Introduction
Solar rebates and incentives have long played a crucial role in advancing the solar and renewable energy industry. These incentives lower your investment and in most cases make purchasing a solar panel system more attractive for your home or business. This article covers the solar incentives available in Colorado at the federal, state, and local levels.
Links for all incentives are included with each description. All of our solar proposals come with eligible incentives based on your specific solar project — if you have questions about which incentives you may qualify for, reach out to us.
Federal programs & incentives
Federal Investment Tax Credit (ITC)
A taxpayer may claim a credit for a system serving a dwelling unit located in the United States that is owned and used as a residence by the taxpayer. Expenditures are treated as made when the installation is completed; for a new home, the "placed in service" date is the date of occupancy. Eligible expenditures include labor costs for on-site preparation, assembly, and original system installation, plus piping or wiring to interconnect the system to the home. If the credit exceeds your tax liability, the excess may be carried forward to the succeeding taxable year.
The home served by the system does not have to be the taxpayer's principal residence. Note that credit percentages have been legislated in steps over the years, so always confirm the current rate for your placed-in-service year.
Energy storage: the federal tax code does not explicitly reference energy storage, so stand-alone systems do not qualify. However, IRS Private Letter Rulings in 2013 and 2018 found that storage paired with a PV system met the statutory definition of a "qualified solar electric property expenditure" and was eligible. Private Letter Rulings apply only to the taxpayer who requested them and do not establish precedent — consult your accountant before claiming.
Source: energy.gov homeowner's guide to the federal tax credit
Modified Accelerated Cost-Recovery System (MACRS)
Under MACRS, businesses may recover investments in certain property through depreciation deductions. MACRS establishes class lives for various property types, ranging from three to 50 years. A number of renewable energy technologies are classified as five-year property.
Bonus depreciation has been sporadically available at different levels in different years. Effectively, you can depreciate your solar investment as long as you are a business.
Source: SEIA depreciation of solar energy property
USDA REAP Grant
The Rural Energy for America Program (REAP) provides financial assistance to agricultural producers and rural small businesses to purchase, install, and construct renewable energy systems, make energy efficiency improvements to non-residential buildings, and participate in energy audits and renewable energy development assistance.
Grants and guaranteed loans are generally available to small businesses and agricultural producers. Applicants must demonstrate sufficient revenue to cover operations and maintenance expenses plus any applicable debt service. Rural small businesses must be located in rural areas; agricultural producers may be located in non-rural areas.
Eligible project costs include the renewable energy system or efficiency improvements, energy audits or assessments, permitting and licensing fees, business plans, and retrofitting. Working capital and land acquisition are only eligible for loan guarantees.
| Program | Amount |
|---|---|
| Renewable grants | $2,500 – $500,000 (historically capped at 25% of project cost) |
Source: rd.usda.gov/reap
Colorado state incentives
Colorado Solar Sales and Use Tax Exemption
Colorado exempts from the state's sales and use tax all sales, storage, and use of components used in the production of alternating current electricity from a renewable energy source, for fiscal years beginning on or after July 1, 2006. The exemption includes photovoltaic (PV) systems, solar thermal electric systems, small wind, biomass, and geothermal systems.
Source: tax.colorado.gov
Colorado Solar Property Tax Exemption
Renewable energy personal property located on a residential-classified property, owned by the residential property owner, and producing energy used by that residential property is exempt from Colorado property taxation.
Source: cdola.colorado.gov
Local county, municipality & utility incentives
Xcel Energy net metering
Net metering is available to Xcel Energy customers, with net excess generation (NEG) at the end of a monthly billing period credited to the next month's bill. If a customer has NEG at the end of a calendar year, they will be paid for the credit at a rate comparable to the utility's avoided-cost rate, or they may make a one-time election to have the NEG carried forward month to month indefinitely as a kilowatt-hour credit.
