When you think solar energy, sun-drenched deserts might come to mind before Minnesota’s snowy landscapes. But the state’s wide-open skies and supportive legislation make it a surprisingly great place for solar panels. To sweeten the deal, Minnesota offers various solar incentives and tax rebates to help you save big and offset installation costs.
To help you navigate these opportunities, we’ve compiled everything you need to know about Minnesota’s solar incentives, from tax credits to net metering. The best solar companies can also help you navigate these programs and figure out what works best for your home.
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What Are the Available Minnesota Solar Tax Credits and Rebates?
Minnesota’s solar incentives rival those of popular states for solar, such as Texas. Some of its incentives are linked to the popular home energy company Xcel, and one of its solar rebate programs is a unique lottery-style incentive. Learn about each solar incentive below.
Solar Energy Sales Tax Exemption
Minnesota’s state sales tax exemption prevents you from paying sales taxes on your solar energy system and equipment. This extends to solar water-heating and space-heating systems. Complete the Minnesota Department of Revenue Form ST3 “Certificate of Exemption” to apply.
More resources: Certificate of Exemption
SolarSense
Minnesota Power’s SolarSense program provides tax rebates to reduce your up-front solar panel installation costs. The program is available to all Minnesota residents. Funds are awarded to customers on a lottery basis, so you must submit a SolarSense application to be considered.
The program opens for applications on March 1 each year. Applications are accepted for three calendar days. Some homeowners are placed on a waitlist if more applications are received than available funds. Visit the program’s website to understand its current funding and availability better.
More resources: Minnesota Power SolarSense
Xcel Energy’s Solar Rewards Program
Minnesota Xcel customers can take advantage of the company’s Solar Rewards Program, backed by the Minnesota Renewable Development Fund. Xcel pays homeowners $0.07 per kilowatt-hour (kWh) of solar power production annually for up to 10 years. However, you may have to go on a waitlist depending on the program’s current funding. Projects on the waitlist are not guaranteed to receive funding.
Xcel Low-Income Solar Program
Income-qualified Xcel customers who receive benefits under the Low-Income Heating Assistance Program (LIEAP) or Weatherization Assistance Program (WAP) can receive a $2,000 per kilowatt (kW) solar rebate from Xcel. You must meet the following criteria to qualify:
- Make $52,000 or less for a family of four.
- Have a system sized to a maximum of 120% of your usage.
An average-sized 6 kW system would receive a $12,000 rebate based on this criteria.
More resources: Xcel Solar Rewards page
How Does the Federal Solar Tax Credit Work?
In addition to the incentives above, Minnesota homeowners can take advantage of the federal solar tax credit, also known as the Investment Tax Credit (ITC). This incentive allows you to deduct up to 30% of your total solar panel installation costs from your federal taxes, making solar energy more affordable. Originally introduced in the Energy Policy Act of 2005, the ITC was set to expire in 2007 but has been extended multiple times by Congress. It is currently available through 2034, with a gradual reduction in the credit beginning in 2033.
Does Minnesota Offer Net Metering?
Minnesota is one of several states with net metering laws, also called interconnection laws.
These laws allow you to sell the excess energy your solar panel system generates back to the power grid. Minnesota residents can choose to receive a standard compensation rate per kW or a credit applied to future electricity bills.
How Much Do Solar Panels Cost in Minnesota?
The average cost to install a standard solar panel system in Minnesota is approximately $14,958, according to EnergySage, aligning with national solar pricing trends. Most solar installers charge per panel, with Minnesota’s average price sitting at $2,128 per panel, according to our 2025 survey. If you qualify for the federal solar tax credit, you can reduce this cost by 30%, bringing your total out-of-pocket expense down significantly.
Your chosen payment method significantly affects the total cost of your solar investment. Here’s a breakdown of the most common solar financing options to help you choose the best one for your budget and long-term savings:
- Cash purchase: Paying for your system in full is the most cost-effective approach. You’ll avoid interest rates, credit checks, and additional fees while gaining full ownership of the system. This means you qualify for all available solar incentives, including the federal tax credit, state rebates, and net metering benefits.
- Solar loan: If you prefer to spread out your payments, a solar loan allows you to finance your system while still benefiting from solar incentives. Instead of paying up front, you make monthly payments toward ownership. However, interest rates apply, which means you’ll pay more over time compared to a cash purchase.
