2022 Colorado Solar Incentives Guide (Tax Credits, Rebates & More)

In this EcoWatch guide on the solar incentives in Colorado, you’ll learn:

  • Whether local solar incentives are available in Colorado
  • How Colorado incentivizes low-income households to go solar
  • Which solar tax breaks Coloradans can take advantage of
  • How Coloradans can profit off of the solar energy their homes produce

This guide has helped thousands of Colorado homeowners save time and money when going solar by providing them with all of the latest incentives available in the area. Let’s get started!

Ecowatch Author Karsten Neumeister

By Karsten Neumeister, Solar Expert

Updated 9/18/2022

Why You Can Trust EcoWatch

Our solar experts have sifted through hundreds of local governments’ and utility companies’ websites to find accurate information about current solar incentives in each state. We’ve also unbiasedly ranked and reviewed hundreds of solar installers to empower you to make the right choice for your home.

 

Jump to Section:

  1. What Should You Know About Colorado’s Solar Market?
  2. Colorado Solar Rebate Programs
  3. Colorado Low-Income Solar Incentive Programs
  4. Colorado Solar Tax Exemptions
  5. Net Metering in Colorado
  6. Local Incentives
  7. What Do Coloradans Need To Know About the Federal Solar Tax Credit?
  8. FAQs: Colorado Solar Incentives

When you’re ready to speak with a qualified professional, follow the links below. Each of these companies can help you identify and apply for incentives available in Colorado.

Disclaimer: This article is for informational purposes only. It should not be relied on for and is not intended to provide accounting, legal or tax advice.

 

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What Should You Know About Colorado’s Solar Market?

Colorado is one of the best states in the country to install solar, with more than 300 sunny days each year and relatively low electricity rates. In fact, Colorado capacity to produce 24.7 million megawatt hours each year. However, the average cost to install a solar panel system in the state is $20,175, with a per-watt price of $2.69 and a typical system size requirement of 7.5 kilowatts to offset energy needs.

At over $20,000, going solar is prohibitively expensive for many Colorado homeowners. Luckily, the state and federal governments provide some solar incentives and benefits to help homeowners reduce the financial burden of converting to clean energy and to maximize the return on investment when installing panels.

Below, we’ll discuss all of the incentives available for home solar projects in Colorado and how they affect your costs.

Watch Below: U.S. Secretary of Energy Visits Colorado, Announces Millions of Dollars Towards Net-Zero Goal

 

What Solar Incentives Does Colorado Offer?

The table below provides a quick look at the top solar incentives in Colorado. We’ll include additional information for each incentive further down to help you understand how they’ll benefit you.

Colorado Solar Incentive Description
Federal Solar Tax Credit (ITC) The federal tax credit is available statewide and provides a credit to your federal income tax in the amount of 30% of your total cost of going solar.1 With the average cost to go solar in Colorado hovering around $20,175, the typical credit is $6,052.
Net Metering Net metering is a great billing option provided by utility companies and mandated by the State of Colorado. It helps homeowners with PV systems offset their energy costs when their panels overproduce power.2 CO’s net metering policy is one of the best in the country, and we’ll explain it in greater detail below.
Local Solar Rebates Colorado residents are a bit spoiled when it comes to local solar rebates. Many utility companies — including Xcel Energy, Colorado Springs Utilities and more — provide rebates for energy-efficiency upgrades, including solar panels.
Low-Income Solar Rebates Xcel Energy and the Colorado Energy Office both provide options for low-income solar customers, including per-watt deductions and more.
Sales and Use Tax Exemption for Renewable Energy Equipment Colorado waives sales tax on all solar equipment to reduce the upfront costs of converting to renewable energy.3 With a typical solar photovoltaic system cost of $20,175 and a state sales tax rate of 2.9%, the average homeowner saves a modest $585 when installing solar panels.
Property Tax Exemption for Residential Renewable Energy Equipment Colorado also has a property tax exemption that prevents your property taxes from increasing as a result of installing your solar system.4 In many cases, this exemption alone can save homeowners hundreds or even thousands of dollars over time, especially in higher-priced areas like Denver and Boulder.

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Colorado Solar Rebate Programs

According to the Solar Energy Industries Association (SEIA), Colorado is ranked 13th in terms of solar-friendly states.5 This high ranking is due in part to the many rebates provided to solar customers from local utility companies.

Colorado was one of the first states in the country to establish a Renewable Portfolio Standard (RPS), setting a lofty goal of producing around 30% of all of its power via renewable energy sources.6 Rather than providing a statewide solar tax credit as some other states do, the local utility companies are incentivized to provide residents to adopt solar.