Source: Xcel net metering
Xcel Energy Solar*Rewards
Solar*Rewards provides incentives for customers who install grid-connected PV systems sized up to 120% of the average annual load of their home or facility. Xcel purchases the renewable energy credits (RECs) produced by the system for 20 years. The size of the REC payment depends on the system size and owner.
| Program tier | System size | REC payment | Annual capacity limit |
|---|---|---|---|
| Small (standard offer) | 0.5 – 25 kW | $0.005 per kWh | 12 MW |
| Medium (standard offer) | 25.1 – 500 kW | $0.0375 per kWh | 24 MW |
Source: Xcel Solar*Rewards
Black Hills Energy Solar Power Program
Black Hills Energy offers a performance-based incentive (PBI) for PV systems up to 500 kW. In exchange for the PBI, Black Hills Energy earns the RECs associated with the generated electricity.
| System size | Incentive | Term |
|---|---|---|
| 0.5 – 30 kW | $0.030 per kWh | 10 years |
| 30.001 – 500 kW | $0.060 per kWh | 10 years |
Source: blackhillsenergy.com
San Miguel Power Association rebate program
SMPA provides rebates to residential and commercial customers installing PV, small wind, solar water heating, and other renewable systems on a case-by-case basis. Applicants must own the system — third-party leases are ineligible.
- Incentive: $0.50 per watt
- Maximum incentive: $1,500
- Maximum system size: 3 kW
Source: smpa.com
La Plata Electric Association
LPEA offers an incentive, not to exceed the cost of the system, to residential and small commercial customers who install a PV, wind, or hydropower facility. The system must be grid-tied and located in LPEA's service territory. Payments are made every six months for the first 10 years of operation.
| System size | Incentive |
|---|---|
| 10 kW-DC or less | Upfront incentive of $16 per kW |
| Greater than 10 kW-DC | Performance-based, paid every 6 months for 10 years (currently $1.00 per MWh) |
Source: lpea.coop
Holy Cross Energy WE CARE rebate program
Holy Cross Energy's WE CARE program (With Efficiency, Conservation And Renewable Energy) offers an incentive for customers who install renewable generation for net metering. Eligible technologies include wind, hydroelectric, photovoltaic, biomass, and geothermal.
| System capacity tier | Incentive |
|---|---|
| First 6 kW | $500 per kW |
| Next 6 kW | $335 per kW |
| Next 13 kW | $150 per kW |
| Energy storage up to 25 kW | $250 per kW |
For example, a 15 kW system is eligible for a $5,460 incentive. For non-taxable entities, Holy Cross provides an incentive equal to 40% of the installed cost of a system (on a per-kW basis) up to $1,000 per kW for the first 25 kW installed at a site.
Source: holycross.com
Colorado Springs Utilities rebate program
Through its Renewable Energy Rebate Program, Colorado Springs Utilities (CSU) offers a rebate to customers who install grid-connected PV systems. A de-rating factor is used to calculate AC output, accounting for shading and suboptimal orientation or tilt. All RECs generated under this program are transferred to CSU for compliance with Colorado's renewable portfolio standard.
- Incentive: $0.10 per watt
- Eligible residential systems: 0.5 kW – 15 kW
- Eligible commercial systems: 0.5 kW – 100 kW
Source: csu.org
City of Aspen rebate program
The City of Aspen encourages residents and businesses to increase the energy efficiency of homes and offices through rebates and incentives for both single-family and multi-family dwellings. Rebates cover geothermal heat pumps, solar photovoltaics, air sealing, insulation, water heaters, lighting, and refrigerators. Custom rebates are available but require pre-approval.
- Incentive: $0.75 per installed watt, up to 3 kW or $2,250
Source: cityofaspen.com
City of Boulder Solar Grant Program
The Solar Grant Program provides grants for PV and solar water heating installations on income-qualified homes, site-based non-profit organizations, and low- to moderate-income housing owned or developed by a non-profit. Individual grant amounts are determined case by case but generally will not exceed 50% of total out-of-pocket costs after all other rebates, tax credits, and incentives are subtracted. There are two grant cycles each year, with submissions due April 30 and October 31.
Source: bouldercolorado.gov
Summary
There are many Colorado solar incentives available. Ultimately, whether you qualify for each one comes down to the specifics of your project. For residential projects, the two most common incentives our customers qualify for are the federal tax credit (ITC) and Xcel Energy's net metering program. For business clients, the federal tax credit, MACRS, and net metering are the most common.
Find out exactly which incentives you qualify for
Every Solar Wave proposal includes the eligible incentives for your specific project, stacked and calculated.
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Steven Weaver
Steven is the founder of Solar Wave and has dedicated the last seven years of his career to the solar industry. After consulting for multiple solar companies across the US he founded Solar Wave in Denver, Colorado. Solar Wave is on a mission to continue the rapid deployment of residential and commercial solar in Colorado by offering the best solar equipment and installation services at the lowest prices possible.
