Minnesota Solar Power Rebates, Tax Credits, and Incentives
Maple Springs at Lake Pepin
2012 Update
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 |
|---|---|---|
| Austin Utilities | $1,000/kw | $10,000 |
| 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.
My buddy has a solar panel system in (on) his home and is getting PAID by the utility company for his excess power.
Knowledge is power — FOR REALZ! And solar power doubly-so.
Minnesota Roxxors! (in terms of providing opportunities for running your electric meter backwards via solar panels)
Pingback: Energy Tough Love Blog » Solar Power Rocks - This is a pretty cool site
What about the rest of the state? There seems to be less info about the potential of rural residential/farming set-ups. I’m talking about something like 40 acres of land with solar or wind installed which you can swath around for bio-fuel.
36 Thousand I simply cannot afford as a single homeowner. Can we come up with a reverse electrical bill of some sort and I begin with 10 thousand loan from the bank with so low interest payment? How can we all work together on this.
Mary,
The best option we can see currently is what is known as Renewable Energy Payments (aka Feed-In Tariffs, though we don’t like using the word ‘tariffs’ because of the political connotations).
It is how the Germans moved the cause forward so quickly; and have demonstrated it works. On this site (and others) you will find quite a bit of information regarding REP’s. (Set up a google alert for any of these terms and acronyms. You will get an intense education.)
Hope you join us in getting more of these statutes passed. Call your Senators and Representatives. Tell them your wants. There are new versions of such bills being authored in many states in the coming sessions. MI, MN, VT, IL, FL, many others. Hope you get involved!!!
Hi, What about sponsering groups of people to start solar store business locally to support interest and demand. I have been having a great deal of difficulty financing a business although all perspective investors think its a great idea no one has the $$$$ to move on it.
we are building a house in the country with no trees we would love to put pannels on our shop roof but there is no way to fund a new house and $50000 worth of pannels to do it right the first time, is there a lease option?
we live outside the town limits, but in the township of a town on 20 acres and I was thinking about solar pannels for our home & or garage. How much would this cost on an existing structure & is it worth the effort? Also what can you tell me about geothermal energy?
I’ve read about systems wherein some solar panel companies will estimate the monthly energy cost of an individual household. Then the solar company will offer the individual household a monthly bill that will be less than their energy bill would have been. That new monthly bill, paid to the solar company, over a 20-30 year plan, will pay for the cost of panels and installation. So, the consumer saves by paying a monthly bill that’s less than what their energy bill would have been without solar panels, and the solar company saves by being able to install a far greater number of panels for a more diverse group of people, while still getting their money, just over a longer period of time.
I think it is fantastic how the stimulus funds are making a difference. They are being taken advantage of all the time with the installation of geothermal heat pumps to replace high energy heating and cooling systems.
IS EXAMPLE RESIDENTIAL SOLAR INSTALLATION calculation pretty old? Federal rebate is now 30% not $2000 maximum.
Marshall….yes. We’ve got to update all of our pages. So sorry, but we’re only 3 solar dudes, but we will get to all of them. :)
As you noted, the $2000 cap is no more until 2016, so get it while you can from the feds. A 30% tax credit applied after all of the local rebates have been subtracted.
For the folks lamenting the $36,000 to $50,000 cost (pre-incentives) see the article on this site about the enphase micro-inverters – http://www.solarpowerrocks.com/solar-trends/microinverters-my-turn-the-boring-technical-stuff/ – which lets you do a much smaller system with a nice linear cost. i.e. small system, small cost.
I checked into a -tiny- 3-panel system, maybe just 700W or so, and it nets out to around $2k. For maybe $1k each or so, I can add a panel+inverter to that as I’m able to afford it … don’t buy a flat-panel for the den, buy one for the roof! :)
Does anybody know of a business that can or will install a small grid tie system. Small as in under $2500, something that you can expand on at a later date.
http://solarpowerrocks.com/free-solar-estimates/
sign up there and someone will give you a buzz for a free quote. If you live in one of 13 or so states, you can get it for zero down and just pay for the energy ($0 is way below $2500). Otherwise, that will be tough. Best way is to sign up and find out.
I think its a crap investment:
Annual savings = $0.11/kwh X 9840kwh X 50% = $541.
Cost = $36K less 30% less $6.4K = $19K
Payback = $19K / $541 = 35 years.
No thanks.
Couple things about your math I have a question about, but if it is correct, I have to agree with you, not close to a good deal. Under savings, where do you get the X 50% from, it significantly reduces your ROI, and under the cost, from everything I’ve read, they pay 60% of the total cost in rebates, so it would be $36k X 60% = $21,600-36.000=$14,400, which would equate to 26.6 years, still a long time assuming your 50% figure under savings is correct. If it was closer to 100%, it would be closer to a 15 year payback, not super but better.
I’m not understanding your calculation. I come up with much different numbers. I think you could do (and people are doing it) a system for about $3/watt. which is about a 12 kW system.. at 14% capacity factor would produce about 14,700 kWhrs annually.. if you purchase more efficient panels the annual cf may go higher.
(a 9 kw system for 4 bucks/watt would yield about 11,000 kwhrs annually and an appx 20 year payback… not so good)..
so if you multiply the 36000 x .3 = about 25200 to pay off. it depends on your interest rate and how much you can buy down..at current rates of .11/kwhr..and at .11/kwhr would produce about $1600/year in electrical savings I come up with about 15 years or so to pay off at 3 bucks/watt..
Since pv panels last 20 – 25 years maybe it’s not such a bad investment..if you can get it done for 3/watt.
and electrical costs go up generally each year with inflation and if the EPA rules start to kick in the rates may jump higher than normal and it would pay itself off faster. I think you at least need to put a cost of living escalator in there somewhere to accurately reflect year to year energy costs.
I know you can get panels for about 70 – 80 cents/watt right now.. inverters another 50 cents/watt or so.. which leaves your racking and electrical breakers, wires etc.. which you should be able to do in my opinion for the 3 – 4 dollar mark. I know it’s under what they’re quoting but I’ve talked to developers who are doing projects in the 2/watt range so I don’t think it’s totally unreasonable. I think the national average is about 4 – 5 bucks a watt..which is too much imo.
first time I’ve been here.. pretty good website.
I’m in Colorado and a have sold 8 million in solar here, and Johnm you are correct 3/watt is very doable. This is the math I understand out of Minnesota. a 10kw system at a cost of 30k- xcel rebate 15k, – fed tax credit 4,500 would be a net 10,500. This system in a ideal orientation would produce 13,000 kwhs at a local value of 1,400 annual savings. This would be less than a 7 year ROI! Not bad and very sellable!
Thank you for the informative and thorough website- very nice. I have just one quick comment: I think it is just a touch ironic that the above photograph at the top of this page is a picture of a diesel powered locomotive… pulling train-cars full of coal. It just seems a bit incongruous on a website promoting solar energy.
How much would it cost for a city like minneapolis