Minnesota Solar Incentives in 2024: A Complete Guide to Tax Credits, Exemptions, and Savings

If you're a Minnesota resident thinking about going solar, you're in luck. Minnesota solar incentives make installing solar panel systems not only an environmentally friendly choice but also a financially smart one. With a range of state and federal programs designed to offset the costs, going solar has never been more accessible.

From tax credits to net metering, these incentives can significantly reduce the upfront investment while offering long-term savings. Let's delve into the various Minnesota solar power incentives available and see how they can help you save on your solar installation.

What Are the Available Minnesota Solar Incentives?

Minnesota offers a variety of solar incentives that make investing in renewable energy more affordable for both homeowners and businesses. By leveraging these incentives, you can significantly lower the upfront costs of installing solar panels and maximize your long-term savings. Here's an overview of the key solar panels Minnesota incentives available:

Residential Clean Energy Credit

The Residential Clean Energy Credit, formerly known as the Federal Investment Tax Credit (ITC), is one of the most valuable incentives available to homeowners looking to invest in solar energy in Minnesota and across the U.S. If you're searching Minnesota commercial solar incentives for your business, the ITC applies as well.

Under the ITC, individuals who install a solar photovoltaic (PV) system now can claim a tax credit worth 30% of the total cost of their system on their federal income taxes. This credit applies to both the equipment and installation costs.

To enhance the overall benefits of solar panels or for going off-grid, adding a battery storage system to your solar setup is crucial. It allows you to store the excess energy produced during peak sunlight hours, which can then be used at night, on cloudy days, or during power outages. And the great news is that battery systems with a storage capacity of 3 kWh or more are eligible for the ITC, meaning that you can claim the 30% tax credit on batteries as well.

One excellent example of a solar system with battery storage that qualifies for the ITC is the Anker SOLIX F3800 + Expansion Battery + 2× 400W Solar Panel + Home Backup Kit.

The base F3800 portable power station features a battery capacity of 3.84 kWh, but you can easily scale it up to 26.9 kWh with additional Anker SOLIX BP3800 batteries, allowing you to customize the system based on your energy needs. Built with LiFePO4 batteries, known for their long lifespan, and covered by a 5-year warranty, this kit ensures reliable energy storage for years to come.

The system is designed for easy integration with home appliances, offering 6,000W and 120V/240V split-phase output, making it capable of powering even the most energy-intensive appliances. The kit's plug-and-play design allows for straightforward installation, and it offers intelligent monitoring via the Anker app, with Bluetooth and Wi-Fi connectivity.

Here's what more you need to know about the ITC:

• The 30% ITC was enhanced and extended through 2032 by the Inflation Reduction Act (IRA). For those who install a system after 2032, the credit will gradually decrease: it drops to 26% in 2033 and 22% in 2034.
• To claim the credit, you'll need to file IRS Form 5695 when submitting your federal taxes in the year you install the solar system. Just keep in mind that you must own your solar system outright, whether through a cash purchase or a solar loan, to be eligible. Leased systems do not qualify for the ITC.
• Another important consideration is that the ITC is a tax credit, not a rebate, meaning it directly reduces the amount of federal taxes you owe. If your tax liability is not large enough to use the full credit in one year, you can carry over any unused portion to future tax years until 2034, when the credit is set to expire.

Solar Sales Tax Exemption

Minnesota also offers a 100% sales tax exemption for the purchase of solar energy systems. This means that when you purchase solar panels, inverters, and other necessary equipment for your solar installation, you are exempt from paying the state's sales tax.

Given that Minnesota's sales tax is currently 6.875%, this exemption can lead to considerable savings on the overall cost of your solar energy system. Your solar installation company will take care of completing the Minnesota Department of Revenue's Certificate of Exemption for you, so you won't need to do anything to claim this tax break.

Net Metering Program

Minnesota's Net Metering Program is another excellent incentive for solar owners. This program allows you to send excess electricity your solar panels generate back to the grid and receive credits on your utility bills. The energy credits can be used to offset future electricity usage when your solar panels aren't producing enough energy, such as during cloudy days or at night.

