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SolarReviews is the leading American website for solar panel reviews and solar panel installation companies. Our industry experts have a combined three decades of solar experience and maintain editorial independence for their reviews. No company can pay to alter the reviews or review scores shown on our site. Learn more about SolarReviews and how we make money.
Last updated: January2025
Written by Ben Zientara Ben ZientaraBen Zientara is a writer, researcher, and solar policy analyst who has written about the residential solar industry, the electric grid, and state util...Learn more , Edited by Catherine Lane Catherine LaneCatherine has been researching and reporting on the solar industry for five years and is the Written Content Manager at SolarReviews. She leads a dyna...Learn more
Minnesota may be called the North Star State, but that doesn’t mean there’s room for only one celestial object in the hearts of the state’s citizens. Yes, with the solar incentives available in Minnesota, people from Roseau to Rochester and Luverne to Lutsen can take advantage of solar power and save money.
The average solar installation in the state is 7.6 kilowatts (kW) in size, consisting of 19 average 400-watt solar panels. That’s enough to make nearly 9,900 kilowatt-hours (kWh) in electricity.
The pre-incentive cost of that average system is around $22,000, which is enough to make anyone say “Ope!” But solar incentives can reduce the cost by over 46%, and the state’s energy buyback rules under net metering lead to a solar payback time of 11.5 years.
Several solar incentives in Minnesota have limited lifespans based on the funding available each year. For example, at the beginning of each year, Xcel Energy’s Solar*Rewards program changes the amount it will pay per kilowatt-hour (kWh). Minnesota’s new energy storage incentives also have limited funding but should last through 2025, at least.
Incentive | Estimated average savings | Eligibility | About |
---|---|---|---|
Federal solar tax credit | $6,600 | All tax-paying U.S. citizens | Tax credit equal to 30% of installation costs, applied to federal income taxes |
Xcel Solar*Rewards program | $2,900 for an average installation. $23,000 for income-qualified customers | All Xcel residential customers. | Xcel will pay customers $0.03/kWh for the first 10 years after installation. |
Utility rebates | $500 to $5,000 depending on utility | Homeowners who are customers of a participating utility (see below for details) | Rebates available from Austin Public Utilities, Dakota Electric, Minnesota Power, and Owatonna Public Utilities |
Property tax exemption | Savings vary | All homeowners | Personal solar energy generating property is exempt from property taxation |
Sales tax exemption | $1,500 (avoided cost) | Anyone who pays for a solar installation | All solar energy equipment is exempt |
Energy storage | $2,362.50 | Anyone who purchases a battery storage system up to 50kWh | Xcel: $175/kWh ($375/kWh for income qualified), up to $5,000 max. Outside Xcel territory: $250/kWh, up to $7,000, or $1,000/kWh up to $15,000 for income qualified. Inside Xcel: |
Quick Facts
Value: 30% of solar installation costs; average of $6,600 for a 7.6-kW system
Frequency: One-time tax credit, rollover for five years
How to apply: File IRS Form 5695 with annual tax return
There is no specific Minnesota solar tax credit, but the federal government offers the federal solar tax credit (formerly known as the Federal Solar Investment Tax Credit or ITC). The Clean Energy credit applies to all U.S. residents who own a home on which they install solar panels.
The credit equals 30% of the cost to install solar and can only be used by homeowners with the tax liability to claim it.
The average solar panel system in Minnesota will earn a tax credit of about $6,600. But, the value of the solar tax credit can depend largely on system size, which you can see in the following table:
System size | Estimated cost | Tax credit |
---|---|---|
6 kW | $18,000 | $5,400 |
7.6 kW (Minnesota average) | $22,000 | $6,600 |
10 kW | $28,500 | $8,550 |
15 kW | $40,500 | $12,150 |
Taxpayers can claim the credit in the year after their solar installation is complete. The credit applies to all solar equipment or home battery storage costs but won’t include expenses like structural improvements that aren’t directly associated with generating solar energy.
Note: Lending companies often require paying the value of the solar tax credit toward a solar loan by 18 months to keep monthly payments low.
