel will pay you $.08/kWh! Your system will produce 5,850 kWh per year, so you'll end up with $499 more from Xcel, bringing your costs down to $11,877. And those extra payments keep going for 10 long years!
- Your system will pay for itself with electric bill savings in 11 years, and you'll see a total net profit of $16,167 in our 25-year estimate period. The internal rate of return for this investment is a solid 8.8%. Better and more sure than the stock market!
- And don't forget... your home's value just increased by more than $18,000, too (your expected annual electricity savings over 20 years).
- In addition to all that cash (and home value), you’ve created some green for the earth as well by not using electricity from fossil fuels. It's like planting 104 trees a year, every year your solar power system is humming.
Keep in mind, the numbers above are based on an average home in Minnesota. If you're ready for a custom quote for a solar panel system, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Option 2: Using a loan to pay for solar
You don't need $19,000 sitting around to pay for solar. As long as you have good credit or equity in your home, you can still own solar panels and reap all the benefits. Heck, even if you do have the cash, getting a loan to pay for solar is by far the best option when it comes to percentage return on investment.
That’s because, in Minnesota, using a loan to pay for solar is like investing in a business that's sure to succeed, and also earns you a tax break. That's right: a HUGE tax break!. You'll come out thousands ahead this year, and you'll still see a handsome profit over the 25-year life of your system.
A solar purchase like this will make sense for you if the following is true about you and your current situation:
- You can qualify for a solar loan or home-equity line of credit (HELOC) for $18,750, with a fixed rate of 4% or so and a 15-year repayment period. Don't be put off if you're offered a higher rate. It just means a tiny bit less of the thousands of dollars you'll make with solar.
- You love making money without much risk.
Here’s how the numbers pencil out for an Xcel customer who makes a solar purchase with a loan:
- Installing a typical 5-kW solar system should start at about $18,750. That's how big your loan will need to be to cover it.
- The electricity you'll save in the first year of operation would have cost $749, but your annual loan payments will be $1,664, meaning you'll spend $915 on solar this year, but...
- You'll also see a huge tax break. The Feds give you 30% of the cost of your system back as a tax credit, which in this case is $5,625. You'll be paying over time but getting the benefits up front!
- But wait, there's more! On top of the electric bill savings, Xcel will pay you $.08/kWh! Your system will produce 6,240 kWh per year, so you'll end up with $499 more. And those extra payments keep going for 10 long years!
- All those incentives mean you'll come out $5,208 ahead after year 1. Your loan payments will be about $76/month more than your energy bill savings, but that difference will get small as the utility company raises rates every year.
- By the time you've paid off your loan in 2031, you'll see yearly savings of greater than $1,000. After 25 years, your total profit will be $9,952!
- On top of the green that will stay in your pocket, your system will mean green for the environment, too. 104 trees-worth, every year!
Keep in mind, the numbers above are based on an average home in Minnesota. If you're ready for a custom quote for a solar loan, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Option 3: Buying the electricity, not the panels with a Power Purchase Agreement (PPA)
A PPA is a great way to go solar if you haven't got stacks of cash or oodles of equity in your home. In Minnesota, it's possible to get solar panels for $0-down and see savings over 20 years!
The North Star State doesn't quite have the financial benefits of states with more sunshine or higher electricity prices—or both. For now, getting a PPA for a 5-kW solar system will save you just about $110 per year, which might not sound like a great deal, but as the utility company raises rates, you will start to see monthly savings. Over 20 years, our estimate shows a total savings of $3,766.
So you can get free solar panels on your house, which will mean you're greatly reducing greenhouse gas emissions and helping the environment. The panels will be installed and maintained by professionals, and all you have to do is brag to the Andersons down the street about your green habits!
Here's more about how a solar PPA works:
Keep in mind, the numbers above are based on an average home in Minnesota. If you're ready for a custom quote for a solar PPA, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Minnesota Solar Policy Information
Ever wonder why solar seems to be everywhere in some states, but not in others? We did too.
State legislatures and public utilities commissions can enact rules to make solar power accessible for everyone. Favorable rules explain why some of the cloudiest states—New York, New Jersey, and Connecticut, are doing so well with solar, and yet some of those with the most natural solar resources—like Alabama, Mississippi, and Georgia—are doing so poorly.