For residential systems up to 40 kW (which is virtually all home solar systems), utility companies compensate for the extra electricity at the Average Retail Utility Energy Rate, which is slightly less than what you pay per kWh. If your system generates more energy than you consume over the year, some utilities may even compensate you with a check or bill credits for the surplus power.

This program is particularly beneficial during the summer months when solar panels often produce more energy due to longer daylight hours. Over time, net metering can significantly reduce your energy costs and shorten the payback period for your solar investment.

Property Tax Exemption

Installing solar panels on your property in Minnesota can increase its value, but fortunately, the state offers a 100% property tax exemption for solar energy systems. This means that even though your property value may rise due to the addition of solar panels, you won't see an increase in your property taxes.

Local Solar Incentives

In addition to state and federal incentives, Minnesota residents can also benefit from local solar incentives offered by specific utility companies and municipalities. These programs provide additional financial assistance to help offset the cost of installing solar systems. Here are some examples:

• Xcel Energy Solar*Rewards Program:This performance-based incentive offers homeowners in Xcel Energy's service area an annual rebate of $0.02 per kilowatt-hour (kWh) for the electricity generated by their solar system, for up to 10 years.
• Minnesota Power's SolarSense Program:This program provides a one-time rebate to homeowners installing solar photovoltaic (PV) systems, reducing 60% of the upfront installation costs up to $5,000. Rebates are awarded through a lottery system, and funding is limited, so early application is recommended.
• Local Utility Rebates:Smaller utilities, such as Rochester Public Utilities and Dakota Electric, also offer one-time solar rebates ranging from $500 per system to help with installation costs.

What Are the Estimated Solar Savings in Minnesota? 

Now that you understand the various solar incentives available in Minnesota, you might be wondering exactly how much you can save when investing in a solar panel system. Let's take a closer look:

As of September 2024, the average cost of a solar panel system in Minnesota is approximately $3.09 per watt. This means for a typical 5 kW system, the total upfront installation cost is around $15,435 before any incentives. As we've explored, the cost can drop significantly once the 30% Federal Investment Tax Credit (ITC) is applied.

To give you a clearer idea, here's a breakdown of average solar costs by system size before and after applying the ITC: 

In addition to upfront savings from incentives, long-term energy bill reductions are where you can see the most impact. On average, solar panels in Minnesota can reduce monthly electric bills by 50% to 75%.

So, if your household spends around $100 to $120 per month on electricity, this equates to annual savings of about $900 to $1,400. Over the lifetime of a solar panel system (usually 25-30 years), these savings can accumulate to between $25,000 and $35,000.

Conclusion

As we've seen, Minnesota solar incentives make switching to solar energy a practical and cost-effective decision for homeowners and businesses alike. With options like the Residential Clean Energy Credit (ITC), sales tax and property tax exemptions, and net metering, there are multiple ways to lower installation costs and boost your long-term savings. Whether you're just beginning to explore solar power or ready to make the leap, understanding these programs is crucial to maximizing your investment. Take advantage of these Minnesota solar incentives today and start enjoying cleaner, more affordable energy for years to come.

FAQs

Is solar in Minnesota worth it?

Yes, solar energy is worth it in Minnesota, thanks to the numerous state and federal incentives that reduce the cost of installation. With the potential for significant long-term savings on energy bills and the added benefit of increasing your property's value, solar energy is a wise investment for many Minnesota residents.

How much does it cost to install solar panels in Minnesota?

The cost of installing solar panels in Minnesota can vary based on the size and type of the system, as well as the specific equipment used. On average, you can expect to pay between $10,000 and $30,000 for a solar energy system before incentives. However, with Minnesota solar incentives, such as tax credits and rebates, the net cost can be significantly lower.

How long does it take for solar panels to pay for themselves in Minnesota?

The payback period for solar panels in Minnesota typically ranges from 9 to 15 years, with an average of 12 years. This timeframe can vary depending on the size of the system, the amount of sunlight your location receives, and the specific incentives you qualify for.