How Much Do Solar Panels Cost in Minnesota? (2023 Savings Guide)
By Karsten Neumeister /
In this EcoWatch guide to Minnesota’s solar incentives, we’ll answer the following questions:
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Yes, Minnesota offers several inciting benefits for homeowners who install solar panels. Depending on where you live, you may be eligible for additional solar rebates to further save money on solar panels.
The cost of going solar in Minnesota is roughly $22,720 for the average 8 kilowatt (kW) system or $2.84 per watt. While the per-watt price is more expensive than the national average ($2.66 per watt), Minnesotans tend to use less energy than average, so they save money by installing a smaller solar project that can still meet all their energy needs.
Having low energy needs, coupled with various Minnesota solar incentives, can help you save a lot of money on solar panels in the North Star State.
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Below is a glance at some of the best solar incentives available in Minnesota. As you read on, you’ll learn more about each solar incentive and how to claim it.
Note: Most of these incentives are only available if you pay for your solar panels in cash (or finance them with a loan). If you rent your solar panels with a solar lease or power purchase agreement (PPA), you’ll be ineligible for most solar benefits.
Solar Incentives in Minnesota | Incentive Type | Description | Occurrence | Estimated Dollar Amount You Can Receive |
Federal Solar Investment Tax Credit (ITC) | Federal | Residential solar panels purchased and installed in Minnesota by December 31, 2032, are eligible for a tax credit worth 30% of the total system cost | One time: Federal tax credit is applied when you file your taxes during the year your system is installed. If the credit is greater than what you owe in taxes, it can roll over up to five years | In Minnesota, the average credit is a massive $6,816 |
Solar Energy Sales Tax Exemption | State | Solar electric and heating systems are exempt from Minnesota’s state sales tax of 6.88% | One time: Tax savings received upon solar equipment purchase | Roughly $1,560 based on the average solar energy system cost and sales tax rate of 6.88% (varies based on location) |
Wind and Solar-Electric (PV) Systems Exemption | State | Wind facilities and photovoltaic (PV) devices are exempt from Minnesota’s property tax | Ongoing: The value of your solar PV system will never be assessed in your property taxes | Roughly $245 annual savings based on statewide property tax increase rate of 1.05% |
Net metering | Local | Solar users can receive energy bill credits for the excess energy their panels produce and send to the local grid | Ongoing: You’ll be compensated for the excess solar power your panels send to the grid | Varies based on utility |
Local incentives | Local | Certain Minnesota utilities offer home solar incentives and rebates | Varies | Varies based on utility and location |
The federal solar Investment Tax Credit (ITC) is the biggest solar incentive available to Minnesotans, worth 30% of the cost of your solar photovoltaic system. Because the average solar panel system costs $22,720, you can expect the ITC savings to be around $6,816.
Unfortunately, the ITC doesn’t come as a check for you to deposit. Instead, it’s a tax credit value that you can use to deduct off of the federal taxes you owe starting the tax year after your system is installed. If you don’t owe as much as 30% of your solar investment cost in taxes, the ITC rolls over for up to five years.
Thanks to the passage of the Inflation Reduction Act in 2022, the ITC is available to Minnesotans — and all Americans who install solar — at the following rate schedule:
We recommend working with one of the best solar companies in Minnesota, as well as a trusted tax professional, for guidance on how to claim the ITC.
However, these are the steps to claim the ITC from the federal government’s website:
The ITC is the biggest solar incentive in Minnesota, worth 30% of your total system cost. That comes out to $6,816 for the average-priced 8 kW system.
The downside to the ITC is that it’s not going to be a valuable solar benefit for Minnesota taxpayers that don’t owe thousands of dollars in federal taxes over a five-year period.
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Minnesota law exempts solar electric and solar heating systems from the state’s 6.88% sales tax. That could lead to tax savings of roughly $1,560 based on average solar system prices in Minnesota.
You don’t have to take any extra steps to claim the sales tax exemption on your solar power system in Minnesota. The solar company you’re purchasing your equipment from should already have taxes removed, so if you see any type of “sales tax” on your solar invoice, be sure to inquire about what it means.
We think it’s awesome that Minnesota removes the sales tax from renewable energy systems. Considering that the state tax is nearly 7%, it leads to more than a thousand dollars in savings for home solar panels and far bigger solar savings for commercial solar panel installations.
Your residential property taxes won’t increase after you install solar panels in Minnesota, even though solar increases the value of your home.
Property owners will save about $245 a year based on the average cost of a solar panel system in Minnesota and the statewide property tax increase rate of 1.05%.1
Just like the sales tax exemption, claiming the solar system property tax exemption in Minnesota is automatic — you won’t have to do anything. The tax assessor will know not to include your solar panels when determining property value.
Most home upgrades that increase your property value also increase your property taxes, so we love to see Minnesota encourage homeowners to install solar by taking away the tax increase.
Not every state offers a property tax exemption for solar systems, and some only offer the exemption for a set number of years (usually around five). So we think this is a great solar benefit specifically for Minnesotans.
