Minnesota Solar Incentives and Tax Credits (2024)

By Jessica Wimmer Updated February 6, 2024

The average cost ranges from $14,578 to $19,722.

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Minnesota ranks in the top third of U.S. states investing in solar energy, with 3.9% of the state’s electricity now coming from renewable energy according to the Solar Energy Industries Association. Switching to clean energy isn’t the only reason to go solar in the North Star State. Minnesota has several solar incentives and rebates that help homeowners save money on their solar energy system costs. We’ve researched the best solar companies and made a list of the most lucrative solar incentives in Minnesota.

 


 

Overview of Minnesota Solar Incentives

Here are the solar incentives available to Minnesotans:

IncentiveWhere It Comes FromWhat You Get

Xcel Energy Solar Rewards Program

Minnesota Rewneable Development Fund

Annual payment based on energy production

Sales tax exemption

State government

6% savings on your system

SolarSense lottery

Minnesota Power

60% off the cost of installation

Net-metering

Local utility companies

Money back for your excess electricity

Federal solar tax credit

Federal government

30% of the system cost claimed on taxes

 


 

Minnesota Solar Incentives, Tax Credits, and Rebates

Minnesota has some of the most significant solar rebates and financial incentives in the country. Minnesota homeowners can enjoy the following ways to save when they implement solar power.

Xcel Energy Solar Rewards Program

The Xcel Energy Solar*Rewards Program is powered by Xcel Energy and the Minnesota Renewable Development Fund to pay system owners for their systems’ energy production. This is a performance-based incentive available to Xcel Energy customers in the company’s service area. Xcel pays homeowners seven cents per kilowatt hour (kWh) of solar power production annually for up to 10 years.

Note that the program has a yearly budget, so you’ll need to submit an application through Xcel Energy sooner rather than later to ensure you get a spot. Once the budget is allocated for the year, applicants go on a waitlist but aren’t guaranteed savings. Xcel Energy recommends you don’t start construction on your system until your application receives full approval and final agreements are signed.

Additional resources:

State Sales Tax Exemption

The average cost of a solar panel system in Minnesota ranges from $14,578 to $19,722, according to EnergySage. You may feel wary of paying the state’s 6.875% sales tax on such a large purchase. However, you don’t need to worry. Minnesota is among the states that waive sales tax on all solar photovoltaic systems. Considering the average price range, buyers could save anywhere from $1,000 to $1,400.

Additional resources:

SolarSense Lottery

Minnesota Power’s SolarSense program funds are awarded on an annual basis via lottery. The incentive program hopes to encourage Minnesota residents to install solar PV systems to increase the state’s energy efficiency and lower the burden on the power grid.

The program’s 2024–2024 budget was $87,675, so we assume at least five lottery winners could be awarded funds based on the average system cost. Once the funds run out, applicants are put on a waitlist and may not receive anything, so we recommend applying as early as possible. Submit a SolarSense application on the Minnesota Power website when the program opens on March 1 of each year. Submissions are accepted for three days once open.

Additional resources:

Net-Metering

Net-metering is one of the most powerful ways you can recoup money while reducing your electric bills. Net-metering is an incentive many states offer in which you can sell the excess energy your solar system generates to your local utility company for money back. The utility company uses that energy to power the electric grid. All residential-sized systems qualify for net-metering.

Additional resources:

 


 

Federal Tax Credit

In addition to the solar incentives specific to Minnesota, don’t forget about the federal investment tax credit (ITC). The federal solar tax credit, sometimes referred to as the Renewable Clean Energy Credit, allows you to claim a percentage of your total system cost on your federal taxes the year you install the system. This percentage has changed throughout the years, but it’s now set at 30% until 2033. The average home solar system cost in Minnesota is around $17,000, so you can claim roughly $5,000 as a valid expense on your tax form.

Not every solar purchaser has eligibility, however. Only those who purchase their system outright can apply, which means financing your system through a solar loan or purchasing it in full at the time of installation. Right now, the ITC is a one-time credit, but you can carry over excess credit to the next tax year if you can’t use it all when you file. For example, if you owe $3,000 in taxes the year you install and get a $4,000 tax credit, you’ll owe $0 on that year’s federal tax bill and reduce next year’s by the leftover $1,000.

You can claim the solar tax credit when you file your yearly federal tax return. Let your accountant know in advance. If you manage your taxes yourself, you’ll need to fill out IRS Form 5695.

 


 

Minnesota Solar Costs

According to EnergySage, the average Minnesota solar panel system installation costs $2.92 to $3.94 per watt. That’s around $14,578 to $19,722 for residential-sized systems, with an average cost of $17,000. If you qualify for the federal solar tax credit, that number can be brought down to $12,000. EnergySage estimates that it takes Minnesotans approximately 12.65 years to recoup their investment.

 


 

Is Going Solar in Minnesota Worth the Investment?

Minnesota’s many solar incentives and sunny weather make going solar worthwhile. Having a solar installation increases your home value if you plan to sell, and the energy savings you’ll see on your monthly energy bill will eventually lead your system to pay for itself. Going solar saves you money while saving the environment. Sourcing electricity through solar energy versus the power grid is one of the most sustainable ways to reduce your carbon footprint.

 


 

Our Recommendation

We recommend going solar in Minnesota. Between the solar incentives, financial savings, and environmental benefits, it’s a win-win for you and your home. If you decide to pursue a solar panel system, we recommend Sunpower, Blue Raven Solar, and Tesla Solar. These top-rated solar companies are available in Minnesota and boast solid panel performance, pricing, and customer service. Your solar company can help you better understand and apply for solar incentives.

Homeowners Save $20,000 to $97,000 with Solar Panels on Average Over Typical System Life Span
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How We Chose the Top Solar Companies

We researched and analyzed dozens of solar panels and solar installation companies. We then formulated a rating system based on each solar installer or manufacturer’s services and products. We weighed several significant factors, including the quality and type of solar panels offered, the customer support network, warranty lengths and limitations, and additional benefits such as mobile apps for monitoring and customer service.

Speaking directly to representatives, we determined how each solar company personalizes its solar panel installation for each home. We also analyzed each company’s warranty options to ensure their product and performance guarantees match or exceed industry standards.

We evaluated each provider based on their rating and history with the Better Business Bureau (BBB) to determine reputation. In addition, we analyzed the 100 most recent Google Reviews for each provider across various locations and branches.

Read more: Our Methodology