Assumes 3%/yr rate increases, 0.5%/yr panel degradation and no federal tax credit (the 30% §25D credit ended for systems installed after Dec 31, 2025). How we calculate
Data approachEIA rates · NREL sun hours · 2026 federal policy · methodology
A typical 9 kW solar system in Minnesota costs about $27,000 installed in 2026 and, in our model, saves roughly $1,561 in year one, a simple payback near 17 years. The 30% federal residential solar credit ended for systems installed after Dec 31, 2025. Minnesota still requires net metering at the average retail rate for systems under 40 kW and exempts solar equipment from state sales tax, and Xcel Energy customers may qualify for Solar*Rewards production payments when funding is available.
Minnesota gets roughly 4.5 peak sun hours a day, and our model uses an average residential rate of 14.8 cents per kWh. What sets the state apart from neighbors like Wisconsin and Iowa is policy: net metering at the average retail rate, tax exemptions, and a long history of production incentives.
This guide covers the 2026 numbers, the federal change, net metering and Value of Solar, Xcel’s Solar*Rewards, and what to check before you sign. All figures come from our standard savings model and the inputs on our Minnesota solar data page. They are estimates, not quotes.
💰 System Cost
What Does Solar Cost and Save in Minnesota in 2026?
A typical 9 kW system costs about $27,000 at the model’s $3.00 per watt and saves about $1,561 in its first year. No federal credit comes off that price for a homeowner-owned system installed in 2026.
System size
Price per watt
Installed cost
Federal credit (2026 install)
9 kW
$2.60
$23,400
$0
9 kW
$3.00 (model)
$27,000
$0
9 kW
$3.50
$31,500
$0
Assumptions: installed price including labor, permits and interconnection; homeowner-owned system completed in 2026. Per-watt prices are scenario inputs, not market averages. Real quotes vary by installer, roof and equipment.
At 4.5 peak sun hours and a 0.82 system derate, each installed kW produces about 1,347 kWh a year, so a 9 kW system makes about 12,122 kWh (9 × 4.5 × 365 × 0.82). At 14.8 cents and a 0.87 offset factor, that is worth about $1,561 in year one. The system suits a household using roughly 12,100 kWh a year, about a $150 monthly bill at the model rate.
Minnesota exempts qualifying solar energy systems from the state’s sales and use tax, and the installer applies it at purchase. Solar equipment is also exempt from property tax, so the value it adds to your home does not raise your assessment. To size a system from your own bills, use the solar savings calculator.
Data visualization
Cumulative cash flow by price per watt, Years 0-25. A 9 kW Minnesota system at $3.00/W ($27,000) turns cumulative-positive in Year 15, assuming 3% yearly rate escalation and 0.5% degradation, with no federal credit and no Solar*Rewards. Source: Green Energy Calculators standard model 2026.
Chart summary: Each line starts at the negative upfront cost and rises by the year’s bill savings, which grow with 3% yearly rate escalation and shrink with 0.5% yearly panel degradation. The $2.60/W line crosses zero in Year 13, the $3.00/W line in Year 15, and the $3.50/W line in Year 17. These breakeven years come earlier than the simple-payback figures below (15.0, 17.3 and 20.2 years) because simple payback divides cost by flat year-one savings, while this chart includes rising utility rates. Every $0.50 per watt on a 9 kW system moves breakeven by roughly two years.
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🏛️ Incentives
Is There Still a Federal Solar Tax Credit in Minnesota?
No, not for a homeowner who buys a system installed in 2026. The Residential Clean Energy Credit (§25D), which paid 30% of system cost, ended for expenditures made after Dec 31, 2025, and an expenditure counts as made when installation is complete. The change came from Public Law 119-21 (the One Big Beautiful Bill Act, signed July 4, 2025), as explained in the IRS FAQs on the OBBB changes.
Who may still benefit:
2025 installations: if your system was completed by Dec 31, 2025, claim the credit on your 2025 return with Form 5695.
Carryforwards: unused §25D credit from earlier years can still carry forward.
Leases and PPAs: the company that owns the system may still claim the business credit (§48E) if it meets the law’s start-of-construction or placed-in-service deadlines. Any value reaches you only through the contract price, and no discount is guaranteed.
Businesses and farms: business-owned solar may use §48E under the same deadlines.
Heat pumps and insulation credits under §25C also ended after 2025. Programs that vary by state, such as IRA Home Energy Rebates, depend on Minnesota’s program status, so check with the Minnesota Department of Commerce. More detail is in our federal solar tax credit guide. This is general information, not tax advice; confirm your situation with a tax professional.
