The complete list of New Mexico solar incentives and tax credits for 2023, plus how to take advantage.
Table of Contents
- State solar tax credit in New Mexico
- Sustainable building tax credit
- State sales tax exemption for solar in New Mexico
- State property tax exemptions in New Mexico
- New Mexico special assessment for solar installations
- SRECs in New Mexico
- Local solar incentives in New Mexico
- Net metering in New Mexico
- Final thoughts on state solar incentives in New Mexico
For anyone holding out for New Mexico to reintroduce its solar tax credit, March 2022, was a great month! The state’s governor brought back the New Solar Market Development Tax Credit, adding to other solar incentives in New Mexico.
New Mexico Solar Incentives
|State solar tax credit||The new Solar Market Development Tax Credit – a 10% tax credit, worth up to $6,000|
|Sustainable building tax credit||Homeowners and businesses building sustainably or renovating for energy efficiency can claim tax credits worth up to $3,000, or up to $6.50 per square foot|
|State property tax exemption||New Mexico exempts most residential solar energy systems from property tax increases|
|Renewable Energy Certificates (RECs) in New Mexico||New Mexico allows for residential customers to sell RECs to utilities, but the current pay-off doesn’t outweigh the application fee for most homeowners|
|Local solar incentives in New Mexico||The City of Albuquerque offers fast, integrated permitting and building plan reviews for eligible ‘green’ home developments in the city|
|Net metering||New Mexico mandates net metering but doesn’t require utilities to pay full retail rate for excess energy|
State solar tax credit in New Mexico
After five years without a state solar tax credit, New Mexico Governor Michelle Lujan Grisham brought it back on March 2, 2022. The new Solar Market Development Tax Credit policy, also known as the New Mexico solar tax credit, provides a tax credit of 10% for small solar systems, including on-grid and off-grid PV systems and solar thermal systems.
The tax credit is available on a first-come, first-served basis annually and runs through December 31, 2027. There is a cap of $12 million (up from $8 million) in tax credits to be issued every year.
The maximum New Mexico state solar tax credit is $6,000 per taxpayer. Homeowners used to be able to carry forward any unused credit for up to five years, but under the new rules effective May 18, 2022, the taxpayer receives a refund instead for any unused portion that exceeds their tax liability in the year they apply the credit.
Sustainable building tax credit
New Mexico offers a Sustainable Building Tax Credit (SBTC) for buildings with a higher level of LEED (Leadership in Energy and Environmental Design) certification, plus bonuses for a fully electric house, and/or for meeting net-zero carbon certification, zero energy certification, zero waste certification or zero water certification.
The tax credit program reached its legislative cap in 2021. Beginning July 12, 2022, applications submitted for a tax credit certificate will need to meet the eligibility requirements specified under the new 2021 SBTC rule. Owners of certain newly built properties and renovated commercial buildings will have to wait until September 2022 to apply.
The 2021 credit also scales up for low-income persons and affordable housing projects. A 2021 update to the tax law allows for credits to be issued for the installation of energy-conserving products in existing commercial and residential buildings. A new tax incentive is also available for electric vehicle (EV) ready buildings.
Commercial and residential affordable buildings qualify for a tax credit equal to 100% of the product cost up to $3,000. Non-affordable buildings qualify for a tax credit up to 50% of the product cost up to $1,500. Residential buildings can qualify for a tax credit of $5.50 per square foot for the first 2,000 square feet of a property, if they are LEED-H Platinum certified.
Homeowners can sell, transfer, or carry forward the 2021 Sustainable Building Tax Credit for seven tax years. The credit is refundable for low-income taxpayers who have exceeded their income tax liability.
State sales tax exemption for solar in New Mexico
New Mexico law states that “Receipts from the sale and installation of solar energy systems may be deducted from gross receipts.” Basically, your solar installer in New Mexico shouldn’t include sales tax on your home solar installation.
This solar sales tax exemption in New Mexico applies to any solar installations that provide space heat, hot water, or electricity to the property in which it is installed. It includes both the solar panels and all equipment necessary for the installation and operation of the solar panels. This can save around 5% off the upfront cost of your solar installation.
State property tax exemptions in New Mexico
New Mexico doesn’t provide an explicit exemption for residential solar energy systems from property tax assessments but does include it in the state’s limitations restricting excessive increases in property taxes.
The Property Tax Code states that a property’s value in any tax year “shall not exceed the higher of one hundred three percent of the value in the tax year prior to the tax year in which the property is being valued or one hundred six and one-tenth percent of the value in the tax year two years prior to the tax year in which the property is being valued.” Improvements to property are usually excluded from this cap, but solar installations are subject to the cap, helping to prevent a massive hike in property taxes for homeowners installing solar in New Mexico.