Below is important information about the public policy, rules, and economic reasons that affect your ability to go solar here in Minnesota:
31.5% by 2020 (For Xcel only)
A Renewables Portfolio Standard (“RPS”) is a law or other piece of regulation that mandates that a certain percentage of a state’s energy production comes from renewable resources by specified target dates. A strong RPS is important because it forces utility companies to promote conversion to renewable energy. That generally means free money for homeowners in the form of solar power rebates and performance payments when they switch to solar.
Minnesota’s RPS sets different goals for Xcel (the state’s largest electric company) and all other utilities. Xcel is required to generate 31.5% of its electricity from renewable resources by 2020. The current minimum is 18%, which will increase to 25% by the end of 2016 before reaching the final 31.5% mark by the end of 2020.
All other Minnesota utilities are required to produce 25% of their energy from renewable sources by 2025, and investor-owned utilities must produce an additional 1.5% of energy from solar alone. The current minimum is 12%, which rises to 17% in 2016 and 20% in 2020, before making the final jump to 25% by December 31, 2025.
Those figures are solid, though definitely not the best we’ve seen. The public utility targets get a boost by including a solar-specific carve out of 1.5% of total retail electric sales.
What's an RPS? Your state legislature paves the way for strong solar energy incentives to flourish by setting standards for renewable energy generation within their territories. Those standards are called the state’s renewable portfolio standard (RPS). If utility companies do not meet these standards, they must pay alternative compliance fees directly to the state. Many utilities then determine the best ways to source their energy from renewable sources that are less expensive than this fee.
An RPS is a mandate that says "Hey utilities! Y'all now have to make a certain percentage of your electricity from renewable sources. If not, you'll have to pay us huge fines." The consequences are good, because utilities usually try to meet these RPS standards by creating solar power incentives for you, the homeowner. Read more about Renewable Portfolio Standards.
RPS solar carve out
1.5% by 2020
In 2013, the Minnesota state legislature enacted H.F. 729, which requires Xcel and all other public utilities to generate 1.5% of their power from solar installations by 2020. 10% of that energy must come from small-scale solar installations of 20 kW capacity or less, meaning the utility companies have an incentive to encourage homeowners to contribute power toward meeting that goal!
What's a solar set aside? A solar set aside guarantees a specific portion of the overall renewable energy mix generated comes from the sun. For those states with progressive standards, high alternative compliance payments, and clear solar carve outs, the faster those areas become ripe for solar.
Some states have higher alternative compliance fees than others, and some states have more progressive alternative energy standards and deadlines than others do.
For instance, New Jersey has an overall RPS of 22.5% by the year 2021. That requires local utilities to source 22.5% of their energy mix from renewable sources by the year 2021. Pretty good. However, New Jersey also has a specific solar set aside of 4.1% by 2028. That’s the type of firm commitment which really gets the industry rolling forward. No wonder why New Jersey is one of the hottest solar markets right now!
Minnesota Electricity Prices
Minnesota electricity consumers pay an average of 13 cents per kilowatt-hour of electricity. That’s pretty close to the national average of 13.6 cents/kWh, and nowhere near as expensive as some east coast states. Minnesotans have been enjoying the historically-low prices for natural gas and coal, but these resources have long-term environmental costs and are unsustainable over the long term. As fossil fuels become more scarce and energy prices from traditional sources start to rise, electricity rates are going to skyrocket. When that happens, homeowners who take advantage of state solar benefits programs now will be very happy they switched to solar power.
Why are electricity prices so important? Because that is what solar power is directly competing against. The cost to produce power with solar is relatively constant (of course how much sun hits your area has an effect), so if you are paying $0.40 per watt for power, then you make FOUR TIMES AS MUCH as the guy or girl paying $0.10 per watt electricity.
The caveat here is that if the $0.10 per watt person has a HUGE rebate, they may be better off than the $0.40 per watt person. Because of that, states without any renewable standards tend to be heavily reliant on cheap coal for electricity, and also have very low electricity prices. When electricity prices are artificially low, that hinders the ability of solar energy to achieve meaningful payback in the state.
Minnesota Net Metering
Net Metering requires your utility to monitor how much energy your solar power system produces and how much energy you actually consume. If you run a surplus, you get credit for it.
Minnesota’s net metering law applies to all utilities, and requires them to provide net metering for all solar power systems less than 40 kW. Overall we gave net metering in Minnesota a weak grade because of that size limitation. The cap should be raised significantly or removed altogether to allow commercial and industrial customers to meet on-site generation needs. That said, the 40-kW limit should cover virtually all residential solar systems, which typically come in somewhere around 5-kW for a single-family home.
