Residential Solar Power in Colorado

We've dug deep into CO's state incentives and built a complete guide to solar power options for the residents of Colorado

Solar Power in Colorado

With more and more evidence of the negative effects of greenhouse gasses on the environment, conversion to cleaner renewable energy sources is on the rise. One of the more popular options these days is the use of solar panels for electrical power. Solar power in Colorado is currently on the rise due to favorable policies that do not limit the number of potential users. In addition, General Electric (GE) is planning on building an entire solar panel plant in Aurora. Not only is solar great for the environment, it could also be great for your wallet. Converting to solar power for your home could save you thousands and adds value to your home. Why would you continue to pay the utility companies for what you could produce yourself? Here are the basics of everything you need to know in order to make an informed decision about installing solar panels on your home in Colorado.

First of all, there are three main categories of information that you should be familiar with. These are:

  • Solar Purchases, Solar Loans, and Solar Power Purchase Agreements (PPA): These are the various financial options that you have in Colorado.

  • Solar Policy: These are the rules set by the state legislature and public utility commission that determines how easy it is to go solar in Colorado. They govern everything from renewable energy mandates to the rates you receive for the extra energy that your system produces.

  • Solar Incentives: These are the financial benefits that you receive for going solar, such as money-back rebates, grants, tax credits, and tax exemptions.

Colorado Solar Purchases, Solar Loans, and Solar PPA

You have three main options when considering installing solar panels on your home, and that is whether to buy the whole solar system, take a solar loan (which is essentially like a car lease), or make a power-purchase agreement.

Colorado Local Rebates & Credits:

Local RebatesVaries by utility provider
Tax CreditsNone :(
Performance PayoutsVaries
Property Tax Exemptions100%
Sales Tax Exemptions100%
To get more specific data for your home, enter your zip code:
  • Solar Purchases: If you were to purchase the whole system today, it would cost you about $17,500. A total purchase of a solar system in Colorado will technically provide the biggest financial return and will pay itself off in a few years due to available rebates and tax exemptions. Over 25 years, your system will have produced nearly $18,000 in income, after your system cost is paid back. The reason this works is that solar offsets your electricity cost. However, a majority of people do not have the $17,500 to buy a solar system up front. Luckily, there are solar loan options available.

  • Solar Loans: These are the best option when it comes to the percentage return on your investment. This is due to the fact that you are using someone else's money for the purchase price, which is then paid back over time. If you have equity in your home or can get a large loan with an interest rate of 5% or less, a loan is the best option to go with. You will still receive the 30% federal tax credit and the energy bill savings that come along with it. However, your loan payments will initially be higher than the energy bill savings, but the difference will come down each year as electricity prices rise. Currently, the net present value of solar investments in Colorado is +$4,676 for solar loans and +$1,563 for solar purchase.

  • Solar PPA: A power-purchase agreement is the cheapest and easiest way to get involved with solar. With a power-purchase agreement, you are essentially leasing solar panels from a third party solar company. You put $0 down and pay about $756 per year in Colorado. With this option, you save about $133 because you would normally pay $990 to the utility company. The perk of doing a PPA is that the company owns the panels and will do all the maintenance for you. Out of all three options, a PPA has the second best NPV at +$2,127.

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Colorado Solar Policy

When it comes to the availability of access to solar power, state legislatures, and public utility commissions can enact rules to make solar power accessible for everyone. Luckily, Colorado has some of the best solar policies out there. There are four main categories of rules and policies to be aware of:

  • Renewables Portfolio Standard (RPS): This requires utility companies in the state to eventually source at least a certain percentage of their electricity from clean, renewable sources like solar. Colorado was the first state to pass an RPS and has one of the most ambitious goals of 30% renewable energy by 2020. As well, they also mandate that 3% of retail sales must come from distributed generation, such as residential solar. This is great because it forces the usually unwilling utility companies to aid in the transition to solar.

  • Electricity Price: Currently the average price of power in Colorado is about $0.12 for a kilowatt-hour of electricity, which is about even with the national average. The reason that electricity is so cheap at the moment is fossil fuels. But like addressed in the beginning, they are a non-renewable, harmful source that will only dwindle in availability, meaning the price of electricity can only go up.

  • Net Metering: This requires your utility company to monitor how much energy your solar power system produces and how much energy you consume. They use this to make sure that you get the full retail rate for any surplus energy you produce. This credit is applied to your bills for up to 12 months and at the end of the 12 months billing period, they pay you for any remaining energy at an avoided-cost rate. Colorado happens to have one of the best net metering policies.

  • Interconnection Policies: Interconnection policies allow you to connect to the electrical grid with solar panels on your roof. If you are looking to have solar panels on your single home, you should have no problem connecting, with no application fees, if your system is 10kw or less. If your system is larger than 10kw, you will not be required to install a redundant external disconnect switch or be required to purchase additional liability insurance. Overall, Colorado has pretty smooth and easy interconnection policies, but they could improve by eliminating solar farm size restrictions and requirements needed to get additional insurance for solar installations.

Colorado Solar Incentives

When it comes to the perks of installing a solar system on your house, Colorado has four main types of incentives you may have the ability to secure:

  • Solar Power Rebates: Some state legislatures provide rebates for solar panel purchases to branch on investment and create new jobs. If you purchase the solar panel system yourself, you qualify for this free cash, which is generally a large payment back to you. Some solar installers like to take this amount directly off the total installed price, and they'll handle the paperwork for you to make things a lot less complex. Unfortunately, Colorado offers few rebate options now for solar systems. However, the cities of Aurora and Lakewood will refund 100% of the solar installation permit fee.

  • Solar Power Tax Credits: State tax credits are not technically free money. They are 'credits' and not 'deductions' which means that if you have the knowledge of taxes, you can take advantage of them. They could essentially be a 1-to-1 dollar amount off your taxes instead of a fraction of the cost of the system. Colorado does not offer any personal tax credits for solar panels. However, there is still the 30% federal tax credit that does not expire until 2021.

  • Solar Power Performance Payments: These are essentially small payments for each kWh a solar system produces. In Colorado, only one power company will pay you based on your energy produced, and that is Xcel. They will pay you $0.02 for every kilowatt-hour of solar energy produced. This adds up to about an extra $140 per year.

  • Property Tax Exemption: Property tax exemption status is a large factor when putting together your investment considerations. It is argued that solar power adds approximately 20 times your annual electricity bill savings if you happen to own the system. In Colorado, they cannot charge you more property tax if you add solar to your house. In turn, your home will be worth much more if you decide to sell your home. Many average-sized solar power systems on a can mean $20,000 to your home value, giving you an extra incentive of you are considering selling your home at some point.

  • Sales Tax Exemption: Most things that you purchase have a sales tax that is an extra small fee just for purchasing the product. Luckily in Colorado, there is no state sales tax on the purchase of home solar panels. This will essentially save you %7 or more on your purchase.

The Future of Colorado Solar Power

When it comes to deciding whether or not to invest in solar power for your home in Colorado, there is a lot to consider. In general, getting involved in solar power in Colorado is a great idea. They have a strong RPS program that makes sure that Colorado's utilities have to help you get into solar. They offer sales and property tax exemptions along with a solid net metering program, ensuring that you will be able to save some money with the installation. You can eventually make money back from excess power produced, but only if your energy provider is Xcel. The more people that invest in solar, the stronger it can grow and affect policies. Not only is solar power a great investment financially, it is also a great investment for the health of this planet.

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