Net metering in Minnesota: What to know

Net metering in Minnesota: What to know

June 26, 2023 Uncategorized 1
Residential Solar | Wolf Track Energy

Northlanders considering adding solar panels to their home or business should probably understand net metering in Minnesota.  

The net metering law, adopted by the state in 1983, governs how utilities compensate solar system owners for the energy they send to the grid. It’s what allows solar systems to drive down the cost of a customer’s monthly power bills.  

But how exactly does net metering in Minnesota work? Let’s break it down.  

What is net metering? 

Grid-tied solar systems generate electricity that is either used by the customer in real-time or sent back to the grid. 

Let’s take an example of a typical residential system that doesn’t have any batteries.   

Say the sun is shining and the homeowner isn’t there. The electricity flows from the solar panels, through the customer’s meter and back onto the grid for someone else to use. When this happens, the customer’s meter spins backward, reducing the amount of kilowatt-hours they’re charged for on their bill.  

When the customer is at home on a sunny day, the energy produced by the solar panels is powering their devices, meaning they’re less reliant on the power company for electricity. The customer will still need to rely on the grid when they’re using more energy than the system can provide, and after the sun goes down.  

By generating their own energy, solar customers don’t have to buy as much from the power company, reducing their bills.  

But what happens when a customer’s system produces more than what they used from the grid during a given month?  

Getting paid for power 

Under Minnesota’s net metering law, customers with systems that clock in at less than 40 kW (roughly 100 panels), “can elect to receive the Average Retail Utility Energy Rate for net energy sold to the utility at the end of the billing period, typically at a date set every month,” according to the Minnesota Public Utilities Commission.  

The average retail rate is based on a specific formula that takes into account aspects of the utility’s financials. Each utility has its own rate, and it usually ends up being a little less than what the customer pays for each kWh.  

Customers may choose to have their credits for excess energy come in the form of a rollover credit on their next bill or a direct payment from the power company.  

The rollover credits are convenient, but they typically come with a catch: unused credits expire at a certain point. In Lake Country Power’s case, credits that haven’t been used by the end of the year will go unused.

Another note: Municipal utilities and co-ops may charge solar customers a monthly fee.

Solar ROI 

With net metering, customers with solar systems installed on their home or business see their power bills reduced. Over time, those savings should cover the initial cost of installing the system, and then some.  

Typically, we predict it will take 10-15 years for a solar system to pay for itself. That should come well before the system is decommissioned – a typical solar panel power warranty is 25 years.  

One of the major factors in determining the solar ROI is future rate increases from the power company. If electricity rates climb, the energy produced by a solar system becomes more valuable and customers’ savings increase. 

Our proposals predict a 3% annual increase in electricity rates. Be sure to ask your solar installer about their rate assumptions – it can make a big difference in the anticipated payback period.  

Net metering in the U.S.  

Minnesota is one of 33 states, as well as the District of Columbia, that has state-mandated rules for net metering, according to Solar Power World. Solar Reviews gave Minnesota’s net metering program an “A, noting that its rules cover all utilities, regardless of size.  

Wisconsin, meanwhile, received a “D” grade for its net metering laws. Solar Reviews says the credits customers receive vary across the state, and utilities have a lot of latitude in determining how much they pay for excess energy.  

Long story short: Minnesota has a great net metering program that has boosted solar installations for years.  

Minnesota has long been pushing renewable energy development. Earlier this year, Gov. Tim Walz signed a law requiring utilities to offer customers 100% clean energy by 2040. The Legislature also required investor-owned utilities to procure a certain amount of energy through distributed generation like residential solar by 2030.  

Understanding net metering  

Hopefully this explainer helped you understand net metering in Minnesota and how it can save solar customers money on their power bills.  

If you’re interested in learning how you can take advantage of solar energy, give us a call

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  1. […] the system is installed, the school reaps the benefits of reduced utility costs. […]

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