New Mexico special assessment for solar installations
The state’s law allows the board of county commissioners of a county to provide by ordinance for a solar energy improvement special assessment on a residential or commercial property within the boundaries of the county if the owner of the property requests it. These voluntary special assessments can be used to facilitate financing for eligible solar energy improvements.
Eligible solar energy improvements include photovoltaic or solar thermal system installed on residential or commercial property. Homeowners access financing for a solar installation by agreeing to have a lien placed on their property. The county treasurer then includes the solar energy improvement special assessment in the property tax bill for the property.
Homeowners repay the special assessment as part of their property tax bill, making it easier for many homeowners to manage payments. This kind of special assessment also helps homeowners access financing for solar installations without affecting their credit rating.
Check with your local County Commission to see if they have enacted an ordinance that grants the credit.
SRECs in New Mexico
The current Renewable Portfolio Standard (RPS) in New Mexico requires investor-owned utilities to generate or purchase 50% of energy from renewable resources by 2030 and to be 100% carbon-free by 2045. The solar carve-out was for 20% of those renewables by 2020. RECs have a four-year lifespan in New Mexico and the state uses the WREGIS tracking system for certificates.
All that said, the market for SRECs in New Mexico is… lackluster. This is mostly because New Mexico has not put in place an alternative compliance payment (ACP), meaning there’s little to drive utilities to pay a higher price for SRECs on the open market. Instead, utilities have historically purchased RECs to meet RPS requirements using direct buy-back programs.
One of the two main utilities, El Paso Electric, closed its program for buying RECs at the end of 2020.
In January 2020, PNM was approved to extend the Customer Solar REC Purchase Programs for three more years, continuing through the end of 2022. However, if you choose to sell your RECs to PNM you must pay an application fee of $150. PNM will then purchase your RECS for $0.0025 (¼ cent) per kWh of renewable energy that you produce.
For a customer with solar energy production of 600 kWh per month, PNM will pay just $1.50 per month for the 8-year term of your contract. For most customers, the pay-off isn’t worth the application fee currently, amounting only to around $144 over the contract term.
If you install a home solar array bigger than 10 kW, the application fee is $450. It’s very unlikely, then, that PNM’s SREC program makes sense for any medium- to large-sized residential rooftop solar in New Mexico.
Otero County Electric Cooperative (OCEC) also offers a buy-back program for SRECs in New Mexico. Customers can install a meter base for a Renewable Energy Certificate (REC) meter provided by the utility. This meter registers all the electricity generated by your solar energy system and OCEC then buys every REC (created for every 1,000 kWh generated) for $1.00 per REC. Again, this is a very low price for RECs, making it barely worth the trouble to install the meter.
Things may be about to change in New Mexico, though, if recent legislative changes are anything to go by. In June 2022, the New Mexico Public Regulation Commission (PRC) created a new solar carve-out and rules for community solar. This is the state’s push to implement a community solar program with a 30% carve out for low-income customers and organizations. While this doesn’t change the current SREC situation for homeowners who go solar, it suggests legislators are aware of the importance of solar in the state’s move to tackle climate change and be energy resilient.
Local solar incentives in New Mexico
The City of Albuquerque offers a GreenPath program for commercial and residential customers. Residential customers building an energy efficient, sustainable home can access expedited permitting and integrated and preliminary plan reviews at no cost. New homes must substantially exceed code minimum Build Green New Mexico (BGNM) Silver with a HERS rating of 60 LEED for Homes Silver with a HERS rating of 60.
Net metering in New Mexico
New Mexico law mandates net metering but doesn’t require utilities to pay full retail rate for excess energy. It also requires that utilities give customers the option to purchase energy generated by renewables.
The Otero County Electric Cooperative offers net metering using an avoided cost rate. The rate is filed in January of every year with the PRC and OCEC’s 2022 avoided cost rate is $0.02510.
El Paso Electric (EPE) also offers net metering, with rates published as Purchased Power Service Rate No. 16.
PNM also offers net metering, with excess energy credited towards future bills.
Final thoughts on state solar incentives in New Mexico
New Mexico might not have very strong net metering rules or a robust SREC market, but it is now offering a state solar tax credit, as of 2022. Add this to the federal tax credit and you can knock off several thousand dollars from the cost of installing solar in New Mexico.
If you take the pains to renovate or build a sustainable home, especially one that incorporates charging for an electric vehicle, you can also apply for the sustainable building tax credit. With a state sales tax exemption and property tax restrictions, and 6.5 peak-sun-hours a day, New Mexico is a great place to go solar!
Not sure if you’re ready to go solar at home in New Mexico? How about signing up for community solar? Governor Michelle Lujan Grisham signed the Community Solar Act of 2021 into law on April 5, 2021. This act creates a statewide 3-year community solar “pilot program”, offering subscriptions to up to 200 MW of energy. Eligible customers must live near localized 5 MW solar facilities built within PNM service territories. Find out more about community solar here.