⚖️ Net Metering
How Do Net Metering and Value of Solar Work in Minnesota?
Minnesota requires net metering for solar systems under 40 kW, crediting surplus generation at the average retail utility energy rate. That covers essentially every home system, so net metering is what sets most homeowners’ savings.
Net metering. Minnesota passed the first net-metering law in the U.S. in 1983. Surplus power you export earns a credit close to what you pay for electricity, which bridges long summer days and short winter ones. Our model applies a 0.87 bill-offset factor because fixed charges and non-energy costs on a bill remain after solar.
Value of Solar (VOS). A 2013 state law directed the creation of a value-of-solar methodology that recognizes benefits such as avoided energy and capacity costs. It is an alternative to net metering, and in practice it is used for community solar garden bill credits rather than rooftop systems. If you subscribe to a community solar garden instead of installing panels, ask how your credit is calculated.
Net-metering rules differ by utility type and system size, and legislators have debated changes to how cooperatives and municipal utilities compensate excess generation. Confirm current terms with your utility before you sign. Model your own credits with the solar net metering calculator, and compare states in our net metering rules by state guide.
📋 Xcel Incentive
What Does Xcel Energy’s Solar*Rewards Pay?
Solar*Rewards is Xcel Energy’s production incentive for Minnesota customers. It pays a set amount per kWh your system generates over a 10-year contract, in addition to net metering credits, while program funding lasts.
Performance-based. Payments follow actual generation measured by a production meter.
Rates have fallen over time. The program paid about 8 cents per kWh in 2014–2015. Third-party program trackers have more recently listed roughly 2 to 3 cents per kWh, so verify the current rate with Xcel.
Funding-limited. Funds are first-come, and you generally need approval before you buy or install.
Renewable energy credits. Participants transfer their system’s renewable energy credits to the utility under the contract.
Size caps. Xcel has limited eligible system size (a 20 kW DC cap appeared in a 2023 program summary), so check current rules before finalizing a design.
Income-qualified track. Xcel has offered a separate track with added upfront payments for income-qualified households; ask whether it is open.
Because the current rate and remaining funding change, our payback figures exclude Solar*Rewards. At about 3 cents per kWh, a 9 kW system’s 12,122 kWh a year would earn roughly $360 a year; at 2 cents, roughly $240. Treat that as an illustration of scale, then add the confirmed rate to your estimate with the solar payback calculator. Customers of Minnesota Power, Otter Tail Power, municipal utilities and cooperatives should ask their own utility about programs.
The state’s separate Made in Minnesota Solar Incentive Program, which paid production incentives for systems using Minnesota-made equipment from 2014 through 2023, is no longer taking new applications. If you buy a home with an array installed in that period, ask the seller whether payments are still attached.
📈 Payback Period
How Long Does Solar Take to Pay Back in Minnesota?
About 17.3 years for a typical 9 kW system bought for $27,000, based on year-one savings of roughly $1,561 and before any Solar*Rewards payments.
Source: Green Energy Calculators standard model; see methodology.
Data visualization
Simple payback by installed price. A 9 kW system takes about 17.3 years to pay back at $27,000 and 15.0 years at $23,400, using year-one savings of $1,561. Source: Green Energy Calculators standard model 2026.
Chart summary: Price is the biggest lever you control. Moving from a $3.50 to a $2.60 per watt quote shortens simple payback by about five years, from 20.2 to 15.0 years, because year-one savings stay near $1,561 either way. Compare quotes on price per watt and estimated production, not just the total.
Scenario
Net cost
Simple payback
25-year net savings
Installed by Dec 31, 2025 (30% §25D credit; historical)
$18,900
~12.1 years
~$34,300
2026, $2.60/W quote
$23,400
~15.0 years
~$29,800
2026, $3.00/W (model)
$27,000
~17.3 years
~$26,200
2026, $3.50/W quote
$31,500
~20.2 years
~$21,700
Same production, rate and offset inputs as above; no SolarRewards income included. The 2025 row is historical and not available for new homeowner-owned installs.*
Over 25 years, utility bills without solar for this household would total about $65,600 (a $150 monthly bill growing 3% a year). With solar, the system cost plus remaining bills total about $39,400, a net difference of roughly $26,200.
Data visualization
25-year cost: utility vs. solar. Staying on utility power totals about $65,600 versus about $39,400 with a $27,000 solar system, assuming a $150 monthly bill growing 3% a year. Source: Green Energy Calculators standard model 2026.
