The complete list of Colorado solar incentives and tax credits for 2023, plus how to take advantage.
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Colorado gets more than the average peak-sun-hours in the U.S. and is also a great performer when it comes to solar incentives. The Centennial State offers both sales and property tax exemptions for solar, generous net metering policies, and various city-level rebates and grants.
Colorado Solar Incentives
|Colorado Weatherization Assistance Program (WAP)||Colorado residents with high energy burdens can apply to WAP to have rooftop solar PV installed for free|
|State sales tax exemption||Solar panels are exempt from the state’s 2.9% sales tax, but batteries, monitoring systems, and labor costs aren’t exempt|
|State property tax exemption||Colorado offers a property tax exemption for value added by solar|
|Net metering||Mandated net metering with credits rolled over month to month and an annual check for any outstanding credits|
|Utility performance based incentives (PBIs)||The state’s two main utilities offer PBIs for solar energy systems up to 500 kW, in exchange for homeowners’ renewable energy credits (RECs)|
|City-level incentives||The City of Boulder offers a solar grant and a solar rebate of up to 15% of the city’s sales tax|
Colorado’s Weatherization Assistance Program (WAP)
Colorado is the first state in the U.S. to be approved by the U.S. Department of Energy (DOE) to include residential solar into its Weatherization Assistance Program (WAP). This means that in Colorado, residents with high energy burdens can apply to WAP for financial help to install rooftop solar PV.
See also: The best solar installers in Colorado
For most residents approved for solar under WAP, there will be no cost to have solar installed on their rooftop. Other weatherization work may be included in the same project, such as roofing repairs and insulation. One huge advantage (other than free solar!) to WAP is that while homeowners own the installed solar energy system, the CEO WAP will be responsible for paying for any maintenance and repairs to the system for 20 years from the date of installation.
The Colorado Energy Office WAP administrators estimate that every client who installs rooftop solar can save at least $400 on their annual electricity costs. Eligible households include those paying more than 4% of household income on energy costs. To apply, homeowners must contact their local weatherization service provider.
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State sales tax exemptions in Colorado
Colorado offers a Sales and Use Tax Exemption for Renewable Energy Equipment. Unlike some states’ sales tax exemptions, this policy includes both the solar panels and any supporting structures or racks, inverters, and other system components. It doesn’t, however, include energy storage devices, remote monitoring systems, or the labor costs associated with installing the system.
Homeowners themselves don’t need to take any steps to receive the sales tax exemption for solar in Colorado. Instead, the exemption should be accounted for by the solar installer. If you see sales tax in a quote from a solar installer, check the math to ensure the exemption has been included for the panels and eligible hardware.
Given that the sales tax in Colorado is 2.9%, this is a decent saving on the cost of installing solar. In some municipalities, however, the sales tax rate can be as high as 11.2%, meaning even greater savings if local sales tax exemptions are also granted!
State property tax exemptions in Colorado
Colorado also offers a Property Tax Exemption for Residential Renewable Energy Equipment. This is for home solar arrays up to 100 kW and applies only to the value added to the property by installing solar, not to the whole property.
Colorado state law also allows county and municipal governments to incentivize solar installations by offering property tax or sales tax credits or rebates for homeowners who install renewable energy systems. To find out more, contact your county or municipality and ask about local exemptions.
Net metering in Colorado
Colorado offers a generous net metering policy requiring utilities to pay homeowners for net excess energy produced. This is apportioned as monthly bill credits or as an annual check for any outstanding credits at the end of the year.
Black Hills Energy offers a net metering program with two options: year-end cash-out or continuous rollover. Most customers choose the continuous rollover, likely because any extra kWh are carried over month to month, year after year. With the year-end cash-out option, any surplus exported energy at the end of the year’s billing cycle is paid out to customers at the avoided cost rate for the utility. This is much lower than the retail cost of electricity, meaning you’ll lose out if you draw more from the grid any given month than you put in.
Be aware that you will be automatically enrolled in the year-end cash-out option unless you opt into the continuous rollover program. Once you enroll in the continuous rollover option, you will not be allowed to switch to the year-end cash-out option.
Xcel Energy also offers net metering, with similar continuous rollover or year-end cash-out options. Both utilities also offer PBIs (see below).
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Utility PBIs in Colorado
Colorado’s two main utilities, Black Hills Energy and Xcel offer net metering as per state law. They also offer performance-based incentives (PBIs) for solar energy systems up to 500 kW, in exchange for your renewable energy credits (RECs).
Under the Black Hills Energy Solar Power Program, homeowners with systems sized 0.5 kW – 30 kW can earn $0.030 per kWh. The contract is for a 10-year period, during which the utility can claim all your RECs.
Xcel customer in Colorado can sign up for the utility’s Solar Rewards program which pays homeowners $0.005/kWh. Again, the trade-off is that you sign a contract to give Xcel your RECs – this time for 20 years.
Should the market for solar RECs take off in the state in the meantime, you may be out of pocket if you sign up for a PBI. On the flip side, at least with the PBI you guarantee the additional income for a decade or two. If you’re in an area serviced by both utilities, Black Hills Energy seems to me to be the better choice, given the difference in compensation and contract length.
City of Boulder solar incentives
Colorado is a fairly generous state for solar incentives, but the City of Boulder goes a step farther. Boulder created a home solar grant program in 2020 that can cover up to 50% of total project costs after rebates, incentives and tax credits for a family of four with an income below $102,450 a year.
The City of Boulder also offers a solar rebate worth approximately 15% of the city sales and use tax paid on materials and permits for a home solar installation. The rebate applies to solar water heat, solar photovoltaics, and solar pool heating and the average rebate is around $140 for a 4.5 kW photovoltaic system.
Final thoughts on state solar incentives in Colorado
Colorado makes it easy to go solar. If you live in the Centennial State, you can take advantage of a state sales tax exemption, advantageous net metering, PBIs, and property tax exemptions. Depending on where you live and your income, you may even be able to get solar installed entirely free or at least at a hefty discount. And if you install solar in Colorado before 2032, don’t forget your 30% federal solar tax credit!