Colorado Solar Incentives and Rebates Guide
Key Takeaways
- The beautiful state of Colorado has plenty of local incentives to take advantage of—helping to reduce the overall carbon footprint and installation prices.
- Federal incentives such as the federal solar tax credit offer residents of Colorado a 30% tax credit through the year 2032.
- Local programs like rebates and loans help reduce installation costs while tax exemptions encourage solar panel installations.
- Net metering can help Colorado residents save on their electric bills by making use of their excess solar-panel-produced energy.
Known for its sunshine and mountains, the state of Colorado harnesses its clean energy and efficiency initiatives by offering its residents plenty of opportunities to install solar and reduce costs.
Local, state, and federal programs include grants, loans, and tax exemptions that help bring the cost of solar equipment down to a reasonable amount. This way, residents and businesses can get back to enjoying the outdoors while knowing their electricity bills and overall cost of installation are both reduced.
The Database of State Incentives for Renewable Energy (DSIRE) explores some local and state-level incentives. Let’s dive in.
Colorado Solar Incentives
At the state level, Colorado offers solar tax exemption and property tax assessments. This encourages homeowners and residents who are looking to make the switch but may be hesitant due to high costs.
Local Solar Sales Tax Exemption
Offered as a local sales tax incentive, this Solar Sales Tax Exemption program can encourage those who are looking to install solar equipment but are concerned about the cost.
Residential Renewable Energy Equipment
The Renewable Energy Property Tax Assessment applies only to the commercial, industrial, and agricultural sectors and is offered by the Colorado Department of Local Affairs. The property tax incentive amount varies and applies to solar photovoltaics and solar thermal electrics.
On the other hand, for residential property owners, the Property Tax Exemption for Residential Renewable Energy Equipment provides a 100% property tax exemption for a renewable energy system. This means that if Colorado homeowners install solar panels that produce energy for use on-site, the facilities will be exempt from taxes.
Interested applicants should investigate the requirements for this tax exemption.
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Local Incentives
From Boulder to Denver, financial incentives are available to ease the burden of solar system costs. Residents of Boulder, the Roaring Fork Valley, Aspen, and Colorado Springs have access to grants and rebates to reduce solar installation costs and equipment costs in general.
City of Boulder
In Boulder City, low-income residents, multifamily-home residents, and nonprofits can access a grant program for a solar panel system. The program offers up to 50% off the cost of the technologies or a $8,000 cap.
The incentive amount is $1 per watt based on the system’s capacity, and the grants are considered on a case-by-case basis.
The City of Boulder offers up to a 15% refund on sales and use tax for solar energy technologies, including solar water heat, solar photovoltaics, and solar pool heating for both the commercial and residential sectors.
Energy Smart Colorado Energy Efficiency Rebate Program
This local incentive program includes rebates for renewable solar systems between $500 and $2,500 for the residential, commercial, and government sectors. Each county that participates in Energy Smart Colorado establishes an Energy Resource Center to help potential solar investors connect with licensed and approved solar vendors. It offers other resources, too.
The program also provides utility rebates for customers of utility providers, including City of Aspen Electric, Black Hills Energy, and others.
City of Aspen Rebate Program
According to DSIRE, the City of Aspen offers its residents a certain percentage of the total solar project cost with a financial cap depending on whether the applicant is single or commercial and multi-family.
Colorado Springs Utilities Rebate Program
The Colorado Springs Utilities offers a Commercial Energy Efficiency Rebate Program specifically for business customers who are residents of the City of Colorado Springs. Businesses, schools, and multi-family residential buildings are eligible for solar rebates under this program.
Additionally, solar photovoltaic appliance recycling is an eligible renewable technology. Rebate eligibility depends on the size, capacity, and sometimes the efficiency of the equipment installed.
