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LBO: Solar and wind sales-tax exemptions likely support renewable uptake but data gaps limit attribution
Summary
The Legislative Budget Office told commissioners the solar and wind sales-and-use tax exemptions appear to contribute to Minnesota’s renewable-energy mix but cannot be isolated as primary drivers because of overlapping federal, state and private incentives and data limitations; LBO provided fiscal-impact estimates and agreed to provide further installation and beneficiary breakdowns.
The Legislative Budget Office presented a bundled evaluation of the solar energy systems and wind energy conversion systems sales-and-use tax exemptions, which are separate tax expenditures the office evaluated together for efficiency. Thomas Rainey and Carl Whitaker of the Legislative Budget Office described objectives adopted by the commission in March 2024 and explained the LBO limited the scope to distributed energy resources under 10 megawatts that are interconnected to distribution systems.
The LBO showed maps of installations by ZIP code and graphs of annual added capacity (solar installations rose sharply after 2016, driven in part by community solar gardens; wind installations rose earlier and are concentrated where wind resources are higher). ‘‘Capacity does not equate to output,’’ the LBO cautioned, noting many systems do not operate at full capacity.
Fiscal and distributional notes: LBO cited fiscal-impact estimates for FY2026 of roughly $10 million for the solar exemption and $12 million for the wind exemption (figures cited from presentation). The office estimated that a substantial share of the tax benefit accrues to higher-income households (based on federal clean-energy-claim patterns and available data). LBO also presented cumulative state/federal programs that overlap with these tax exemptions and said the data do not permit isolating the effect of the sales-tax exemptions alone.
Members asked for more granular breakdowns (commercial vs. residential vs. community solar, and interconnection/size categories) and for data distinguishing community solar gardens and other project sizes; LBO agreed to provide additional breakdowns using Public Utilities Commission and utility-provided data where possible.
Next steps: Commissioners directed staff to document the evaluation process and to request additional data and breakdowns from the Public Utilities Commission and utilities. LBO will supply more detailed beneficiary and program-type estimates to inform whether any statutory recommendation is warranted.
