Minnesota is clinging to an outdated net metering system for solar

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Minnesota’s energy future is transforming rapidly. Solar power is growing faster than any other type of generation, and the state’s recent carbon-free electricity mandate for 2040 ensures continued expansion. However, outdated policies like net metering are raising costs, creating an inequitable burden on many households and slowing our progress toward a sustainable, carbon-free future.

Net metering was established in 1983 to support the solar industry when systems were expensive and adoption rates were low. The policy allows homeowners with solar panels to sell excess electricity back to the grid at retail rates — the same price utilities charge consumers. This high reimbursement policy was understandable when solar needed help to get off the ground, but today, with costs dropping and adoption rising, Minnesota has a robust solar market that no longer needs this subsidy, especially considering the inequitable effect it has on many of Minnesota’s lower-income households.

At its core, net metering allows solar panel owners to use the electric grid like a savings account. When their panels produce more electricity than they use, the extra power flows back to the grid, earning them credits they can save for later. Then, when their panels aren’t producing enough — like at night or on cloudy days — they spend those credits to offset their energy costs. The problem is that net metering forces cooperative and municipal utilities — nonprofit entities that serve their communities — to buy excess power from homeowners’ overbuilt systems at retail rates, even though utilities could purchase power at a lower wholesale price. This cost difference is passed on to all consumers, raising electricity rates for everyone. The burden falls hardest on lower-income families who cannot afford solar installations, effectively subsidizing wealthier homeowners who can.

The inequity of net metering is further highlighted by abuses of the structure that continue to get worse as solar adoption grows. That is because our current law encourages owners to build a system much larger than necessary for their own needs in order to create passive income. Those installing solar assume they are making money from the “big utility,” but in reality, at your not-for-profit cooperatives and municipals, the extra money comes from other ratepayers — consumers are making money off their neighbors.

Oversized systems create unnecessary strain and limitations on the grid. Cooperative and municipal utilities must still maintain power lines, substations and backup infrastructure to ensure reliable service — regardless of how much solar energy is being exported back. Those fixed costs don’t go away just because someone generates excess solar power. In fact, oversized systems can add complexity to the grid, and limit where other solar systems can be installed.

Large-scale solar installations produce clean power at a much more affordable cost than rooftop solar and are strategically placed by utilities to provide stable, reliable energy. Meanwhile, scattered rooftop solar installations add complexity to the grid, being installed in locations that were not selected by the utility and are not necessarily generating power when energy demand is highest. Utility-scale solar aligns better with Minnesota’s energy goals, making our transition to 100% carbon-free power more efficient and affordable.

Cooperative and municipal utilities often work closely with solar companies to find solutions that benefit all consumers, balancing affordability with renewable energy growth. We fully support the right of individuals to self-generate their own load. Updating net metering ensures fairness. Under our proposed bipartisan reforms, homeowners will still receive retail credit for solar energy they use to offset their own consumption. Only excess power — beyond what they need — would be compensated at market rates, aligning with the original purpose of net metering.

This is not a partisan issue — it’s a pocketbook issue. And it’s a fairness issue. Electricity customers shouldn’t have to pay more just so a wealthier neighbor can make a profit.

Minnesota has always been an energy innovation leader. Reforming net metering will keep us at the forefront of renewable energy policy while protecting lower-income families from unfair cost shifts. Modernizing this policy strengthens the grid, keeps electricity rates fair and accelerates our transition to a cleaner energy future for all Minnesotans.