As the popularity of renewable energy increases, plenty of homeowners have started to move to solar power. Certain states in the US are more solar-friendly than others, as they offer amazing incentives, rebates, and credits.
In this guide, we cover specific solar energy incentives, solar tax credits for Minnesota, and 2024 Minnesota solar rebates available for businesses and homeowners in the state. The Land of 10,000 Lakes is solar-friendly, as there are several state-level incentives available. When coupled with federal incentives, the cost of a new solar power system is quite low.
In addition, we will cover why a solar energy system is beneficial, rebates that can help reduce the cost of a solar energy system, and numerous tax incentives that can make it increasingly affordable to purchase a solar energy system.
Benefits of Using Solar Energy in Minnesota
Even though solar energy systems are a huge upfront investment, they can help homeowners and business owners save plenty of dollars every month on electric bills. These savings can be immense, particularly when we need to turn on our air conditioning or heaters more frequently to create a comfortable living space.
A question that many people frequently ask is, “are solar systems worth it in Minnesota?” While the state does get a cold and snowy winter season, Minnesota is an excellent place to harness the power of the sun. The truth is that solar panels don’t need scorching temperatures to work as they can convert sunlight into usable electricity even in temperatures lower than zero. Note that solar panels capture energy from the sun’s light, not from its heat. In fact, the low temperatures of the state can actually enhance the efficiency of solar panels.
Here are some key benefits of using solar energy in Minnesota.
1. A Renewable Source of Energy
Among the numerous advantages of solar panels, the biggest one is that solar power is a renewable source of energy. It can be used in all parts of the world, including Minnesota, and is available daily. Solar energy is going to be accessible for as long as the sun is shining.
2. Beneficial for the Environment
Solar panels help eliminate air pollution as they generate their own electricity. Plus, they can produce energy without consuming water. If an electrical source does not use fossil fuels as a source of energy, it typically uses water. For instance, hydropower and nuclear energy consume plenty of water to generate electricity. Moreover, building dams to manage the flow of water is harmful to the local ecosystems.
Moreover, solar energy minimizes people’s reliance on fossil fuels and other sources of nonrenewable energy. These nonrenewable energy sources produce several pollutants that negatively impact air quality.
3. Low Maintenance Costs
Once you have invested in a solar system, you don’t need to worry too much about its maintenance. All you need to do is keep the panels clean and remove the snow accumulated on them in winter.
Plus, solar panels don’t have any moving parts, so they don’t undergo too much wear and tear. You might need to replace the inverter as it constantly runs to transform solar energy into electricity and heat, but even that needs to be done after 5 to 10 years.
The Best Solar Incentives, Tax Credits, and Rebates in Minnesota
Residents of Minnesota can save tens of thousands of dollars on installing new solar energy systems. The savings come from the pool of incentives and rebates available to homeowners in Minnesota, such as the state’s property and sales tax exemptions or the rebates offered through local utility and power companies.
1. The Federal Solar Tax Credit
The federal solar Investment Tax Credit (ITC), worth 30%of the total cost of a solar energy system, is the most significant solar energy incentive available to the residents of Minnesota. Since an average solar energy system costs around $22,720, the savings from this tax credit can be approximately $6,816.
Keep in mind that the ITC does not come in the form of a check that can be deposited. Rather, it is a form of credit that you can use to reduce the federal taxes you need to pay starting from the tax year after you installed your system. In case you do now owe up to 30%of your solar investment cost in taxes, the ITC will roll over for a maximum of five years.
2. Sales Tax Exemption on Solar Energy
The law in Minnesota exempts solar heating and solar electric systems from the 6.88%sales tax. This can result in a tax reduction of around $1,560, which is based on the approximate prices of solar systems in the state.
The best thing is you don’t need to take additional steps to avail this exemption on your solar energy system. The company you buy your solar equipment from will already have the taxes removed. Thus, if you notice that sales tax is charged on your invoice, make sure to ask why it’s there.
3. Net Metering
Several states have net metering programs in place, some of which are better than the rest. Net metering refers to a process where you get energy credits or, in certain cases, compensation for the excess energy your solar panels generate and send back to the grid.
In simple words, if your solar energy system generates excess electricity and you do not need all the energy it is generating, you can send it back to the grid. The excess power is credited towards your electricity bill depending on how much you send.
If your solar energy system does not generate sufficient electricity, the grid electricity makes up for the difference. In case you have credits with the utility provider, they will use those credits to reduce your bill. In certain cases, your electricity bill might become zero, even though your system is not producing sufficient electricity for your house.
The net metering law in Minnesota is applicable to all utilities and requires them to offer net metering to all solar energy systems less than 40 kilowatts. The 40-kilowatt limit should cover almost all residential solar energy systems.
While industrial and commercial customers might not be able to benefit from net metering, it is a pretty good deal for homeowners. You get compensation for the surplus you produce at the “average retail utility energy rate.” Minnesota has a particular formula for calculating this rate, but it usually equals the same as the retail rate you pay each month for electricity. The compensation might be in the form of a check or credits on your future electricity bills.
Xcel Energy Net Metering
Xcel Energy in Minnesota provides an excellent net metering policy. The electricity provider rolls over credits for excess electricity sent to the grid each month. If your solar energy system over-generates to bring the total to $25 or higher, XCEL Energy will send you a check for the excess generation since the previous payout.
4. SolarSense Program
The SolarSense program by Minnesota Power offers rebates to customers who install solar. The rebate is determined using an estimate of yearly electricity production from PV Watt (a tool created by the National Renewable Energy Laboratories). In order to calculate the SolarSense rebate, a photovoltaic system’s expected power output is multiplied by $0.52 per kilowatt-hour. The maximum amount of rebate is 60%of installed costs or $10,000, whichever is lower.
5. Solar Rewards Program by Xcel Energy
This performance-based incentive by the Minnesota Renewable Development Fund provides homeowners with solar energy in Xcel Energy’s service area an annual payment depending on the electricity generation of their system. Xcel Energy pays homeowners $0.07 per kWh of solar energy generation yearly for a maximum period of 10 years.
6. Other Local Solar Energy Incentives
Based on where you’re located and your electricity provider, you may be able to avail some more local solar financing options and solar incentives. Here are some local incentives that you might be eligible for:
a. Austin Utilities
If you’re a resident of Austin, Minnesota, you can get a solar electricity rebate worth $500.
b. Dakota Electric Association
Customers of the Dakota Electric Association are eligible for a one-time $500 rebate for installing residential solar systems. Note that you will have to submit your application before installing a solar system in your home and that you need to get your installation approved by the utility provider before interconnection.
c. Minneapolis Green Cost Share Program
Residents of Minneapolis can receive assistance in paying for their solar system installation through the Green Cost Share program. The program incentivizes renewable energy installations with at least $0.20 per kilowatt hour to eligible applicants.
Wrapping Up
Solar power systems are no longer a huge financial burden that prevents residents from investing in renewable energy. Residents can avail several state-level incentives and solar rebates in Minnesota to reduce the cost of their new solar energy system. Coupled with the Investment Tax Credit, solar energy is becoming more financially viable for homeowners all over the state.
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