Quick Facts
Value: $0.03 per kWh for 10 years, or about $2,900 total for the average-sized solar installation
Frequency: Annually in January or February, paid by check
How to apply: Apply through a solar installer before construction commences
Xcel Energy convers most of the state of Minnesota, and thanks to laws from the state legislature, they are always looking to incentivize small-scale solar installation owners. The Solar*Rewards program is how they do that.
If you are approved for the incentive, you receive annual payments of $0.03/kWh for all the energy generated by the system during the first 10 years of operation. Those payments will amount to an average of around $290 per year, or $2,900 total over 10 years.
Funding for the programming is on a first-come, first-served basis, so your solar installer will help you apply, and you’ll find out if you qualify during the process of getting the installation.
Income-qualified Xcel customers who receive benefits under the Low-Income Heating Assistance Program (LIHEAP) or Weatherization Assistance Program (WAP) get an additional incentive: a whopping $2,750 per kilowatt solar rebate from Xcel.
If you make about $68,000 or less for a family of 4, you can qualify. The system must be sized to a maximum of 120% of your usage. For an average-sized 7.6 kW system, that amounts to $20,900!
More information about the Solar*Rewards program is available from Xcel.
Quick Facts
Value: $500 to $10,000 (see below)
Frequency: One-time payment
How to apply: Varies by utility (see below)
Some utilities in areas of Minnesota not served by Xcel offer rebate programs to offset the up-front cost of installing solar panels. Customers of Austin and Owatonna Public Utilities, plus Dakota Electric and Minnesota Power, can apply. Funding for these programs generally runs out very quickly.
Details of each program are outlined in the table below:
Utility | Rebate available | Details |
---|---|---|
Austin Public Utilities | $500 | Application form available from the Austin Utilities rebate page. |
Dakota Electric | $500 | Details available from the Dakota Electric rebate page. |
Minnesota Power | Up to $5,000 | $0.56/kWh in the first year. Average of $5,000 per home. Funding is extremely limited. |
Owatonna Public Utilities | $500 | Application form available from the Owatonna Utilities rebate page. |
Quick Facts
Value: Varies based on home value
Frequency: Ongoing for the life of the system
How to apply: Automatically applied
When you get solar panels installed on your property, your home value goes up. Thankfully, Minnesota saw fit to exempt that additional value from property taxes in its state laws.
Our research shows that a solar installation can add 6.8% to the value of a home. This amount will vary based on your individual home, neighborhood, and solar installation.
Quick Facts
Value: 6.875% of the cost to install solar; $1,512 for the average installation
Frequency: At installation
How to apply: Automatic
Minnesota has a 6.875% sales and use tax on most purchased goods. If you live in Hennepin County, that gets even higher! Thankfully, the state exempts solar energy equipment from this tax, as long as a buyer completes Form ST3 and the seller keeps it on file.
Quick Facts
Electric rates average $0.1457 per kWh in Minnesota
All utilities are required to offer net metering credits for systems under 40 kW in size
Excess generation is credited at the annual average retail rate for each utility
Minnesota’s net metering law applies to all utilities and requires them to provide net metering for all solar power systems less than 40 kW. The 40-kW limit should cover virtually all residential solar systems, which typically come in somewhere around 5 kW 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.
Minnesotans who participate in community solar programs get to use the unique Value of Solar tariff, which values solar energy based on its economic, environmental, and societal benefits as well. Though only available for community solar right now, this methodology for valuing solar energy for its holistic value may become popular for homeowners as more utilities seek to change net metering.
Minnesota is now offering incentives for energy storage, with rates that vary depending on whether you are an Xcel Energy customer or not and your income status. The following table outlines the solar battery incentive rates in Minnesota:
Customer type | Incentive rate | Maximum incentive value |
---|---|---|
Xcel Energy customer | $175 per kWh | $5,000 |
Non-Xcel Energy | $250 per kWh | $7,000 |
Xcel Energy income-qualified | $375 per kWh | $5,000 |
Non-Xcel Energy income qualified | $1,000 per kWh | $15,000 |
A typical solar battery like the Tesla Powerwall 3 costs approximately $15,600 installed from Tesla and holds 13.5 kWh of energy. The Xcel incentive for this battery would be $2,362.50, and people outside Xcel territory would get $3,375. For income-qualified homeowners, those numbers would be $5,000 and $13,500, respectively.