While commercial and industrial customers may not be able to take advantage of net metering, it’s a pretty sweet deal for your residential system. You get compensation for any surplus you generate at the “average retail utility energy rate.” Minnesota has a specific formula for determining what that is, but it basically amounts to the same as the retail rate you pay every month for electricity. Compensation may come as either actual payment (i.e. a check) or a credit on your future bills.
What is net metering? Net metering is the billing arrangement where you can sell excess electricity back to your utility for equal the amount you are charged to consume it. The more customer friendly net metering policies, the higher the grade.
The grade here specifically reflects individual solar system capacity, caps on program capacity limits, restrictions on “rollover” of kWh from one month to the next (yep just like cell phone minutes), metering issues (like charges for new meters), Renewable Energy Credit (REC) ownership, eligible customers and technology (the more renewables the better), being able to aggregate meters across the property for net metering, and safe harbor provisions to protect customers from solar tariff changes.
Minnesota Interconnection Rules
Minnesota’s interconnection rules aren’t as good as those in other states, because homeowners with solar installations are required to purchase additional insurance and have an external disconnect switch on their system, which adds cost in the end. To drive additional solar adoption among residential customers, Minnesota could improve this area by adopting new standards more in-line with the best solar states.
Interconnection rules are a little technical, but they basically allow you to “plug in” to the electric grid with solar panels on your roof. The more complex, out of date, or nonsensical the state rules are for plugging into the grid, the lower the grade.
Specifically, the grade reflects what technologies are eligible, individual system capacity, removing interconnection process complexity for smaller systems, interconnection timelines and charges, engineering charges, prohibiting the requirement of unnecessary external disconnects, certification, spot interconnection vs. wide area interconnection, technical screens, friendliness of legalese, insurance requirements, dispute resolution, and rule coverage.
Solar Incentives in Minnesota
Next to high electricity prices and net metering, solar incentives have traditionally been the most important factor for whether home solar power makes financial sense in a state. In the past, some states with otherwise lousy policy had tremendous incentives that drove down the up-front cost of going solar so much that homeowners could save oodles of money even without net metering or a good RPS.
These days, the big incentive most people can get is the Federal Solar Tax Credit that earns you 30% of your costs back after just 1 year. State incentives play less of a role than in the past, but some really good ones are still out there, ready to help homeowners go solar and save money before you know it.
Let's see how Minnesota measures up:
Minnesota Solar Power Rebates
Because Minnesota has such a strong RPS, there are a number of great utility rebates offered for solar. Most are paid as a simple calculation of dollars-per-kilowatt of generating capactity, but there's one that's different.
Minnesota Power offers a solar rebate program based on your first-year estimated production. The current incentive is $.83 per kilowatt-hour (kWh), and with an average 5-kW system pumping out about 6,200 kWh, you can expect around $5,150 back as a rebate. That's a great incentive, but they disappear fast, so get in touch with a solar expert near you today and get the ball rolling on that rebate!
|Utility Company||Rebate amount||Cap|
|Brainerd Public Utilities||$500/kw||$2,500|
|Minnesota Power||$.83/kWh (est. 1st year production)||No maximum|
|Moorhead Public Service Utility||$1,500/kw||$30,000 total program budget|
|New Ulm Public Utilities||$1,000/kw||$2,000|
|Owatanna Public Utilities||$500/kw||$5,000|
|Rochester Public Utilities||$500/kw||$5,000|
How do solar rebates work? Similar to getting a rebate card from your local big box store for a dishwasher purchase, state legislatures also provide rebates for solar panel purchases to spur on investment and create new jobs. If you purchase the solar panel system yourself, you qualify for this free cash, which many times is a lump payment back to you. Some solar installers like to take this amount directly off the total installed price, and they'll handle the paperwork for you to make things a lot less complex.
The availability of state and utility rebates were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The better the rebates, the higher the grade.
Minnesota Solar Power Tax Credits
Minnesota does not currently offer any tax credits for solar power. With all those strong utility rebates available, the legislature is missing a golden opportunity to piggyback onto the existing programs and drive even more conversion to renewable energy.