Federal Incentives for Solar Panels
Federal Solar Tax Credit
Colorado solar incentives are not limited to state and local. The Inflation Reduction Act of 2022 introduced the federal solar tax credit, or investment tax credit (ITC), available to all U.S. homeowners (businesses qualify for federal tax credits, too.) This program offers a 30% tax credit for solar systems installed between 2022 and 2032. Homeowners installing solar systems in 2033 can receive a 26% tax credit, while those installing in 2034 will get a 22% tax credit. Importantly, this federal program has no financial limit, allowing individuals with large solar installations to maximize their savings.
Federal Solar Investment Tax Credit
| Through 2032 | 30% |
|---|---|
| 2033 | 26% |
| 2034 | 22% |
Modified Accelerated Cost-Recovery System (MACRS)
Another federal financial incentive is the Modified Accelerated Cost-Recovery System (MACRS), and it affects the commercial, industrial, and agricultural sectors. Provided by the U.S. Internal Revenue Service (IRS), MACRS is a method in which a business’ investments in tangible property are recovered, for tax purposes, over a certain period through annual deductions. That period for solar energy systems is five years. This system can help businesses regain costs associated with property investments.
Energy-Efficient Mortgages
This loan program is for homeowners who are looking to buy a new home or improve their energy efficiency for their existing home. These mortgages are funded through the Federal Housing Authority and can be a great help for homeowners who may otherwise be unsuccessful in securing a mortgage.
The stipulations include that the loan itself cannot exceed the overall expected savings as a result of these energy efficiency improvements. ENERGY STAR partners with lenders in hopes of allowing energy-efficient mortgages to reach a greater number of eligible residents. This partnership allows for dual promotion and helps lenders achieve credibility by association with ENERGY STAR.
In addition, the U.S. government’s Business Energy Tax Investment Credit (ITC) is a corporate tax credit for industrial businesses, investor-owned utilities, corporate utilities, and the agricultural sector, among others.
Colorado Net Metering
When it’s very sunny out, your solar system panels may generate more energy than you consume, especially if you work outside your home. Within this time, residents are not charged anything since they are producing their own energy. Then, at night or on cloudy days, residents are charged at their regular rate of electric usage. The excess energy that was produced and stored would be credited to the customer’s next bill at the regular retail rate.
For certain Colorado residents, the end of each calendar year provides a chance to roll over unused credits or receive payment. In this way, residents are making sure no solar-produced energy goes to waste.
C-PACE Financing
The Colorado Commercial Property Assessed Clean Energy (C-PACE) Program enables commercial and industrial building owners to finance up to 100% of any energy-saving efforts, including the installation of solar panels. It includes a repayment period of up to 25 years. There are no minimum or maximum project financing amounts, but a typical C-PACE project ranges from $200,000 to over $1 million.
Impact of Payback Period on Solar
Colorado residents may wonder when they will start seeing their solar panels generate a payoff. A payback period is the length of time it takes for the savings generated by an investment to match its cost. With incentives like loans and grants, the payback period may be reduced.
Ultimately, solar payback periods depend on the size of the installation and local electricity rates. When figuring out your payback period, consider your incentive eligibility, the cost of your solar power system, and average local electricity rates.
| Typical 6kW solar system installation cost | $17,700 |
|---|---|
| 30% Federal Tax Credit | $5,310 |
| Total Cost After Incentives Not including local incentives, which vary | $12,390 |
| Assumed Electricity Produced by a 6kW Solar System in Indiana | 10,235 kWh |
| Annual Electricity Cost Reduced or Offset Assuming 100% utilization by the home | $1,481 |
| Sample Payback Period | 8 years |
Sources: https://www.nrel.gov/docs/fy22osti/83586.pdf, https://globalsolaratlas.info/map (Denver); https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a
Conclusion
Residents of Colorado have no shortage of financial incentives to take advantage of when it comes to lowering their solar panel installation costs and their energy costs. Between locally offered rebates and loans, and federal and state programs, there are numerous opportunities to make solar energy a more affordable option.