Depending on your area and the utility company that serves you, you could be eligible for one or more of the solar rebate programs below:

  • Xcel Energy Solar*Rewards: Xcel Energy, the largest power company in Colorado, provides one of the best rebate programs in the state. Solar*Rewards is an incentive-based rewards program that provides rebates based on the kilowatt-hours of energy your system produces. Residential systems up to 25 kilowatts will receive a reward of $0.005 per kWh.
  • EnergySmart Colorado: EnergySmart provides a nice rebate program to several counties throughout Colorado, and many utilities partner with EnergySmart to bring this incentive to a wider audience. The rebate is for up to 25% of your total system cost or $2,500, whichever is lower.
  • Colorado Springs Utilities Renewable Energy Rebate Program: Customers of Colorado Springs Utilities are eligible for a rebate for systems up to 15 kilowatts, which is about double the size of the average system in Colorado. The rebate is for $0.10 per watt.9
  • Holy Cross Energy Renewable Energy Rebate Program: Holy Cross Energy customers can get a rebate of up to $250 per kilowatt for systems 6 kW and under, or up to $100 per kW for systems over 6 kilowatts in size.
  • Black Hills Energy Solar Power Program: Black Hills Energy customers have access to a rebate program that provides an incentive of $0.03 per kilowatt for systems under 20 kW. This incentive is paid out over 10 years.11

what incentive programs does colorado offer for solar

Colorado Low-Income Solar Incentive Programs

In addition to the many solar rebates available to Colorado homeowners, there are some programs that help make solar financing more accessible, specifically to low-income individuals and households.

  • Xcel Energy Solar*Rewards includes an upfront incentive of $2.00 per watt for income-eligible customers. With an average system size of 7.5 kilowatts in Colorado, most qualifying homeowners will get an incentive worth an incredible $15,000.
  • The Colorado Energy Office Rooftop Solar PV Program includes incentives that can save qualifying homeowners an estimated $400 per year via community solar and rooftop solar installations.12

Colorado Solar Tax Exemptions

While Colorado doesn’t provide access to a state solar tax credit, it has implemented two tax exemptions to reduce upfront and ongoing costs of going solar in the area.

First, the Solar Sales Tax Exemption prevents homeowners from having to pay sales tax on all solar equipment. With an average system cost of $20,175 and a state sales tax rate of 2.9%, most homeowners will instantly save around $585 thanks to this exemption.

Residents can also take advantage of the state’s property tax exemption. Under normal circumstances, any home improvement that bumps up your property value will also cause your property taxes to increase. Although solar panels make your home more valuable, the property tax exemption prevents your taxes from increasing as a result of converting to solar. This can produce massive savings in the long run.

Net Metering in Colorado

Net metering is a billing policy that lets you offset what you pay for supplemental electricity from the grid by overproducing energy with your panels. For example, when your panels fail to create enough energy for what your home is using, the grid will supply the difference.

When your panels create more than you need, you’ll send the excess to the grid. You’ll earn credits from your utility provider for the energy sent to the grid, which can be used to offset future electric bills.

Colorado has one of the best net metering programs in the country. Established in 2004 by the Colorado Public Utilities Commission (PUC), the net metering policy in CO states that your overproduction will be purchased for up to 120% of the retail rate from investor-owned utilities (IOUs), including Xcel Energy and Black Hills.

Essentially, your power company could pay you rather than the other way around! Colorado’s net metering policy makes solar a great investment for most homeowners, but you should still check the specific net metering details offered by your utility provider, as the minutiae can vary.

Local Incentives

Aside from the many benefits listed above — including the local rebates from utility companies — there are no additional local incentives afforded to Colorado residents.

See also: Find out how much solar power your roof can produce with our solar calculator

What Do Coloradans Need To Know About the Federal Solar Tax Credit?

As if the above benefits don’t provide enough reason to convert to solar, all Colorado residents also have access to the federal solar investment tax credit (ITC). The ITC is provided to all homeowners in CO and provides a credit in the amount of 30% of your total solar energy system installation cost. This averages out to an incredible $6,052 in Colorado, where the average system cost is $20,175.

U.S. homeowners are eligible for the 30% federal tax credit through 2032. The credit will decrease to 26% in 2033 and 22% in 2034 before it phases out in 2035.

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FAQs: Colorado Solar Incentives

Given the popularity of solar conversions in Colorado, the EcoWatch team gets inundated with questions about solar incentives, rebates and other benefits available in the area. Below are some of the questions we see most often, along with our responses. If you have specific questions that aren’t answered here, reach out to our team of solar experts at solar@ecowatch.com.

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Karsten Neumeister

Solar Expert

Karsten is a researcher, editor, writer and energy specialist focused on environmental, social and cultural development. Before joining EcoWatch, Karsten worked in the solar energy sector, studying energy policy, climate tech and environmental education. A lover of music and the outdoors, Karsten might be found rock climbing, canoeing or writing songs when away from the workplace.