2022 Colorado Solar Incentives, Tax Credits, Rebates (And More)
Here’s a quick look at the solar incentives in Colorado:
- Federal Solar Tax Credit (ITC)
- Net Metering
- Sales and Property Tax Exemptions
- Additional City & Utility Rebates
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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. 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.
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.
Current Solar Rebates, Tax Credits and Incentive Programs in Colorado
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 26% 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 $5,246.|
|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.|
Colorado Solar Rebate
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.7
- 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.8
- 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.10
- 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
Other Colorado Solar Incentives
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 Sales and Property 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.
Aside from the many benefits listed above — including the local rebates from utility companies — there are no additional local incentives afforded to Colorado residents.
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 26% of your total solar energy system installation cost. This averages out to an incredible $5,246 in Colorado, where the average system cost is $20,175.
The federal tax credit for home solar projects will dip to 22% in 2023, meaning it’s best to install solar as soon as possible to take full advantage. While the commercial ITC will still be available at 10% in 2024, it will disappear for residential solar customers unless renewed by Congress.
FAQ: 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.
Colorado does not have a state tax credit at this time, as the state promotes conversion to solar instead by having local utility companies provide rebate programs for solar panel installation. There are many rebates available throughout Colorado from some of the largest utility companies in the state, so most homeowners should be able to take advantage of one or more rebates to offset their cost of conversion.
There will not be a state tax credit in Colorado in 2022, but residents can still take advantage of the many other incentives available. Namely, the federal tax credit is available to all Colorado homeowners, there are several rebate programs offered by the largest electric providers in the state, and Colorado has one of the best net metering programs in the country, which can improve your energy savings, eliminate your electric bills and even let you see a profit.
Colorado is scattered with rebates for solar conversions, most of which are offered by local utility companies. Below is a brief list of the most popular solar rebates in CO, and you can read about these in greater detail above.
Xcel Energy: $0.005 per kWh for renewable energy systems up to 25 kW
EnergySmart Colorado: Up to 25% of your total system cost or $2,500, whichever is lower
Colorado Springs Utilities: $0.10 per watt for systems up to 15 kilowatts
Holy Cross Energy: up to $250 per kilowatt for systems 6 kW and under, or up to $100 per kW for systems over 6 kilowatts
Black Hills Energy: $0.03 per kilowatt for systems under 20 kW, paid out over 10 years
Thankfully, solar panels will not increase your property taxes in Colorado. Typically, any home improvement that improves your property value will also cause your taxes to go up. While solar panels do bump your home value, Colorado’s Property Tax Exemption prevents your non-educational property taxes from increasing as a result of going solar.