Funding for this incentive program is limited, with $3,480,000 from Xcel and $2,160,000 outside Xcel, but that is enough money for a few thousand of these average-sized systems. We love that MN is now offering some good battery incentives.
The average cost of solar panels in Minnesota is $22,000 before incentives for a 7.6-kilowatt solar installation. Once you factor in all of Minnesota’s solar incentives, that cost can drop to as low as $11,800 — over 46% lower than the pre-incentive costs.
Average pre-incentive cost: $22,000
Federal tax credit: $22,000 x 30% = $6,600
Xcel Solar*Rewards program payments (over 10 years): $3,600
Total savings: $6,600 + $3,600 = $10,200
Effective system cost: $22,000 - $10,200 = $11,800
But what if you get a battery? Remember the Tesla Powerwall 3 costs about $15,600 on average and also earns you a 30% tax credit ($4,680). The total solar plus storage system would cost $37,600 before incentives, which can offset the cost by a lot. Here’s how the calculations work:
Average pre-incentive cost with battery: $37,600
Federal tax credit: $37,600 x 30% = $11,280
Minnesota Xcel energy storage incentive: $2,362.50
Xcel Solar*Rewards program payments (over 10 years): $3,600
Effective system cost: $37,600 - $11,280 - $2,362.50 - $3,600 = $20,357.50
That’s nearly a 46% reduction in the cost of the system.
When calculating the value of solar tax incentives, you must first subtract the value of any solar rebates that reduce the upfront cost of the system. That’s the reason Minnesota takes great pains to point out that the energy storage incentive is NOT an up-front rebate but is instead an after-the-fact incentive payment. It works out that you can take the federal credit based on the full up-front cost of the system. That said, we’re not tax experts, so speak with a trusted tax professional to be sure.
The solar incentives available for the average homeowner in Minnesota today are quite nice, with the federal tax credit and Xcel incentives adding up to a pretty substantial chunk of change. And if you are an income-qualified homeowner, the available incentives are really huge, and should allow you to get solar panels for a very low cost.
The average homeowner served by Xcel in Minnesota will see a solar payback time of around 11.5 years, which is excellent compared to the estimated 25-year life of the solar installation. It’s not the best out there, but the state has done a solid job of supporting residents who want to go solar.
The first step in your solar journey is to find the best solar companies in your area and contact them for quotes. It can take several months to go from comparing solar estimates from installation companies to getting the final permission to connect the system to the grid, so be sure to understand which of the incentives listed above may or may not be available at the time of installation.
Solar rebates in Minnesota are very limited, and only available in Austrin, Owatonna, and places served by Dakota Electric and Minnesota Power. However, there are other solar incentives available to Minnesotans, such as battery storage incentives and Xcel Energy’s Solar*Rewards program.
Minnesotans can claim the federal clean energy credit, which provides an incentive of 30% of the costs paid to get solar panels installed. There are also sales and property tax exemptions for solar installations in Minnesota, which help reduce your tax burden.
As the owner of a solar installation of 40 kW or less in Minnesota, you can transmit excess solar energy back to the grid and earn credit that can be used toward energy you pull from the grid when the sun isn’t shining.
Yes they do! Solar panels that are covered by snow can only generate very little power, but Minnesotans know even the biggest winter storm is often followed by days of cold, sunny conditions. Once the sun starts shining on the solar panels, the snow melts quickly, and can often fall off the roof in big clumps. Because of this, you may want to invest in snow guards for solar panels.
Solar panels absolutely love the cold. In fact, they’re more efficient when the temperature is very low. Have you seen pictures of satellites in space with their solar panels unfurled? If they can work in space, where it’s -450 degrees fahrenheit, a Minnesota winter is like a walk in the park.
Ben Zientara is a writer, researcher, and solar policy analyst who has written about the residential solar industry, the electric grid, and state utility policy since 2013.
His early work included leading the team that produced the annual State Solar Power Rankings Report for the Solar Power Rocks website from 2015 to 2020. The rankings w...
Learn more about Ben Zientara