Chart summary: In this model, a household that stays on utility power pays about $65,600 over 25 years, while the solar household pays about $39,400 including the $27,000 system, a gap of roughly $26,200. The result depends on rate escalation staying near 3% a year; slower rate growth lowers the gap.
Financing: a $27,000 loan at 7% costs about $278 a month over 12 years or about $209 a month over 20 years, against year-one savings of about $130 a month. Leases and PPAs avoid the upfront cost, but compare the contract price with your retail rate. See how Minnesota compares in our payback period by state guide.
Solar vs utility company · 25-year comparison
25-year totals: 3%/yr rate increases, 0.5%/yr degradation, no federal credit. Methodology
Identify your utility. Xcel Energy, Minnesota Power, Otter Tail Power, municipal utilities and cooperatives each have different interconnection processes and programs.
Check program funding. In Xcel territory, ask your installer to confirm Solar*Rewards availability and the current rate before you buy.
Size to usage. Design for roughly 100% of annual consumption, and plan ahead for an EV or heat pump if one is coming.
Compare quotes correctly. Reject proposals that subtract a 30% federal credit for a 2026 homeowner-owned installation, and compare price per watt and PVWatts-checked production.
Treat storage separately. Batteries installed in 2026 get no federal homeowner credit; ask your utility and check DSIRE for current programs, and size one with the battery storage calculator.
To estimate lifetime savings for your home, enter your utility, usage and roof details in the solar savings calculator, and see how much solar panels cost in 2026 for national price context.
Related calculators
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Our model prices a typical 9 kW system at about $27,000 installed ($3.00 per watt), or $23,400 to $31,500 across a $2.60 to $3.50 per watt quote range. No federal credit comes off that price for homeowner-owned systems installed in 2026. Minnesota exempts solar equipment from state sales tax, and your installer applies it on the invoice. Always compare at least three written quotes.
Not for a homeowner who buys a system installed in 2026. The 30% Residential Clean Energy Credit (§25D) ended for expenditures made after Dec 31, 2025 under Public Law 119-21. A system completed in 2025 is claimed on the 2025 return with Form 5695, and unused credit can carry forward. A company that owns a leased or PPA system may still claim the business credit (§48E) if it meets the law's deadlines, but any benefit reaches you only through the contract price.
Minnesota requires utilities to offer net metering for solar systems under 40 kW, which covers virtually every home system, and surplus generation is credited at the average retail utility energy rate. Credits help balance long summer days against short winter ones. Our savings model applies a 0.87 bill-offset factor because fixed charges and non-energy costs on your bill remain. Confirm interconnection steps and credit rules with your own utility.
Solar*Rewards pays eligible Xcel Energy Minnesota customers a production incentive for each kWh their system generates over a 10-year contract, on top of net metering credits. Third-party program trackers have listed rates of roughly 2 to 3 cents per kWh in recent years. Funding is limited and first-come, and you generally need approval before you buy or install. Ask Xcel or your installer for the current rate, size cap and remaining funding in writing; our payback figures do not include it.
About 17.3 years for a typical 9 kW system at $27,000 in our model. The model assumes 12,122 kWh a year (9 kW × 4.5 sun hours × 365 days × 0.82 derate) at 14.8 cents per kWh with a 0.87 offset factor, giving year-one savings near $1,561. A $2.60 per watt quote shortens payback to about 15.0 years, and Solar*Rewards payments, if you receive them, shorten it further. Your own bill, roof and quote will change the result.
$150/month electric bill by state
System size and payback vary by electricity rate and sun hours — see your state.
16.25¢/kWh — Minnesota average residential price. Source: EIA Electric Power Monthly, Table 5.6.B (year-to-date through July 2026), residential average retail price (July 2026) (EIA)
Solar production
4.5 peak sun hours/day × 0.82 system derate. Approximate state-average daily solar resource (peak sun hours) based on NREL solar resource data (NSRDB); not location-specific — use NREL PVWatts for an address-level estimate. (NREL PVWatts)
Installed price
$3.00 per watt before incentives. Blended 2026 US residential installed price used by this site; EnergySage marketplace reported about $2.60/W (mid-2026); full-market medians are higher.
Federal tax credit
$0 for homeowner-owned systems installed in 2026 — the 30% §25D credit ended Dec 31, 2025 (IRS)
Net metering
Full retail net metering — solar assumed to offset 87% of the bill. Minnesota requires net metering at the average retail rate for systems under 40 kW.
Estimates only — not tax, legal or financial advice. Get at least three installer quotes and confirm incentives with your utility and a tax professional.