Minnesota Solar Rebates, Incentives and Tax Credits

Minnesota has the bragging rights for the largest enclosed mall in the US and most probably the world. The Mall of America also known as the ‘Megamall’ (Wow original) is located in the Twin Cities suburb of Bloomington, Minnesota and has its own amuzement park. Another interesting fact has to do with the Minnesota solar industry. Did you know that this northern state has approximatelty the same solar resource (amount of sunshine) as parts of Florida and Texas. Luckily the state government and utilty companies are offering some rebate and incentive programs that rival the Mall of America, read on to find out all the details.

State Legislation

In 2006, the Minnesota House of Representatives passed a renewable energy bill that requires all utilities to generate at least 25% of their total energy from wind, solar, geothermal, and other renewable energy sources by 2025. Xcel Energ (the state’s largest utility provider) has even higher standards, and must produce at least 30% of its power from renewable energy sources by 2025 – better get on that.

 

PACE Financing

In April 2010, Minnesota enacted legislation allowing cities, counties, and towns to offer PACE financing programs that provide loans to local residents for energy efficiency improvements, including certain renewable energy systems, like home solar power systems. The authorizing legislation sets a series of rules governing these local programs, but some details are left up to the local government that establishes a program. Qualifying properties are defined as residential, multi-family residential, commercial, or industrial properties, which would benefit from energy conservation improvements based on the results of a formal energy audit or renewable energy feasibility study.

 

Austin Public Utilities Solar Choice Program

Modeled after the successful Sustainable and Natural Alternative Power (SNAP) program in Chelan County, Washington, Austin Public Utility’s Solar Choice program encourages customers to install photovoltaic solar arrays and connect them to their utilities’ electrical distribution system by offering an incentive payment based on the system’s production on a $/kWh basis. The amount paid by each participating utility to its solar energy producers depends on the total amount contributed by that utility’s purchasers through their solar green pricing program. The greater the amount contributed by purchasers, the greater the amount that will be distributed among participating producers, up to a maximum of $1.00 per kWh. This amount is considered payment for the green attributes of the electricity only, and is additional to retail rates the producer may receive for their electricity under the state’s net metering laws. Producers are compensated for the total electricity produced, not the total exported to the grid.

 

Other similar programs are being run at:

Property Tax Incentive

Minnesota excludes the value added by home solar power systems from real property taxation. However, the land on which a PV or wind system is located remains taxable.

 

Sales Tax Exemption

In Minnesota, solar-energy systems purchased on or after August 1, 2005, are exempt from the state’s sales tax. All components of home solar power systems are exempt, including panels, wiring, pipes, pumps and racks. Buyers must complete Minnesota Department of Revenue Form ST3 “Certificate of Exemption” in order to claim the exemption. Sellers are required to keep the form in their files for tax reference. This incentive has no expiration date.

 

NEC Minnesota Energy Loan Program

The Neighborhood Energy Connection (NEC) offers secured, low-interest loans for qualified energy efficiency and renewable energy improvements to Minnesota residences. Loans are available for single-family homes, duplexes, and quads with household incomes of $96,500 or less, in amounts ranging from $2,000 – $35,000. Loan repayment terms vary from 1 to 20 years according the amount of the loan at a fixed interest rate of 5.75%. Most costs of this financing offer, including a 1% origination fee, credit report fee, and document preparation fee can be rolled into the loan.

In order to be eligible for a loan, qualified homeowners must generally contact the NEC to schedule an energy audit. Customers of Xcel Energy may be eligible for a reduced rate on an energy audit and should contact Xcel Energy (1-800-895-4999) directly to request an audit. The actual improvements undertaken are up to the homeowner, but financed projects must include at least one of the recommendations made by the auditor. The NEC may also provide assistance in selecting a contractor and will perform follow-up inspections at the request of the homeowner. All loans are secured by a mortgage on the property.

 

State Rebate Program

Residential systems must be located at a primary residence; however, applicants do not need to be the primary resident in order to qualify (i.e., apartments or rental properties are eligible if at least one tenant occupies the property as a primary resident). The minimum system size is 0.5 kilowatts (kW) and capacity up to 5 kW for residential systems. Larger systems are eligible for a rebate but the incentive amount is only calculated up to these capacity limits.

