Solar Panels Could Make Sense in Minnesota With These Incentives

Minnesota is more known for lakes than it is for the sun. But with relatively low energy bills and below-average solar panel costs, it won't take much of a solar system to make a dent in your utility costs.

Solar power in the North Star State is growing. Minnesota currently ranks 16th in the nation for solar production, with enough installed capacity to power more than 230,000 homes, according to the Solar Energy Industries Association. 

Residential solar panels are growing in popularity nationwide, but do they make financial sense in Minnesota? The answer depends on your personal situation, electricity bills, energy usage and goals. Solar panels are a significant investment, but they can help you save money on electricity bills in the long run.

Minnesota tends to have lower residential energy rates compared to the rest of the US, based on data from the Energy Information Administration. In 2022, the average electricity rate in Minnesota was 5% lower than the national average. This translated to lower energy bills, too, according to SaveOnEnergy, owned by CNET's parent company. Minnesotans tend to consume less electricity than residents in other states.

Meanwhile, the price of solar panels in Minnesota has dropped by 52% in the last decade, based on data from the SEIA. Because Minnesota residents tend to use less electricity, a smaller (and thereby cheaper) solar panel system can cover their total energy needs. There are also a variety of solar incentives, rebates and tax credits that bring the cost of solar panels down further. 

Before you make a decision about going solar, we suggest doing your research, comparing quotes from multiple solar installers and thinking through whether your home is a good candidate for solar panels. Here's what you need to know.

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Minnesota solar panel costs

The total cost of solar panels will depend on the system size, the installation costs and the incentives and tax credits that you qualify for. The average solar panel system in Minnesota is smaller than the national average, according to data from the Lawrence Berkeley National Laboratory, but according to consulting firm Wood Mackenzie, the cost per watt is higher than the national average. 

Here's a breakdown of the average size and cost of a solar panel system in Minnesota compared to the national average based on figures from the Berkeley Lab.

How to pay for solar panels

There are several ways to finance solar panels for your home, each with its pros and cons. Here are the most common financing options:

Purchase the system upfront: This option requires you to have the cash available to pay for the system, and with an average cost of more than $20,000, that's not easy. If you do have the cash, you can make the purchase more seamless and avoid financing costs. If solar panels are in your future, consider saving up for them with a high-yield savings account.

Finance the system with a solar loan: Solar loans are often offered by the solar installer, usually in partnership with a financial institution. This option might be quicker to access than other types of financing, but you should make sure you're getting the best deal.

Other types of financing: You can use other types of loans to pay for solar panels. Home equity loans and lines of credit are often used to pay for home improvements, and may have better rates than solar loans. They're secured by your home, so make sure you can pay them back or you risk foreclosure. Personal loans are generally unsecured, but often come with higher rates and shorter terms.

Sign a solar lease or power purchase agreement: If you sign a solar lease or PPA, you won't own the solar panel system. This means you won't qualify for incentives or tax credits and your long-term savings will be lower. However, solar leases and PPAs are more affordable than purchasing the system outright.

Minnesota solar panel incentives or rebates

While the cost of solar panels has decreased significantly in recent years, a solar panel system is still a big investment that you should consider from all angles before purchasing. That includes the incentives, rebates and tax credits solar panels qualify for. 

At the federal level, the residential clean energy credit offers a tax credit worth 30% of the cost of a system to residents who buy and install solar panels on their home. This credit, formerly known as the investment tax credit, was increased and extended when the Inflation Reduction Act passed in August 2022. To apply for the federal solar tax credit, fill out IRS form 5695 (PDF). The IRS provides instructions for how to fill out this form.

Based on the average cost of solar panels in Minnesota, this federal tax credit could save as much as $7,618 and bring the average solar panel price down to $17,778. There is no cap on this credit, so you can claim the full 30% no matter how much your system costs. You can also combine this tax credit with other incentives at the state and local level. After you apply for this credit, you will receive 30% of the cost of your solar system in credit when you file your federal tax return. 

There are several Minnesota solar incentives that you may qualify for, depending on where you live in the state. The Database of State Incentives for Renewables and Efficiency offers a more complete list. Here are a few to know about in Minnesota.

Minnesota solar panel installers

Minnesota currently has 58 solar installers and developers, according to the SEIA. As solar panels grow in popularity, the number of installers in the state will likely increase to keep up with demand.

Finding the right solar installer for your home is crucial. You should search for an installer that fits within your budget, can meet your timeline and offers the products you want. It's also important to read customer reviews and get several quotes from different installers. We've compiled a list of solar panel installers that stand out in the market, but be sure to do your own research before signing a contract. 

