Minnesota Solar Power: Check Your Savings, Costs, Tax Breaks, Incentives and Rebates
Being located to the north of the USA, Minnesota receives modest amounts of sunlight compared to many other states, particularly those of the southwest.
Surprisingly, Minnesota is currently one of the top 10 states for solar power, something that is possible thanks to a combination of rebates, tax exemptions, performance payments and a favorable net metering policy.
Also, don’t forget the 30% federal tax credit, which removes a huge portion of upfront expenses!
Return on Investment for Residential Solar Power in Minnesota
The ideal installed capacity for a residential PV system depends on the energy consumption and the available rooftop area of the respective home. However, most residential PV systems average at around 5 kilowatts, so we will assume that installed capacity to illustrate project financials with a case study.
- The upfront expense before incentives is around $20,000. - Apply the 30% federal tax credit, valued at $6,000 for this project, and the cost is now $14,000. - Considering you will save around $750 over the first year, your upfront cost drops to $13,250. - You can save even more cash if you’re a customer of Xcel, one of the largest utilities in the state, who will pay you an extra $0.08/kWh. This translates into roughly $450 for the first year, bringing your net outlay to just around $12,800. - The payback period you can expect is around 11 years. When you assume a 25-year project life, this results in 14 years of free energy and over $20,000 in net profits! - You home will increase in value by around $15,000, and you will not be taxed for it. - The environment also wins from your investment, which has a benefit equivalent to planting more than 100 trees per year.
- The upfront expense before incentives is around $20,000.
- Apply the 30% federal tax credit, valued at $6,000 for this project, and the cost is now $14,000.
- Considering you will save around $750 over the first year, your upfront cost drops to $13,250.
- You can save even more cash if you’re a customer of Xcel, one of the largest utilities in the state, who will pay you an extra $0.08/kWh. This translates into roughly $450 for the first year, bringing your net outlay to just around $12,800.
- The payback period you can expect is around 11 years. When you assume a 25-year project life, this results in 14 years of free energy and over $20,000 in net profits!
- You home will increase in value by around $15,000, and you will not be taxed for it.
- The environment also wins from your investment, which has a benefit equivalent to planting more than 100 trees per year.
Minnesota has relatively cheap electricity, with average prices of around $0.14/kWh, but this is possible thanks to power plants driven by fossil fuels.
If tougher regulations for power plants come into play, those prices will rise... but this is good news if you go solar because your will simply save more cash!
This is the general performance you can expect from a 5-kilowatt solar PV system, assuming the average conditions for Minnesota. However, no two projects are identical because site-specific conditions influence their energy production. If you would like to know the costs and saving in your specific home click here for a fast solar calculation.
The top performance is normally achieved when:
- Solar panels are installed on a south-facing rooftop.
- There are no obstacles blocking sunlight (natural or man-made).
Check out the NASA Atmospheric Science Data Center website if you want to know the exact amount of sunlight you can expect throughout the year, according to your geographic location.
Just input your coordinates, and you will get a detailed breakdown of solar radiation by month and by solar panel tilt angle. You can check average yearly values as well.
Minnesota Solar Power Incentives, Tax Breaks and Rebates
When it comes to incentives for solar power, Minnesota is way ahead of the pack.
Residential solar power is a solid investment in the state thanks to the combination of a strong Renewable Portfolio Standard, various rebates, great tax exemptions and a favorable net metering policy.
There is a strong Renewable Portfolio Standard in Minnesota, which requires utilities to meet a certain renewable energy generation percentage by a given deadline, and they face hefty fees if they don’t comply.
There is a solar carve out of 1.5% for private utilities in general, and residential PV systems count towards the goal.
A strong RPS is great for solar power, because it turns utilities in favor of residential PV systems. It is cheaper for utilities to incentive homeowners than to develop all the required solar capacity with their own funds!
Minnesota Tax Credit
There is no state-specific tax credit in Minnesota, but the presence of the 30% federal tax credit more than makes up for this. The great thing about this tax credit is that you get it regardless of how you purchase your PV system.
The federal tax credit can be split in two if you are not taxed high enough to use the whole benefit in one year.
The best recommendation we can give is that you carry out any plans to go solar before 2020, because that is the current expiration date of the 30% ITC. After that, the incentive will drop to a more modest 10% unless extended.
Minnesota Tax Exemption
You can go solar in Minnesota completely free from taxes:
- You are not charged the sales tax when you purchase your PV system. This is an immediate 7% price reduction on your purchase.
- There is no property tax on the increase of your home’s value after you go solar: it will remain the same as before.
What could be better than not paying any taxes for solar power, but still being able to deduct 30% of your PV system’s cost from income taxes?
Are There Any Rebates for Solar Power in Minnesota?
When there is a strong RPS, rebates tend to be abundant. Although the rebate structure is set by each individual utility, the general scenario for Minnesota is the following:
- Rebates vary from $500 to $2000 per installed kilowatt.
