Ultimate Guide to Renewable Energy in Minnesota

Minnesota has a lot of nicknames. Officially, it’s the North Star State, based on its state motto “L’etoile du nord” (the star of the north). Popularly, it’s also known as the Land of 10,000 Lakes, the Gopher State, or the Bread and Butter State.

One name it doesn’t have, but perhaps should, is “The Green Energy State.” Minnesota was one of the first states in the country to pass laws promoting clean energy. Today, it gets more than half its electricity from carbon-free sources. And that number is rising fast.

The history of renewable energy in Minnesota 

Minnesota got an early start on clean energy. In the 1980s, it created its Conservation Improvement Program (CIP) to promote energy efficiency. The state also passed a law in 1983 requiring all utilities to offer net metering. This allows homes with solar panels to get credit from utility for energy they put into the grid.

In 2001, Minnesota created a Renewable Energy Objective (REO). This regulation encouraged utilities to get 10% of electricity sold from renewable sources by 2015. However, for most utilities, this was voluntary. In 2007, the state replaced the REO with a new Renewable Portfolio Standard (RPS). Under the RPS, all utilities were required to get at least 20% of their power from renewables by 2020, and further to 25% by 2025.

The same year, Minnesota passed the Next Generation Energy Act. This required the state to cut its greenhouse gas emissions to 80% below their 2005 level by 2050. It also set an energy efficiency resource standard, or EERS. It required utilities to reduce their average energy sales by 1.5% each year, starting in 2010. In 2021, that figure rose to a 2.5% reduction per year. The EERS also requires utilities to spend a certain portion of their annual revenue on efficiency and renewable energy.

How can Minnesota residents take advantage of renewable energy? 

Switching to renewable energy offers both economic and environmental benefits for everyone. It can save you money on your electric bill while also reducing your carbon footprint. But in Minnesota, it’s an even better deal. Various programs at the state and local level can help you save even more money.

Net metering in Minnesota 

If you have a grid-connected solar system, sometimes your solar panels produce more energy than you need. Net metering laws require your utility to pay you for the excess energy you put into the grid. Minnesota’s 1983 net metering law is one of the oldest in the country.

Under this law, when your panels produce extra energy, you receive a “solar credit” for it on your bill. You can use this credit to pay for the energy you use when your panels are not producing energy. The process of enrolling in net metering depends on your utility. Your solar installer can help you sign up.

Tax exemptions and credits

Minnesota residents can take advantage of several tax exemptions and credits for renewable energy use:

• Sales tax exemption. New solar electric and heating systems in Minnesota are not subject to the state’s 6.88% sales tax. This exemption can save the average resident $1,560 on a solar system.
• Property tax exemption. Adding solar panels or a residential wind turbine to your property increases its value. However, in Minnesota, it does not raise your property tax. Any added value from wind or solar systems doesn’t count toward your property tax bill. This exemption can save the average homeowner around $245 per year.
• Federal ITC. Home solar setups in Minnesota qualify for the federal Investment Tax Credit (ITC). If you buy and install your system before the end of 2032, you get a credit for 30% of the cost on your federal income taxes. For Minnesota residents, this typically adds up to a $6,816 savings.

Check out our deep-dive on Minnesota's solar incentives and tax credits if you're a resident or business owner looking to learn more.

MinnPACE program 

Business owners in MN can finance the costs of energy improvements through MinnPace. This loan program covers 100% of the cost of new renewable energy or energy efficiency upgrades. Business owners pay back their loans through a special assessment on their property tax bill. Payments are made twice a year over a period of up to 20 years. For most users, the savings on their utility bills more than offset the loan payments. 

