Minnesota solar rebates and incentives: 2025 guide

Solar panel systems in Minnesota are expensive, but incentives from the state and federal governments can help you reduce the upfront cost. Between the federal tax credit and other state-specific incentives, you can save thousands on solar panels, making them well worth the investment. Here's how you can lower the cost of solar if you live in Minnesota.

As a Minnesota homeowner, you have access to some great incentives that can substantially improve your return on investing in solar panels. The programs below are some of the most impactful ways to bring down your solar costs.

Residential Clean Energy Credit

The Residential Clean Energy Credit, formerly known as the federal investment tax credit (ITC), can reduce your solar panel system's cost by 30%. Your entire system qualifies for this incentive, including equipment, labor, permitting, and sales tax. 

When you file your federal income taxes, you can claim this incentive as a credit towards your federal tax bill. Just keep in mind that to qualify for the ITC, you need to purchase your system either with cash or a solar loan–if you lease your system, you won't be eligible. 

You also need a high enough tax bill, though you can roll over any remaining credit year-to-year until the end of 2034 when the ITC expires. The only time you might be eligible for a direct payment for the ITC is if you're a tax-exempt entity, like a nonprofit organization.

Minnesota Housing Finance Agency (MHFA) Fix-up Loan 

Minneosta’s Housing Fix Up Home Improvement Loan Program helps homeowners upgrade their homes with affordable loans with fixed interest rates. Loan amounts range from $2,000 to $75,000 with terms varying between one and 20 years. No downpayment is required.

Xcel Energy Solar*Rewards Program

Xcel Energy’s Solar*Rewards program offers incentives to Minnesota homeowners who install solar panel systems. You receive annual payments for 10 years based on your system’s actual energy production. In exchange, you transfer the Renewable Energy Credits (RECs) your system generates to Xcel Energy. 

Participants receive $0.03 per kWh your solar panel system produces. On top of that, income-qualified participants may be eligible for an upfront payment of $3.00 per kWh. 

Eligibility requirements include: 

• You must be an Xcel Energy customer 

• You must own the home where you want to install the solar panel system

• Your solar system must be between 0.5 kW DC and 20 kW DC.

Applications are accepted on a first-come, first-served basis, and there are only limited funds available each year—so it’s best to apply early in the year.

Yes,  Minnesota offers tax exemptions for solar panel systems. The solar sales tax exemption ensures that you won't have to pay a sales tax on your system.

If you connect your solar panel system to the grid, you can benefit from net metering, one of the best solar panel incentives available in Minnesota. With net metering, you earn credits when you send excess electricity from your solar panels to the grid. When the sun isn't shining and you need to pull electricity from the grid, your utility will apply the credits to your bill. Net metering makes it so you will owe very little, or even nothing, on your electric bills with solar panels. 

Minnesota's net metering program is solid. Here are a few nuances to keep in mind:

• Compensation rates vary from utility to utility. Excess solar generation is credited to customers at the average utility energy rate, which is slightly less than what you pay per kWh. While, all utilities use the same formula to calculate this rate (total revenue minus fixed charges, then divided by annual kWh sales), the final numbers vary. 

• You can request to be credited at the Simultaneous Purchase and Sale Billing Rate. This is a flat rate or a Time-of-Day rate. The average utility energy rate is usually more favorable. 

• Credits can be rolled over month-to-month. But you might lose them at the end of the year. Public utility customers are paid at the avoided cost rate for any leftover credits at the end of the year, whereas cooperative and municipal utility customers will lose unused credits.

Learn more about Minnesota's net metering programs:

Yes, Minnesota has several state-specific battery incentives for battery storage systems up to 50 kWh paired with solar energy systems. 

• If you’re an Xcel Energy customer: You may be eligible for a rebate of $175 per kWh of storage capacity up to $5,000. For income-qualified customers, the rebate is $370 per kWh.

• If you’re not an Xcel Energy customer: You may be eligible for a rebate of $250 per kWh up to $7,000 from the Minnesota Department of Commerce. For income-qualified customers, the rebate is $1,000 per kWh up to $15,000. 

Note that there are limited funds for this program, so check availability before applying. 

All batteries above kWh are also eligible for the 30% federal tax credit. A solar battery is a great way to boost your energy independence since you can also use it as a backup power source during outages.

If you're looking for solar installers in Minnesota, here are some popular suggestions: