Maple Springs at Lake Pepin
Some unhappy campers have said that Minnesota has only two seasons: winter and the 4th of July. However, that’s not quite true. The state has four distinct seasons, even though it isn’t uncommon to see snowfall during three of them. Nevertheless, Minnesota still gets a pretty fair amount of sunlight. Combined with strong utility-backed solar power rebates to lower costs, full tax exemptions, and a strong RPS, the outlook for solar power is pretty strong here. Let’s take a look …
Minnesota’s Renewable Portfolio Standard
A Renewables Portfolio Standard (“RPS”) is a law or other piece of regulation that mandates that a certain percentage of at state’s energy production comes from renewable resources by specified target dates. A strong RPS is important because it forces utility companies to promote conversion to renewable energy. That generally means free money for you in the form of solar power rebates and performance payments when you switch to solar.
Minnesota’s RPS sets different goals for Xcel (the state’s largest electric company) and all other utilities. Xcel is required to generate 30% of its electricity from renewable resources by 2020. The current minimum is 18%. That will increase to 25% at the end of 2016 before reaching the final 30% mark at the end of 2020.
All other Minnesota utilities are required to produce 25% of energy from renewable sources by 2025. The current minimum is 12%. That figure rises to 17% in 2016, and 20% in 2020 before making the final jump to 25% by December 31, 2025.
Both of those figures are solid, though definitely not the best we’ve seen. The Xcel targets do get a boost by including a solar specific carve out of 1% of total retail electric sales. The non-Xcel targets, unfortunately, do not contain any solar specific mandates.
Solar Performance Payments in Minnesota
Minnesota does not offer any performance incentives (i.e. cash for all those kilowatt hours of clean energy) for solar power. Don’t fret, though. Most Minnesotans are eligible to receive a rebate on the initial cost of installing a solar system, so you’re still getting free cash. Speaking of those solar power rebates …
Minnesota Solar Power Rebates
Here’s a summary of the rebates that are currently available from utilities in Minnesota:
|Utility Company||Rebate amount||Cap|
|Brainerd Public Utilities||$2,000/kw||$4,000|
|Minnesota Power||$2,000/kw – $4,250/kw||$20,000 or 60% of costs (plus up to $5,000 Energy Efficiency bonus|
|Moorhead Public Service Utility||$2,000/kw||None|
|Owatanna Public Utilities||$1,000/kw||$10,000|
|Rochester Public Utilities||$1,000/kw||$10,000|
|Xcel Energy||$2,500-$5,000/kw||$90,000 or 60% of costs|
Minnesota Solar State Tax Credits
Minnesota currently does not 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.
Solar Tax Exemptions in Minnesota
There may not be tax credits, but there are tax exemptions to save you money. First of all, the purchase of your solar power system is 100% exempt from sales tax. That saves you almost 7% up front. Second, but possibly even more important, your newly installed solar power system is 100% exempt from associate property taxes. See, when you install that solar power system, your home value goes by a pretty significant amount – twenty times your estimated annual electricity savings. With the property tax exemption in place, you’ll never pay any taxes on that increase in value.
Utility Prices in Minesota
Minnesota pays an average of 10.96 cents per kilowatt-hour of electricity. That’s pretty cheap. In fact, it’s about a half-cent below the national average is 11.43 cents/kwh. Cheap electricity rates mean you’re probably not feeling too much of a strain in your pocketbook …. yet. But keep in mind why electricity is currently so cheap.
You got it … fossil fuels. Lots and lots on dirty-burning, greenhouse gas producing fossil fuels. When all those fossil fuels really start to bite us in the butt, or the growing scarcity problem gets worse … or both … electricity rates are going to rise, and fast. When that happens you’re going to be really, really happy you switched early to all that efficient, clean, cheap solar power.
Minnesota Net Metering and Interconnection
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 40kw. 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 40kw limit should cover virtually all residential solar systems, which typically come in somewhere around 5kw 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.
5kW Example Return on Investment in Minnesota
What do all the numbers add up to for you? Let’s check:
We based our rebate numbers for an Xcel customer. Check the chart above for what solar power rebate you qualify for, and remember of course that all of these calculations are estimes. Your home is unique and how much power you generate and how much money you save depends on that uniqueness. The best way to find out how much cash switching to solar can save you is to get one of our free quotes, and an expert installer in your area can draw up a home-specific estimate for you.
Installing a typical 5kW solar system should start at about $25,000. Don’t freak – that’s gonna drop fast!
- Here’s where that big fat solar power rebate from the utility in handy! At $2,500/kw, we subtract $12,500, cutting costs exactly in half for a new starting price of $12,500.
- The feds are smart – they calculate your 30% federal solar tax credit on your costs after state rebates. So we take 30% of $12,500, and subtract another $3,750 for a new price of $8,750.
- Finally we subtract your first year’s energy savings, which we estimate to be about $686. That brings your final cost after the first year to $8,064. That’s about 17 grand less than where we started – a ridiculous discount of 68%!
- With a conservative estimate for the future rise of electricity prices, you can expect your new solar power system to pay for itself in about 10 years.
- In addition to those direct wallet-fattening savings, you also increased your home value by almost 14 grand – tax free.
- On top from all that green in your pocket, you’re creating a bunch of green for the planet –110 trees worth– every year your solar power system is humming, and you’re not buying fossil-fuel based electricity.
Minnesota Solar Consensus
With those big utility-backed solar power rebates and the 30% federal solar tax credit, Minnesota offers an astonishingly low initial cost, leading to a solid overall payback timeframe. While we’d like to see some performance payments added to bring the payback timeframe down a few more years, that’s enough to earn a solid “B” from us, especially with a strong RPS ensuring that those big solar rebates should continue.