Key takeaways


he state in the western part of the country has a lot of sunshine, making it a great location for solar. In recent years, the use of solar power has increased significantly here, with more and more people and businesses choosing to install PV modules to generate clean, renewable energy.

Renewable energy in Colorado: wind is in the lead, but solar gains traction

Colorado is one of the largest producers of fossil fuels in the United States: it ranks fifth in oil production and seventh in natural gas production, Energy Information Administration’s statistics show. But despite heavily relying on fossil fuels, the state is attempting to diversify its energy mix and increase the share of renewables, currently accounting for 35% of its total generation.

Wind is by far the most popular source of clean energy in the state, making up 27.9% of all electricity it produces. In 2021, Colorado had a total wind generating capacity of 5,019 megawatts, which is enough to power over 2 million homes.

Although wind is the state’s dominant source of clean solar power, solar is also gaining popularity. In 2021, Colorado had 1,054 megawatts of utility-scale solar power capacity, which ranked it 13th among US states. Another 750 megawatts are set to be added by the end of 2022. Small-scale solar power also continued to increase and made up almost two-fifths of the state's total solar generation, EIA reports.

Is it worth installing solar panels in Colorado?

Colorado has some pretty good solar resources, especially down south near the New Mexico border. With 300 sunny days and average sunlight of 4,960 kJ/m² per year, it lands in the 6th spot on the list of the sunniest states in the US. Additionally, the Centennial State state offers a lot of benefits for solar, including a favorable net metering policy and an exemption on property taxes for solar installations. This all makes it an excellent place for installing solar panels.

Top Colorado solar incentives

Colorado has set ambitious goals for renewable power, and solar is a big part of that. Therefore, the state has established a number of incentives to help residents get started with solar. Let's explore each of these solar perks in more detail.

Federal Solar Investment Tax Credit (ITC)

The Federal Solar Investment Tax Credit (ITC) is an incentive offered by the United States government to encourage individuals and businesses to invest in solar. It allows for a reduction in the taxes the taxpayer owes based on the amount of money invested in a solar system.

The Investment Tax Credit was first introduced in 2006 and has been extended multiple times. Currently, it allows for a 30% credit for the cost of the solar system, which can be applied to the taxpayer's federal income tax bill.

To apply for the credit, you must first install a solar system on your property. Once solar panels are in place, you'll need to fill out Form 5695 and submit it with your annual tax return. The form will require you to provide details about the cost of your solar installation, as well as any tax credits or deductions you've already claimed for energy efficient improvements. You'll also need to attach proof of your solar installation, such as a receipt or invoice.

Solar sales tax exemption

Residential solar systems in the state are also eligible for a sales tax exemption. This means that homeowners who install solar panels on their property can save money on the cost of the system by not having to pay sales tax on the purchase.

However, there are certain limitations to this exemption. It only applies to solar panels installed on a homeowner's primary residence and not on rental properties or vacation homes. Additionally, the exemption only applies to the purchase and installation of the PV equipment and not to any other costs associated with the project, such as permitting fees or utility interconnection charges.

To apply for the solar sales tax exemption, homeowners must provide proof of ownership of their primary residence and a signed contract for the installation of a solar system.

Explore the myriad incentives and rebates driving solar adoption across the nation with our comprehensive guide on Solar Incentives and Rebates. From the sun-kissed shores of Hawaii to the majestic peaks of Colorado, states are implementing a range of initiatives to encourage the transition to renewable energy.

Solar property tax exemption

In Colorado, householders who have installed solar panels on their property also may be eligible for a property tax exemption. This means that they can save money on their property taxes by not having to pay taxes on the value of the solar modules.

To qualify for this exemption, the solar panels must be used to generate electricity for the property owner's own use. The homeowner must apply for the exemption with their county assessor's office. If approved, the homeowner will be able to save money on their property taxes.

Weatherization Assistance Program (WAP) for solar energy systems

The Weatherization Assistance Program (WAP) is a program that helps low-income households save money by providing free energy saving improvements to their homes. This includes installing solar systems to generate clean electricity.

The program offers rooftop solar installations at no cost for residents with high energy burdens. It covers the cost of materials, labor, and other necessary expenses. Additionally, Colorado Energy Office (CEO) will cover the system's maintenance and repair costs for 20 years from the date of installation, allowing homeowners to own the solar system without worrying about those expenses.

On average, Coloradans participating in this program can expect to save around $400 per year on their energy bills.

Local solar perks: utility solar incentives & Boulder solar programs

Additionally, residents can make use of Colorado solar incentives offered on a local level, such as utility performance-based incentives (PBIs). For instance, the state's two major utilities offer PBIs for solar installations in exchange for homeowners' renewable energy credits (RECs) – credits issued to solar power producers to prove that they have generated a certain amount of clean energy, which can then be sold to others who want to offset their own carbon emissions.

Boulder citizens are lucky to have an additional set of solar incentives. In 2020, Boulder started a solar grant program that can cover up to half of a project's cost for families with four or fewer people and an income under $102,450. Plus, the city offers a rebate worth about 15% of its sales and use tax paid on materials and permits. The average rebate for a 4.5 kW setup is about $140.

Coloradans who want to install solar on their property may also be eligible for cash rebates such as EnergySmart Colorado: depending on where you live, you could qualify for a rebate ranging from $400 to $2,500.

Net solar energy metering

Colorado is among the states that have adopted a net metering program. Net metering is a billing tool that allows homeowners with solar panels to generate their own electricity and sell any excess energy back to the grid. Conversely, when a home consumes more electricity than the PV modules produce, it draws power from the grid. At the end of the billing period, the homeowner is charged for the net amount of electricity consumed, taking into account any excess electricity that was sent back to the utility.

How much can I cut my solar costs with solar energy incentives?

The cost of a solar installation in the state typically falls within the range of $14,700 to $20,000. However, generous incentives for solar power can greatly reduce the amount you pay for PV modules. So if you invest in a solar system costing $18,000, you can expect a tax credit of $5,400 for the tax year. Taking advantage of state and local rebates can add up to several thousand dollars in savings. There are even Colorado solar incentives that can assist low-income homeowners in obtaining a PV system at no cost.

Final thoughts on going solar in Colorado

With over 300 days of sunshine annually, Colorado solar panel is an ideal location for solar power. The state's high levels of sunlight make it possible to generate a significant amount of electricity, which can help cut utility bills and reduce dependence on the local grid.

Colorado solar incentives make switching to green power even more beneficial. Combined with a 30% federal tax credit, state and local tax exemptions and rebates can considerably reduce the upfront cost of going solar, making it more affordable for homeowners.


Key takeaways

Mar 23, 2023
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