As the graph below depicting the Swanson Effect shows, the cost of solar has dropped dramatically. It is now incredibly affordable and cost-effective to install and use solar in Colorado.
Colorado is a superstar in the world of renewable energies like solar. The state enacted the country’s first Renewable Portfolio Standard (RPS) in 2004, and it has been a leader ever since.
One downside to solar in Colorado is that the program has been so effective that rebates have all but disappeared. While there are some local utility and city rebates, the big rebates are gone. The good news? These missing rebates mean the Colorado solar program is working!
Let’s take a look at some of the great solar options available in Colorado.
The chart below gives you an idea of the costs and returns for each solar option available to Colorado residents— cash purchase, purchase with credit, and solar leasing. One important thing to note while viewing the chart: investing in solar energy in Colorado makes you money. Unlike states with weaker solar programs and lower energy costs, you’ll actually make money right away.
A cash purchase always delivers the most immediate, largest savings. With no loan payments, you immediately realize 100% of the energy savings, along with the 30% federal tax credit.
Considering an average purchase price of $17,500 for a 5kW system, you will receive a federal tax credit of $5,250 (30% of the net cost). So your first-year investment is only around $12,250!
Your energy savings the first year should be around $889. Taking into account the inflation of energy costs, your system should pay for itself in around 12 years. And by year 25, you should see a net profit of around $22,000!
Not a bad return. And remember that you are helping to provide good-paying, local jobs and doing your part to save the environment.
For most people, paying for solar with a home equity loan makes the most sense. Going this route, you not only get the 30% federal credit, you can also deduct the interest on the loan. You get all of the benefits and incentives without any cash out-of-pocket.
Let’s assume you have a home equity loan of 5% for a $17,500 system. While there will be a few years in the beginning when the loan payments are greater than the savings for energy costs, energy inflation will quickly outpace your loan payment.
With an average installation price of $17,500, a purchase on credit makes perfect financial sense. After year one, you should have about $889 in energy costs, and your loan payments should total about $1,661. This means you pay around $64 per month out-of-pocket your first year. But remember, you’re getting $5,250 in tax credits. That tax credit means you are $4479 ahead the first year!
By year 15, the loan is paid off. Then you will be realizing about $1,300 per year in savings. And by year 25, your total net returns are around $15,000—even after paying off the system!
If you would like a custom quote based on your energy use, click here.
Solar leasing is a great way to go solar if you are short of cash or don’t have the ability to take out a loan. As you can see in the chart below, the immediate returns are not as impressive. But energy costs in Colorado are relatively high (25th in the nation). And there’s the normal inflation of energy costs, so your savings multiply year after year!
In Colorado, you will start out with a relatively small savings of $16 per month. That multiplies over time, as you won’t pay anything out-of-pocket.
With solar leasing, you generally have two distinct options:
With standard leasing, you basically make a rental payment for a solar roof system. The system is installed on your roof and maintained by the solar company. Depending on the amount of sun you get, the lease payment plus the new, lower electric bill should be less than what you are currently paying.
With a Power Purchase Agreement (PPA), you agree to allow a company to install solar on the roof of your home. You then purchase the energy your panels produce at a substantial discount to the electric rates your home currently gets. As with a lease, the company maintains the system and assumes all risk. You just collect the savings.
Keep in mind that with a lease, you do not get the residual value of the system to your property, as you do not own it. You also do not receive any of the tax credits or other benefits of home solar ownership, other than lower energy costs.
A state’s Renewable Portfolio Standard (RPS) is a plan based on legislation or regulations. It outlines goals and targets for the production of renewable energy in the state. The RPS is the tool that encourages power companies to supply renewable energy, rather than using fossil fuels.
Though there are some states with stronger RPS guidelines, Colorado is the 5th in the nation, so that’s pretty strong. It has a mandate that by the year 2020, almost 30% of electricity should be generated by renewables. That’s pretty great!
Solar rebates have diminished greatly in the past few years, as the local utilities have come closer to reaching their goals of generating renewable energy. Updating the Colorado RPS to strengthen the goals should mean new rebates for the state.
Statewide, solar performance payments are nonexistent in Colorado, as are rewards for production of solar power. But some local utilities offer limited-time payments. Solar performance payments are bonuses paid to homeowners producing solar energy.
There are no state tax credits to encourage participation in Colorado. State tax credits are a win for both the state and the consumer. For the state, there is no out-of-pocket cost, and for the consumer, there is an incentive to participate.
Colorado has the nation’s 8th largest solar carve-out. This means that a certain amount of energy in the state must be generated by renewables like solar.
Net metering requires each utility to monitor how much energy is produced, and to credit you for any excess over what you use. Colorado has excellent net metering laws, crediting each surplus to the next utility bill indefinitely, or allowing some customers to receive the surplus as an annual payment.
Colorado has a fairly strong interconnectivity law, which governs what utilities can charge or demand—in return for hooking up to the grid. This is fairly simple and cost-effective in Colorado.
In Colorado, solar is exempt from state sales and property taxes. An exemption on state property tax, as well as no state sales tax on solar, means that your total cost is lower than states that charge taxes on renewable energy systems.
Just a few years ago, Colorado was a leader and innovator in energy policies, including solar and other renewables. Since the original goals have been met, the state has neglected a perfect opportunity to strengthen those goals and to increase the required amount of energy produced by solar.
Now is the perfect time to renew some of the original rebates and incentives. Then Colorado can once again be the nation’s leader in energy policy.