These Are The Colorado Solar Incentives [Ultimate Guide]


by Eric Lam - Published 1/17/2024


Colorado is renowned for its abundant sunshine, making it an ideal location for harnessing solar energy.

Ultimately, this article aims to equip readers with a comprehensive understanding of Colorado's solar incentives, empowering them to make informed decisions regarding their transition to solar energy.

Whether you are a homeowner or a business owner, the information presented here will prove invaluable as you embark on your solar journey in Colorado.

Key Takeaways:

  • Solar incentives are financial or tax-based benefits offered to individuals or businesses that install solar energy systems.
  • Colorado offers various incentives like federal and state tax credits, utility rebates, net metering, and renewable energy credits to encourage the use of solar energy.
  • These incentives can benefit Colorado residents by reducing installation costs, increasing return on investment, and lowering energy bills.

Why Are Solar Incentives Important in Colorado?

Solar incentives play a pivotal role in Colorado's energy landscape for several reasons.

First, they significantly lower the financial barriers to solar adoption for both residential and commercial property owners. By reducing the upfront cost of solar installations through tax credits, rebates, and other financial incentives, more individuals and businesses are encouraged to invest in solar energy.

Colorado, with its ample sunshine, stands to benefit greatly from increased solar capacity, leading to a reduction in reliance on fossil fuels and a decrease in greenhouse gas emissions. This shift is crucial for the state’s environmental goals, aiming to reduce carbon emissions and combat climate change.

What Are the Current Solar Incentives in Colorado?

In Colorado, solar incentives offer substantial benefits to both residential and commercial property owners considering solar energy systems. These incentives include:

  • Local Solar Rebates: Some utilities and local organizations in Colorado offer cash rebates for solar installations. For instance, EnergySmart Colorado provides rebates ranging from $400 to $2,500 for solar installations in specific counties. Holy Cross Energy offers a rebate that can save homeowners $3,000 on the installation costs of an average 6kW system​.
  • Federal Solar Tax Credit (ITC): This significant incentive allows you to deduct 30% of the cost of installing a solar energy system from your federal taxes. The credit applies to the total system cost, including panels, batteries, inverters, and associated equipment. This tax credit is available until 2032, after which it will decrease to 26% in 2033 and 22% in 2034, before expiring in 2035 unless renewed​.
  • Sales and Use Tax Exemption for Renewable Energy Equipment: In Colorado, solar equipment purchases are exempt from the state's sales and use tax, providing direct savings on the upfront cost of solar systems​.
  • Property Tax Exemption for Residential Renewable Energy Equipment: Solar system installations can increase home values, but in Colorado, the added value from solar installations is exempt from property taxes, ensuring your property taxes don’t increase as a result of going solar​.
  • Net Metering Policies: Colorado has a favorable net metering policy that credits solar system owners for the electricity they add to the grid. This can significantly reduce your utility bills and ensure that any excess power your system generates doesn’t go to waste. Most major utilities in Colorado are required to offer net metering, allowing you to offset your future electricity costs with the energy your solar panels produce.
  • Renewable Energy Certificates (RECs): In Colorado, when you sign up for certain programs like with Xcel Energy, you can receive payments for the Renewable Energy Certificates your system generates, which can provide additional financial benefits over time​.

These incentives collectively make solar installations more affordable and financially appealing in Colorado, encouraging the adoption of renewable energy and supporting the state's environmental and sustainability goals. For more specific details or to see how these incentives apply to your situation, it's recommended to consult directly with solar providers or financial advisors in Colorado.

How Do Solar Incentives Benefit Colorado Residents?

Solar incentives significantly benefit Colorado residents by making solar energy systems more affordable and accessible, fostering sustainable energy use, and promoting environmental stewardship. These incentives, including local rebates, tax exemptions, and net metering policies, directly reduce the initial cost of installing solar panels and enhance the financial viability of such investments. For example, local rebates offered by utilities and municipalities lower the upfront cost of installation, making solar energy a more attractive option for homeowners​.

How to Claim Solar Incentives in Colorado?

To claim solar incentives in Colorado, residents and businesses can follow a series of steps that leverage both federal and state-level programs designed to reduce the cost of solar installations and encourage renewable energy use.

  1. Federal Investment Tax Credit (ITC): This significant incentive allows you to claim 30% of your solar system's cost as a credit on your federal income taxes. The process involves filling out IRS form 5695 and submitting it with your tax return. If you're using tax software like TurboTax or H&R Block, it will guide you through claiming the credit​.
  2. State Sales Tax Exemption: Colorado exempts solar energy system purchases from the state's sales tax, effectively lowering the upfront cost of going solar. This exemption is automatically applied at the time of purchase, meaning you won't have to pay state sales tax, though local taxes might still apply​.
  3. Property Tax Exemption: The value added to your property from a solar installation won't increase your property taxes in Colorado. This exemption is automatic, so no action is needed on your part to benefit from it. When your property's value is assessed, the added value from the solar system will be excluded​.
  4. Net Metering: Most homeowners will be automatically enrolled in net metering through their utility provider. This program credits you for the excess electricity your solar panels produce and send back to the grid. It's advisable to check with your local utility company for specific enrollment procedures or any necessary agreements​.
  5. Local Rebates and Programs: Some local utilities and municipalities offer additional incentives. Programs like EnergySmart Colorado and Holy Cross Energy provide cash rebates for solar installations in specific areas. It's best to check with your local government or utility company for available programs and how to apply​.
  6. Commercial and Nonprofit Incentives: Businesses and nonprofits in Boulder can access additional incentives, such as the PACE Solar Rebate and the Nonprofit Solar Equity Grant. These programs are designed to help cover the costs of solar power systems​.

By taking advantage of these incentives, Colorado residents and businesses can significantly reduce the cost of solar installations, making it an attractive investment for reducing energy bills and contributing to a sustainable future. For more detailed information on each incentive and how to apply, visiting official state and utility websites or consulting with a solar professional is recommended.

Frequently Asked Questions

What are the Colorado solar incentives?

The Colorado solar incentives refer to the various financial benefits and policies offered by the state of Colorado to encourage the use of solar energy.

What types of incentives are offered for solar energy in Colorado?

Colorado offers a combination of tax incentives, rebates, grants, and loan programs to support the adoption of solar energy.

Are there any tax incentives for installing solar panels in Colorado?

Yes, Colorado offers a state tax credit worth 30% of the total system cost, with a maximum limit of $1,500 per year.

What rebates are available for solar installations in Colorado?

Colorado offers a rebate program for residential and commercial solar installations, with a maximum rebate of $4,500 for residential and $50,000 for commercial projects.

Does Colorado have any grant programs for solar energy?

Yes, Colorado has a grant program called the Solar Grant Program, which provides funding for community solar projects and low-income households.

Are there any loan programs for solar energy in Colorado?

Colorado has a low-interest loan program called the Colorado C-PACE program, which provides financing for energy efficiency and renewable energy projects, including solar installations.