- Solar lease: A solar lease is a good option for homeowners who may not qualify for a loan or want to avoid a large upfront payment. You pay a fixed monthly amount to use the system, but since the solar company owns it, you won’t qualify for incentives. Additionally, a leased system doesn’t increase home value the way an owned system does.
- Power purchase agreement (PPA): With a PPA, you pay for the electricity your panels generate rather than the system itself. Your contract will specify a per-kilowatt-hour rate that’s typically lower than your utility’s electricity rate. However, as with a lease, you don’t own the system and can’t take advantage of solar tax credits or incentives.
Is Going Solar Worth It?
Yes, going solar is worth it in Minnesota due to its net-metering laws, local rewards programs, and tax incentives. These benefits will help you to save long-term on your energy bills in addition to reducing your environmental impact by generating clean energy. Solar panels typically have a payback period between six and 10 years, meaning the time it takes for the system to pay for itself. Minnesotans can also expect solar panels to increase their home’s value by an average of $15,000.
The Process of Going Solar in Minnesota
Switching to solar in Minnesota follows a structured process with a few state-specific considerations. Here’s an overview of the steps to install solar panels in the North Star State:
- Consultation: The first step is to consult with solar providers to assess your home’s solar potential. Installers will analyze your property’s sun exposure, energy consumption, and available roof space to figure out how many solar panels you need using digital tools before scheduling an in-person site visit. This evaluation typically takes a few days.
- System design: Once your site assessment is complete, your installer will design a system customized to your energy needs, budget, and available space. You’ll receive different system options, including solar inverter and battery storage recommendations. This design phase usually takes 1–2 weeks, including back-and-forth discussions to finalize your system.
- Permitting and approvals: After you approve the system design, your installer will handle local permitting, utility approvals, and any homeowner association (HOA) requirements. Minnesota’s permitting timeline varies by location, but the process typically takes 1–2 months. Some municipalities, especially in the Twin Cities, have more efficient approval systems.
- Installation: Once your permits are approved, installation can proceed. Most solar panel installations in Minnesota take one day, but depending on system size and complexity, it may take longer. Your system will typically be up and running within 1–3 months of your initial consultation.
- Final Inspection and activation: After installation, your installer will test system performance and guide you through its operation. Many companies offer monitoring apps to track solar energy production, while others require manual checks through your inverter box. If you have a solar battery, your installer will explain how your system switches between grid power and off-grid solar power from battery backup during outages. They’ll also discuss net metering and how it can reduce your energy bills.
Our Conclusion
Minnesota is an excellent state to go solar. The state’s solar panel system cost is in line with the national average, and it provides several incentive programs to make going solar more affordable. This guide covers Minnesota’s most significant incentives, but there are smaller city- and municipality-specific options worth exploring. We recommend checking the Database of State Incentives for Renewables and Efficiency (DSIRE) for more information.
Once you feel ready, we recommend reading our guide to the best solar panel brands to narrow down your choices.
FAQs About Solar Tax Incentives in Minnesota
How long does it take for solar panels to pay for themselves in Minnesota?
It should take about six to 10 years for solar panels to pay for themselves in Minnesota, which aligns with the national average. Where your payback period falls within this range greatly depends on the type of solar panels and upgrades you install. We recommend selecting panels that provide optimal energy production and energy efficiency, such as monocrystalline panels.
Can HOAs prevent solar panels in Minnesota?
A Homeowners Association (HOA) can prevent you from installing solar panels in Minnesota. However, Minnesota’s state legislature has introduced bill HF1262, which would limit community or homeowners associations’ from blocking their neighbors from installing solar panels.
How big of a solar system do I need in Minnesota?
Various factors determine what system size you need, such as your average electricity consumption, your roof’s layout, and the surrounding area. Most homeowners purchase systems around 6 kW, but we recommend consulting a solar installation company to determine the right fit for your home.
Is there a limit to how many solar panels you can have?
There is no limit to how many solar panels you can have. However, having too many solar panels may be impractical. We suggest consulting a solar energy professional to determine the appropriate number of solar panels for your home.
Our Rating Methodology
We are committed to providing comprehensive and unbiased reviews to our readers. After over a thousand hours of research on solar companies, interviews with experts, and common customer needs, we’ve created a detailed rating system for solar providers based on six factors:
- Solar equipment, installation, and services (25%)
- Warranty and performance guarantees (25%)
- Brand reputation and certifications (15%)
- Financing options (15%)
- Experience (10%)
- Availability (10%)
Total scores are divided by 20 for a final 5-point rating scale.