All Energy Solar

All Energy Solar offers residential solar panels and solar storage options in Minnesota, as well as Iowa, Massachusetts, New Hampshire and Wisconsin. It has earned a high number of positive reviews and an A+ rating on Better Business Bureau. Customers who choose All Energy Solar can purchase their solar panels upfront or finance them with a loan, but this installer does not offer solar leases at this time. 

This installer is also licensed as a building contractor and electrical contractor, making it a full service solar company that can handle every step of the installation process. All Energy Solar says its solar panels come with a standard 25- to 30-year production warranty and mentions that credible installers will offer a 5- to 10-year quality-of-work warranty, although it does not elaborate on specific warranty terms. All Energy Solar provides system monitoring to track your solar panels' performance and ensure they are working efficiently.

Sunnova

Sunnova is a solar installer operating in 40 states and territories, including Minnesota. With Sunnova, customers can purchase a solar panel system or sign a lease or PPA. Sunnova offers a range of products and services, including solar panels, batteries and home EV chargers. 

The Sunnova Protect warranty offers coverage for 25 years on maintenance, system monitoring and necessary repairs or replacements. Sunnova also provides a 10-year roofing warranty. Customers who choose this installer can benefit from the company's system monitoring service, which tracks the system's energy generation and allows Sunnova to perform remote assessments if the system is underperforming.

SunPower Solar

SunPower Solar is one of the largest solar installers on the market and operates in all 50 states. This installer offers the most efficient solar panels available in the industry and is quickly expanding the products and services it offers. You can purchase or lease solar panels through SunPower Solar.

The SunPower Equinox solar panel has an efficiency rating of up to 22.8%, beating all of its competitors on the market today. SunPower offers an Equinox package, which includes solar panels from Maxeon and Enphase microinverters. Maxeon and Enphase products are widely-used and have a track record of reliability in the industry. In terms of warranties, SunPower guarantees 92% production capacity for 25 years and offers a 25-year product warranty, which are some of the strongest warranty terms in the industry.

Tesla Solar

Tesla has become a household name in the solar industry since it entered the market in 2016. What sets Tesla apart from competitors is its impressive lineup of home energy products, which includes solar panels, the Powerwall solar battery, electric vehicles, home EV chargers and more. Through all of Tesla's products, consumers can create an entire home energy system. 

Tesla offers traditional solar panels and the Tesla Solar Roof. The price, specifications and warranties differ depending on which option you choose. The Tesla Solar Roof has a 25-year product warranty and a performance guarantee of 95% capacity after five years and 85% after 25 years. The Tesla Solar Roof is the more expensive option.

Tesla's traditional solar panels are more affordable than the Solar Roof. Its solar panels have an efficiency range between 19.3% and 20.6% and come with a warranty of 85% capacity after 25 years. While Tesla's name carries a lot of brand awareness, it's worth noting that some customer reviews have included complaints about the installer's customer service after installation is complete.

Installation factors to consider

Before signing a contract with an installer or moving forward with installation, it's important to consider whether solar panels will be a good fit for your home. Here are a few factors to think about before installation day.

• Your roof. The age and condition of your roof are important to think about. If your roof is older or needs maintenance, you may need to replace or repair it before it can handle solar panels. The size, shape and slope of your roof affect how efficient a solar panel system can be. The Department of Energy says solar panels will be most efficient on roofs with a slope between 15 and 40 degrees.
• Your neighborhood. Some states have passed solar rights laws, which prohibit homeowner associations from banning solar panels. However, Minnesota has not passed any laws regarding HOA oversight when it comes to solar panels. Before signing a solar contract, be sure to research whether solar panels are allowed in your neighborhood and if there are specific requirements you need to know about.
• Your insurance plan. After your solar panels are installed, contact your homeowner's insurance agency to update your plan so it covers your solar system. Most standard homeowner's policies can cover solar panels without needing a separate plan, but you should check with your agency to learn about your policy's details.
• Your location. Minnesota tends to get less sun and more snow per year than the US average. Solar panels will generate the most electricity if they receive at least four hours of direct sunlight each day. Based on the amount of snow and sun Minnesota receives, solar panels in the North Star State likely won't generate as much power as solar systems in Florida, for example. 
• Your landlord. If you rent your home, you may not be allowed to install solar panels. Check with your landlord or management company to learn more about what your lease permits. If solar panels aren't an option for you, consider community solar as an alternative. Community solar lets you pay a monthly subscription to access solar power generated at another location (usually nearby). In exchange, you receive credit on your energy bills. The subscription fee is set at a lower rate than the value of the bill credits, so you end up saving money. Minnesota is one of the leading states for community solar, with 847 megawatts of installed capacity from community solar projects in 2022.

Minnesota solar power FAQs