Local solar incentives 

Along with these statewide programs, many local utilities and municipalities offer additional incentives to go solar. Examples include:

• SolarSense. Customers of Minnesota Power are eligible for rebates on the cost of a new grid-tied solar setup. This program covers residential, commercial, and industrial customers. However, it doesn’t have enough funds for everyone, so you must enter a lottery (held every March) to qualify. Winners receive a rebate of $0.29 per kWh of solar system output. The maximum rebate is $5,000 or 60% of the total cost, whichever is lower.
• Green Cost Share. This program helps Minneapolis property owners pay for solar installations, efficiency upgrades, and pollution reduction. It even offers funds for refinishing cars so they produce less pollution. This program is mainly for businesses, nonprofits, and multi-family homes. However, single-family homes can also apply for solar funding in groups of five or more.
• Solar*Rewards. Residential and business customers of Xcel Energy can earn credit for any power they produce from a solar array. The process is similar to net metering, with customers earning renewable energy credits (RECs) on their bills. Home users receive $0.02 per kWh and businesses get $0.015 per kWh for a period of 10 years. Low-income customers can receive additional up-front credits of up to $2 per watt installed. Like SolarSense, this program has limited funding, so only 75 applicants per year can enroll—first come, first serve.

This is only a partial list of solar incentives in the North Star State. Check with your local utility or municipal government for other incentives in your area.

Wind and solar capacity in Minnesota 

Minnesota has already more than met its RPS goals. As of 2021, the state got 28% of its electricity from renewables and 52% from zero-carbon sources. Renewable energy accounts for over 80% of all new energy capacity added in the past decade.

Most of Minnesota’s renewable power generation comes from wind energy. It’s the eighth-largest wind-generating state in the nation, producing 3% of all U.S. wind power. In 2021, wind energy supplied 22% of all the state’s electricity. Solar power is a much smaller contributor but still produces 4% of all Minnesota’s electricity.

Wind and solar aren’t Minnesota’s only renewable energy sources. The state is also a major producer and user of biofuels. Across the state, there are 19 plants produce ethanol from the state’s ample corn crops. Another two plants produce biodiesel. A state law requires all diesel fuel sold in Minnesota to contain between 5% and 50% biodiesel. (The percentage varies based on the time of year.)

Reducing reliance on natural gas in Minnesota through renewable energy 

As Minnesota’s use of renewable energy has grown, its fossil fuel use has declined. According to the 2022 Minnesota Energy Factsheet, the state now gets just 21% of its power from natural gas. That percentage is more than one-third lower than the nation’s as a whole.

Coal power in Minnesota is declining even faster. In the past decade, the state built no new coal plants and retired 953 megawatts’ worth. By 2035, all its coal plants will be gone. These changes have helped Minnesota reduce its greenhouse gas emissions to 45% below their 2005 levels. Minnesota is tackling pollution in other ways, too.

Renewable energy sector employment in Minnesota 

In 2021, the clean energy sector employed nearly 58,000 Minnesotans. This figure includes jobs in:

• Energy efficiency, such as upgrades to buildings. This is the largest part of the clean energy sector, providing nearly 75% of its jobs.
• Clean power generation, such as wind and solar. This field employs over 8,000 workers in Minnesota.
• Clean transportation, such as building and developing electric vehicles. This is the fastest-growing part of the sector, with 23% growth in 2021.
• Advanced grid technologies for storing and distributing energy more efficiently.
• Renewable fuels, such as ethanol and biodiesel.

Recent legislation on energy policy in Minnesota 

In 2015, Minnesota’s new Building Energy Codes took effect. These codes set energy efficiency standards for construction, remodeling, and repair of residential and commercial buildings. They cover factors such as how much heat a building loses, climate control inside it, and lighting.

The future of Minnesota solar 

The North Star State updated its RPS in 2013 by adding a Solar Energy Standard (SES). The SES requires all utilities to get at least 1.5% of the electricity they sell from solar power by 2020. At the same time, the state set a goal to get 10% of its electricity from solar by 2030.

Reaching this goal could be a challenge for this northern state. As of 2021, just 4% of its power generation came from solar. More than 90% of that small amount came from large solar farms. To meet its goals, Minnesota may need to expand rooftop and community solar as well.