About state solar tax credits: State tax credits are not technically free money. However, they are 'credits' and not 'deductions' which means that if you have the tax appetite to take advantage of them, then they can be a 1-to-1 dollar amount off your taxes instead of a fraction of the cost of the system. So that means they can be an important factor to consider. In certain circumstances, state tax credits can provide a very powerful incentive for people to go solar.
(Keep in mind, we are not tax professionals and give no tax advice so please consult a professional before acting on anything we say related to taxes)
The availability of personal tax credits for solar energy were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the tax credit amount, the higher the grade.
Solar Power Performance Payments
$0.08/kWh for 10 years
Xcel energy offers a great incentive program called "Solar*Rewards" that pays 8 cents per kWh of generation, in addition to any energy bill savings you gain from solar. The program allows you to install a solar system sized to meet 120% of your average annual usage, and you can increase that further if you plan to buy an electric car that you'll be charging at home.
If you're an Xcel customer in MN (that's most of you!), this program can help you save hundreds of dollars per year on top of energy bill savings, so connect with a local solar expert today and see how much you can save!
Explanation of performance payments: Performance payments represent a big chunk of the financial rationale for going solar, and in many instances they make your decision a wise one. For certain states, if you’ve got solar panels on your roof, not only will you be cutting your electric bill down to size, but you'll be getting paid additional cash from your utility company. Pretty awesome, huh? Not only are you generating electricity for yourself, freezing your own popsicles with sun, and feeling like you’re doing something smart for your children or any of the other 4 reasons people go solar, but you are getting PAID!
Utility companies are paying people with solar panels on their roofs because their states say they have to, otherwise they will pay a fee. Therefore, the payment amount to homeowners is typically a little bit less than the amount they would be billed for by the state. For states with these alternative compliance fees, Solar Renewable Energy Credit (SREC) exchanges have popped up. In the above chart, we outlined an estimate of yearly payments a homeowner might expect from the utility company for the SREC credits from their solar energy system.
Expected SREC payments were calculated by using the latest trade values in the SRECtrade database. The availability of feed-in tariffs were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the expected monthly payments, the higher the grade.
We've got a great article if you like to read more about what SRECs are and how to earn them.
Property Tax Exemption
A newly-installed solar power system is 100% exempt from associated property taxes. When a solar power system is installed, your home value rises significantly – twenty times estimated annual electricity savings. With the Minnesota property tax exemption in place, you’ll never pay any taxes on that home value jump.
About solar property tax exemptions: Property tax exemption status is a pretty big factor when putting together your investment considerations. Some argue that solar power adds approximately 20 times your annual electricity bill savings (if you own the system and are not leasing). Other studies seem to indicate a home price premium about equal to solar panel cost, minus any incentives like the federal solar tax credit.
For many average-sized solar power systems on a house, that can mean adding $20,000 to your home value. And if you don't believe us, believe the bean counters: Many banks and solar financing companies now offer traditional style equity-based home loans for installing solar. An additional $20,000 in property tax basis in many states amounts to a big chunk of change owed back to the state. However, many states have complete exemptions from added taxes when you install solar on your home!
The availability of a property tax exemption for solar energy was sourced from the Database of State Incentives for Renewables and Energy Efficiency. Grades in this category are basically all-or-nothing. Either you got it or you don't. Thankfully, many states have "got it.".
Sales Tax Exemption
The purchase of your solar power system in Minnesota is 100% exempt from sales tax. That saves you almost 7% up front.
What's the deal with solar power sales tax exemptions? When states give you a sales tax break on solar, we notice. You should too. State sales tax exemption status for the purchase of solar energy systems were sourced from the Database of State Incentives for Renewables and Energy Efficiency. Sales tax exemptions, if present, were all 100%. A handful of states are completely exempt from sales tax regardless, and therefore received ‘A’ grades by default (OR, DE, MT, AK, and NH).
The consensus on Minnesota solar power rebates and incentives
With some utility-backed solar power rebates, the 30% federal solar tax credit, and the potential for big benefits from using Minnesota-made equipment, Minnesota offers a low initial cost, leading to a solid overall payback timeframe. While it would be much preferable to see a direct rebate program from Xcel, it is possible to design and build a solar system in any part of the state that will be paying you dividends for years to come. We respect the ways Minnesota is encouraging solar enough to give it an “A,” especially with a strong RPS ensuring that those solar payments and utility company rebates should continue.
And of course, if you’d like some personalized assistance, get in touch with us and we’ll have an expert contact you in a jiffy.