Installing solar could get cheaper with tax credit

Imitating Iowa isn’t something to which Minnesotans customarily aspire. The cross-border rivalry inspires a lot of good-natured ribbing, especially closer to where the states meet.

But Rep. Robert Bierman (DFL-Apple Valley) saw something in Iowa he thought would make a lot of sense for Minnesota: The state offers a nonrefundable tax credit to taxpayers who install a solar energy system. That’s why he’s sponsoring HF1850, a bill that would create just such a credit for Minnesotans.

On Thursday, the House Climate and Energy Finance and Policy Committee laid the bill over, as amended, for possible omnibus bill inclusion. Its companion, SF2026, sponsored by Sen. Nick Frentz (DFL-North Mankato), awaits action in the Senate Taxes Committee.

Perhaps you’re saying, “Wait, don’t we already have a tax credit for that?” If so, you probably get your electricity from Xcel Energy or Minnesota Power. Xcel has a program called Solar*Rewards and Minnesota Power has SolarSense. Those are customer rebate programs recently extended by those utilities and the Public Utilities Commission. But, if you live outside those service areas, no such program exists.

Rep. Robert Bierman

The bill would allow a temporary tax credit for people installing a solar energy system on their home or business. The credit amount is equal to a percentage of the cost of the system, beginning at 15% and scaling down over time. The maximum credit would be $5,000 for a homestead and $20,000 for a business. The total amount available for the credit would be capped at $5 million per year, half of which is reserved for homesteads.

“This will help Minnesotans participate in our clean energy transition,” Bierman said. “It’s still just a small slice of our energy portfolio, but this is intended to expand the opportunities. … It’s a tried and true formula and good public policy that’s been successful in Iowa, where it’s generated hundreds of millions of dollars in economic activity. A typical system pays for itself in 8 to 10 years, and the savings start immediately.”

“It’s designed to help them install systems that can save them a lot of money,” said Griffin Dooling, chief executive officer of Minnetonka-based solar project developer Blue Horizon Energy. “We’ve found that $200,000 can be saved over the life of a system. … And $300 million of private investment has been stimulated by a similar program in Iowa.”

Micah Johnson, operations manager for Rochester-based Solar Connection, says his work installing solar systems has taken him across the border more frequently.

“I’m increasingly drawn to Iowa where there’s a state credit system,” he said. “Minnesota sends billions of dollars out of the state for energy. Imagine what we could do if only 5% of our energy were renewable. And small-scale solar is installed by local staff.”

Rep. Glenn Gruenhagen (R-Glencoe) asked if there was any independent analysis showing programs like this cause rates to rise for other customers on the grid.

Dooling replied, “The University of Michigan found in a study that having a higher penetration of distributed solar can lead to lower costs for that utility.”

Johnson added, “Studies are mixed on this, but those showing that rates go up are generally funded by fossil fuel companies, while those showing them going down are independent.”