- The caps on rebates start at $2000 and can reach $30,000 on commercial PV systems.
Xcel, the largest utility company in Minnesota, offers no rebates. However, they have an excellent feed-in tariff that provides more savings than a rebate in the long run.
Minnesota Electricity Rates
At $0.14/kWh, electricity is relatively cheap in Minnesota, just above the national average. Despite this, there are considerable savings to achieve by going solar: remember you can make nearly $20,000 in profits over 25 years.
Is There Net Metering in Minnesota?
All utilities in Minnesota are required to provide net metering for solar PV systems below 40 kW, which means practically all residential systems get the benefit.
Perhaps the only weak spot of the legal framework is that the interconnection policy requires you to purchase additional insurance and to have an external disconnect switch for your PV system.
Is there a Feed-in Tariff in Minnesota?
If you are a customer of Xcel, the largest utility in Minnesota, you can sign up for their Solar Rewards program and get an extra $0.08/kWh for every kilowatt-hour produced from your residential PV system, capped at 120% of your monthly production.
This benefit brings your savings to $0.22/kWh… a 57% boost above the retail price!
Are There $0 Down Payment Financing Options in Minnesota?
Minnesota allows solar PV systems to be owned by third parties, which means you have access to both solar leases and Power Purchase Agreements (PPAs).
Alternatively, you can purchase your PV system with a low-interest HELOC (home equity line of credit) if you want to own it… but still want to get it for $0 down.
The main drawback of leases and PPAs is that all incentives go to the company owning the PV system, and your savings are just a fraction of what you would get if you actually owned the solar array.
Solar Lease in Minnesota
The concept of a solar lease is very simple:
- You pay 0 cash down, the residential PV system is installed and maintained by the company providing the lease, and you pay them a fixed monthly fee instead.
- All energy produced is yours to take.
You can expect to save around $1,000 over a 20-year period if you sign up for a lease in Minnesota.
PPA Option in Minnesota
The Power Purchase Agreement is similar to a lease in that a third party owns and maintains the system.
- You don’t pay a fixed monthly payment. - Instead, you agree to purchase all energy from the PV system at a price below utility rates.
- You don’t pay a fixed monthly payment.
- Instead, you agree to purchase all energy from the PV system at a price below utility rates.
A PPA ensures you will always save cash; with a lease, there is a small risk that your lease payment may exceed your savings for a given month.
However, the long-term financial performance of both options is typically the same: you can also expect around $1,000 in savings from a PPA over a 20-year period.
In terms of dollars returned per dollar spent, taking a low-interest solar loan beats all other options. The main advantage of using a low-interest loan such as a HELOC to go solar is that you will have from 10 to 15 years to pay, but will get 30% of the solar panels cost as a tax deduction within one year and your PV system will also start generating savings immediately.
In the long term, the tax credit and the yearly savings pay the loan for you, and you will have made around $12,000 in profits by the end of year 25.
Also, keep in mind that you get this great deal for zero cash down.
Leasing VS Purchasing: What’s Best for Minnesota Homeowners?
Your cash availability and the equity owned in your home are the main factors that determine which is the best option for you:
Purchasing a PV system in Minnesota
Purchasing a PV system in Minnesota is recommended if you have either the cash availability for a down payment or the equity for a HELOC. The cash purchase yields the highest total savings, but the HELOC provides the highest percentage return on investment.
Leasing a PV system in Minnesota
Leasing a PV system in Minnesota is recommended only if you don’t have the equity for a HELOC. Otherwise, the HELOC is the top choice: you can go solar for $0 down and save 12 times as much money compared with the leasing option.
What is the Solar Power Installation Process in Minnesota?
The process of installing a PV system in Minnesota is standardized by the interconnection policy, but we recommend you hire experts who are familiarized with it, especially to ensure the PV system is plugged into the grid properly.
1. Fill our solar installation form, providing basic information about your property.
2. Talk with trusted solar contractors near you to get detailed quotes.
3. Compare quotes and choose the best option for you. We recommend you get at least three.
4. Have your contractor install the PV system, and enjoy clean power while helping the planet.
Once you sign the agreement, the installation process only lasts from three to four days, without much hassle or disruption.
Remember all the information in this article is for a 5-kilowatt system subject to the average sunlight conditions of Minnesota. Once you have a proposal from your contractor of choice, you will know exactly what to expect for your particular project.
Minnesota is a clear example of how favorable regulation can boost solar power, even when the available sunlight is modest and energy prices are low.
Solar power in Minnesota becomes a great investment thanks to the combination of a strong RPS and tax exemptions, complemented with the 30% ITC from the federal government.
The main hurdle when going solar in Minnesota is the interconnection policy, but the benefits far outweigh the drawbacks, and have helped Minnesota secure a position among the top 10 states for solar in the USA.