Rebate levels for 2010 range from $1.50 – $2.00 per DC watt depending on installer qualifications; initial project application date; and the date that a final rebate claim is filed. Systems must be installed by a licensed electrical contractor or general contractor having at least two installations of 0.5 kW or larger in the previous 12 months; however, systems installed by contractors that meet the above criteria and are NABCEP certified are eligible for higher incentives. The list below describes how the actual incentive level is determined:

  • For residential applications submitted after March 31, 2010 the incentive is $1.50 per watt, or $1.75 per watt if the installer is NABCEP certified.

Minnesota Power – Solar-Electric (PV) Rebate Program

Minnesota Power offers a rebate of $2,000 per kilowatt-DC for grid-connected solar-electric (PV) systems, with a maximum award of$4,000 per customer. This program, which began in 2004, is available to the utility’s residential and customers, subject to availability of funding. Minnesota Power’s rebate for PV systems can be combined with the Minnesota Office of Energy Security’s Solar-Electric (PV) Rebate Program, which offers rebates of $1.75-$2.00/W for residential and small business PV systems.

  • Systems must be installed on or before December 31, 2010
  • The minimum system capacity is 0.5 kW; the maximum rebated capacity is 2 kW. (Systems may be larger, but the incentive is paid only on the first 2 kW.)
  • Systems must be installed by an approved installer. Contact Minnesota Power for a listing of trained installers or visit the program website.

More information can be found here.

Xcel Energy – Solar Rewards Program

Xcel Energy’s Solar Rewards Program provides an incentive for residential and commercial customers that install grid-connected photovoltaic (PV) systems of at least 0.5 kilowatts (kW) and less than 40 kW. The incentive takes the form of an up-front rebate of$2.25 per watt DC. In exchange for the up-front incentive, the customer is required to enter into a 20-year contract with Xcel Energy that transfers ownership of all renewable energy credits (RECs) produced by the system to the utility during the life of the contract.

Requirements:

  • The PV system must be installed on a property or a building located in Minnesota that is owned by the applicant and that receives electric service from Xcel Energy.
  • New construction projects are eligible for incentives, but must have an Xcel Energy electric meter on-site and an electricity account set up with the utility.
  • Customers must have performed energy audit within the last three years that meets the standards of Xcel Energy’s energy audit program and may be required to implement certain measures identified in the energy audit prior to participating in the Solar Rewards program.
  • Residential customers with homes that have been Energy Star certified through the utility’s Energy Star project automatically qualify.

More info here.

Net-Metering

Minnesota’s net-metering law, enacted in 1983, applies to all investor-owned utilities, municipal utilities and electric cooperatives. All “qualifying facilities” less than 40 kilowatts (kW) in capacity are eligible. There is no limit on statewide capacity.

Each utility must compensate customers for customer net excess generation (NEG) at the “average retail utility energy rate,” defined as “the total annual class revenue from sales of electricity minus the annual revenue resulting from fixed charges, divided by the annual class kilowatt-hour sales.” This rate is basically the same as a utility’s retail rate. Compensation may take the form of an actual payment (i.e., check for purchase) for NEG or as a credit on the customer’s bill. The option to have NEG purchased by the utility at the retail rate distinguishes Minnesota’s net-metering law from net-metering laws and programs in most other states, where monthly reconciliation is generally limited to a bill credit.

Wisconsin is the only other state that provides for the actual purchase — in the form of a check payable to the customer — of NEG at the utility’s retail rate for electricity generated by a renewable-energy system. However, in Wisconsin a check will only be issued to the customer if NEG exceeds $25

LocationSt Paul, MN
UtilityXcel
Av. Monthly Electricity Bill$100
System Size5.5 kW
% Reduction in Electricity Bill82
Cost / Watt (installed)$7.00
Cost Breakdown
Total Cost$38,500
Rebates
State Rebate$7,500
Xcel Energy Solar Rewards Program Incentive (20 yr program)
$12,375
Federal Tax Incentive$5,588
NET COST – 1st Year$13,038
Cash Flow
New Av. Monthly Electric Bill$18.75
Monthly Loan Payment (25 year home equity at 7%)$92
Tax Saving (assuming married filing jointly, $140K income)$28*
Average Monthly Payment$82.75
Cumulative Lifetime Savings$47,060 over 25 years

* Tax savings will decrease as the principal is paid down. Please consult your tax preparer.


 

That’s $17 less per month. Sound like a good deal? Have a solar expert give you a detailed quote so that you can find out how much you could save by going solar.