Solar Electricity

Five 200-watt solar panels is 1000 watts or 1 kilowatt (kW).

One kilowatt of solar electricity that is completely un-shaded at all times of the year will produce around 1100 kilowatt-hours per year (kWh/yr) – the average Minnesota home uses 8400 kWh/yr but it varies significantly by user.

A grid-connected solar electric system does not need batteries. The system will instantaneously buy or sell electricity to the power company as needed - you do not necessarily need to offset all of your power with solar electricity.

Solar Electricity Incentives

	Description	Individual	Business	Non-taxable*
State Rebate	$2,000/kW up to $10K ( expires 12/31/07 )	X	X	X
Utility rebate**	$2,000/kW up to $4K	X	X	X
Federal tax credit***	30% of costs ( 1/1/06 - 12/31/07)	X	X
State sales tax	Exempt	X	X
Depreciation	Accelerated		X
Federal production Tax credit	1.9 cents/kWh ( expires 12/31/05 )		X
Net metering	Retail credit	X	X	X
Local property tax	Exempt	X	X

* Non-taxable entities include non-profits, schools, government, tribes, etc.

** Currently only MN Power & Great River Energy. Others may on a case-by-case basis.

*** 30% of costs after rebates and sales tax exemption; $2000 individual limit, no business limit

Solar Electric Example:

2 kilowatts in Duluth or Minneapolis purchased and installed by a solar dealer in 2006 or 2007

	Duluth			Minneapolis
	Individual	Business	Nontaxable	Individual	Business	Nontaxable
Initial Cost	$17,000	$17,000	$17,000	$17,000	$17,000	$17,000
State Rebate	-$4,000	-$4,000	-$4,000	-$4,000	-$4,000	-$4,000
Utility Rebate	-$4,000	-$4,000	-$4,000	-	-	-
Federal tax credit	-$2,000	-$2,451	-	-$2,000	-$3,651	-
Sales tax*	-$829	-$829	-	-$829	-$829	-
Depreciation**	-	-$2,002	-	-	-$2,982	-
Final Cost	$6,171	$3,718	$9,000	$10,171	$5,538	$13,000
Reduction	-64%	-78%	-47%	-40%	-67%	-24%

* Assumes 75% of total cost is subject to 6.5% sales tax

** 35% federal tax bracket less rebates, sales tax exemption, and tax credits; no MN tax saving

Solar Thermal

Depending on the set-up and the fuels used for space or water heating, solar thermal systems can offset electricity, natural gas, propane, or other sources.

You will still need a back-up source for space or water heating – solar will offset higher percentages in summer and lower in winter. The amount of energy you can offset will depend on the size and shading of your system and your heat storage option(s) (see “Resources” below).

Solar thermal systems sold or installed in Minnesota must be done according to Solar Rating Certification Corporation (SRCC) requirements. We are familiar with those requirements.

Solar Thermal Incentives

	Description	Individual	Business	Non-taxable
Utility rebate*	TBD	X	X	X
Federal tax credit**	30% ( 1/1/06 – 12/31/07 )	X	X
Depreciation	Accelerated		X
State sales tax	Exempt	X	X

* No standard programs exist but some utilities could offer rebates on a case-by-case basis.

** 30% of costs after rebates and sales tax exemption; $2000 individual limit, no business limit

Solar Thermal Example:

2 solar thermal panels in Minnesota purchased and installed by a solar dealer in 2006 or 2007

	Individual	Business	Non-taxable
Initial Cost	$6,000	$6,000	$6,000
Federal tax credit	-$1,712	-$1,712	-
Sales tax exemption*	-$293	-$293	-
Depreciation**	-	-$1,398	-
Final Cost	$3,995	$2,597	$6,000
Reduction	-33%	-57%	-

* Assumes 75% of total cost is subject to 6.5% sales tax

** 35% federal tax bracket less rebates and sales tax; does not include MN tax depreciation

Tax Incentives References

1. Federal Solar Tax Credit Information ( www.seia.org )

The 30% solar tax credit is for expenditures on solar systems “placed in service” on or after January 1, 2006 through December 31, 2007 . Costs incurred in 2005 are believed to be eligible if the system is “placed in service” in 2006. However, the IRS guidelines have not been released as of 9/1/05 - consult a tax advisor about your particular situation.

2. Depreciation Information ( www.irs.gov publication 551, p5)

Accelerated depreciation is available for business investments in solar energy. Home-based businesses may qualify if it is your primary business location. The depreciation basis is after state/utility rebates, sales tax exemption, and tax credits. Consult a tax advisor about your particular situation.

3. Are state/utility rebates taxable income? ( www.irs.gov form 525, p28)

“You can exclude from gross income any subsidy provided, either directly or indirectly, by public utilities for the purchase or installation of an energy conservation measure for a dwelling unit.” The Minnesota Solar Rebate Program is funded by Xcel Energy, a public utility. There is strong evidence that utility rebates for residential solar thermal and solar electric projects may be nontaxable. However, the IRS has not ruled definitively on this issue – consult with your tax advisor.