Net metering is a process in which you earn energy credits or, in some cases, compensation for the excess energy your solar panels produce and send back to the grid.
You can then use those energy credits to pay for the electricity you use from the grid when your panels aren’t producing, further lowering your electric bill. Or, depending on your utility, you can get a cash payout for your energy contribution.
Minnesota has one of the oldest net metering laws in the U.S., enacted way back in 1983. As the law stands, all energy companies (investor-owned utilities, or IOUs), municipal utilities and electric cooperatives) have to offer some form of net metering. That’s already an improvement compared to other states that only force IOUs to offer it.2
In Minnesota, a utility will either compensate or credit you for your solar energy, depending on what type of contract you sign. The rate at which you’re paid for your electricity depends on the following factors:
If your utility is an IOU, you’ll earn credits for your solar energy at the utilities “avoided cost rate.” If you have a municipal or cooperative, you’ll have a year to use or cash out your credits before they expire.
In 2013, Minnesota passed a law that instead allows IOUs to apply a Value of Solar (VOS) tariff to “quantify the value of distributed PV electricity.”4 However, as of January 2023, no Minnesota utility has chosen to implement it.
The process of enrolling in net metering in Minnesota will look different depending on your utility company. But don’t worry, if you work with one of the best solar companies in Minnesota, the installers will help you with the process of grid interconnection.
Below are some helpful net metering enrollment resources based on your utility:
Net metering laws in Minnesota are far more beneficial compared to a lot of states, making going solar far more worth it in the North Star State. We love that MN forces all energy companies to offer net metering and, as of January 2023, all utilities credit solar users at a clear, predetermined rate.
Depending on where you live in Minnesota and who your utility provider is, you might be eligible for additional local solar incentives and solar financing options. Below are some additional local incentives for which you might qualify:
Don’t see your utility provider on this list? Reach out to your local utility company to see what solar and energy efficiency incentives are available for your Minnesota home.
At this point we covered all the incentives, here are our top-ranked incentives…
Minnesota is sort of a funny state when it comes to Renewable Energy Credits (RECs) and Solar Renewable Energy Credits (SRECs). While the state does not have an independent SREC market, Minnesotans can still earn and sell these credits in the state.
If you’re unfamiliar with SRECs, here’s how they works: to meet renewable portfolio standards (RPS), some states allow solar users to earn SRECs for every megawatt-hour of energy their panels produce. Utilities can buy those credits from the solar homeowner to meet their renewable energy benchmarks. Typically, one REC or SREC is equal to one megawatt-hour (1,000 kWh) of energy production.
In Minnesota, the customer owns the RECs or SRECs generated by their solar system unless they have agreed to sell or assign it to someone else. Some Minnesota utility incentive programs — like that offered by Xcel Energy — include a transfer of these SRECs when set up for solar interconnection.
SRECs allow utilities to meet Minnesota’s RPS goals, which are pretty lofty at the moment (we’ll discuss in the next section).
Yes, SRECs are taxable both on federal and state returns. However, because Minnesota doesn’t have an active SREC market, we highly recommend working with a trusted tax professional to properly assess your SREC tax payments.
While Minnesota isn’t exactly known for its abundance of sunshine, the state has some pretty ambitious RPS goals which have encouraged its utilities to offer solar-friendly policies.
Currently, Minnesota’s RPS goals require meeting the following percentages by 2025:
The standard also requires 10% of retail electric sales to come from solar by 2030. As of mid-2022 that percentage was only at 3.6%, so Minnesota certainly has its work cut out for it.5
With that said, we don’t anticipate Minnesota will lose any of its solar incentives or rebates anytime soon. But that could change come 2030. To get the most out of your solar panel investment in Minnesota and capitalize on all of its generous benefits, we recommend installing solar panels as soon as possible.
The EcoWatch team gets questions daily from Minnesota residents about the rebate programs and incentives available to them when converting to solar power. Below are some of the questions we see most often, along with our responses. If you have specific questions that aren’t answered here, reach out to our team of solar experts at solar@ecowatch.com.
The Inflation Reduction Act (IRA) extended the federal tax credit another 10 years and increased the rate for 2023 installations from 24% back up to 30%. This was a huge win for solar customers in Minnesota and beyond.
The IRA also extended a 30% tax credit to solar battery installations and added an electrical vehicle credit up to $7,500 depending on the vehicle.
While Minnesota does not have a viable SREC market, some Minnesota utilities allow solar users to earn and sell SRECs.
If you’re unfamiliar with SRECs, here’s how it works: to meet RPS goals, some states allow solar users to earn SRECs for every megawatt-hour of energy their panels produce. Utilities can buy those credits from the solar homeowner to meet their renewable energy benchmarks.
Yes, solar panels increase your home value in Minnesota. Research shows that homes with solar panels sell for about 4% more than homes without, which would lead to an increase around $13,300 based on the average Minnesota home price.6
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