Welcome to the Ultimate Guide to Solar Panels 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 2020 **
Minnesota continues to develop solar friendly programs. Lawmakers recently adopted the IEEE solar interconnection standard, making it easier to connect your panels to the grid. Minnesota has been a leader in implementing innovative community solar programs, and the state's largest utility company, Xcel Energy, also offers a great low-income solar program.
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.
What you'll find on this page:
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.
Generate an accurate online solar estimate for your home
|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, Minnesota has the potential for good financial returns. The purchase option leads to the highest dollar-amount returns over time, but look a little closer. Taking a loan (the orange bars) and paying for the system over time means you'll never actually put down any of your own money.
That's what makes the solar loan option better. If you take a HELOC, you'll pay the system cost down monthly, but you still get a huge tax credit after the first year. Your payments over 15 years will actually be less than the savings and income your system will generate, and it'll mean that you're never putting any of your own money into the purchase. All you need is great credit—or the equity for a HELOC.
The option with the smallest savings is for a solar lease or PPA, which means you put $0 down on a rooftop solar system and pay monthly while you accumulate electricity bill savings over time. Leases and PPAs are an excellent option if you don't have any equity or cash to put down, and they still save you thousands.
Read more below about each of three very good options for solar in Minnesota!
How much can solar panels on roof save you?
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. You'll see a net return of almost $29,900 in 25 years if you pay up front. But it requires a significant up-front investment.
If you have equity in your home or good credit, you can get a solar loan or HELOC with an interest rate of 4% or less. It's like being able to start a business that is sure to succeed, just by having a roof. Read about loans above.
If you've got cash and you prefer to pay up front, you'll have to plunk down $22,875. 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 $29,900 in income. The reason this works is that electricity in Minnesota is EXPENSIVE. Solar offsets enough of it to save you about $1,333 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 when you pay up front for a 7.5-kW rooftop solar system:
- Installing a typical 7.5-kW solar system should start at about $22,875. 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 26% of $22,875, for a tax credit of $5948. Your total investment is now down to just $16,928.
- After the tax credit we subtract your first year’s energy savings, which we estimate to be $1,333. If you're an Xcel customer, add in another $715 from the Solar*Rewards program, and that reduces your cost after the first year to only $14,880.
- Your system will pay for itself in just 6 years, and over its 25-year life, you'll see a total net profit of $29,873. The internal rate of return for this investment is a stupendous 12.4%!
- And don't forget... your home's value just increased by around $14,700, too (your expected cost after solar incentives)!
- 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 205 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 $23,000 sitting around to pay for solar. As long as you have 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. Your tax savings will be huge in the first year—more than enough to offset the small difference between the loan payments and electric bill savings. All this means you'll never have to spend a cent on solar, and you'll still come out way ahead over 25 years.
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 $22,875, with a fixed rate of 4% or lower 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 a Minnesota solar purchase with a loan:
- Installing a typical 7.5-kW solar system should start at about $22,875. 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 $1,333, but your annual loan payments will be $2,099, meaning you would spend $766 on solar this year, but...
- You'll also see a huge tax break. The Feds give you 26% of the cost of your system back as a tax credit, which in this case is $5,948 You'll be paying over time but getting all the benefits up front!
- The electricity savings will continue for 25 years, while your loan payments will last only 15. By the end of the 25-year life of your panels, you'll come out $21,250 ahead.
- On top of the green that will stay in your pocket, your system will mean green for the environment, too. 205 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 7.5-kW solar system will save you just about $219 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 $8,620.
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!
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.
Calculate solar panel cost and savings for your specific home
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:
Minnesota's Renewable Portfolio Standard
31.5% by 2020 (For Xcel only)
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.
Given that it’s already 2020, a new RPS is sorely needed in Minnesota. While other utilities aside from XCel Energy need to source at least 26.5% of their electricity from clean sources by 2025, we’d like to see more ambition out of the Minnesota state legislature. Targets of at least 75% by 2030 are achievable, it’s time to set the bar higher here.
Minnesota's Solar carve-out and SRECs
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!
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.
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.
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.
Minnesota Solar Incentives
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 26% of your total system 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:
The availability of state solar incentives for residential solar systems was sourced from the Database of State Incentives for Renewables and Efficiency, utility company websites, and the state public utility commission.
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 capacity, 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|
Minnesota Solar 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.
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.
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.
Low-income Solar Programs
Grade: ALearn more about low-income solar programs available in the U.S.
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.