Solar Incentives in Colorado (2023 Guide)

Colorado has been committed to clean energy production for more than 20 years. It was the first state to create Renewable Portfolio Standards (RPS) and to begin installing solar shingles. Most recently, the state government mandated that utility companies with 500,000 or more customers move to 100% clean energy by 2050. 

Colorado offers one of the best net-metering programs in the country, plus numerous incentives to lower solar system costs and help residents make the switch. According to EcoWatch, the average cost to install solar panels in Colorado is $13,450–$21,520, so homeowners should consider incentives to reduce this price. Our guide breaks down available incentives and rebates in Colorado, plus offers recommendations for the best solar panel companies in the Centennial State. 

Colorado’s incentive programs allow homeowners to invest in the best solar panels at an affordable rate. It has sales and property tax exemptions, plus additional city-based incentives to reduce your overall solar panel system costs. The list below includes the top solar incentives for Colorado residents. 

Colorado Sales and Use Tax Exemption for Renewable Energy Equipment

Colorado’s sales tax exemption policy allows homeowners to avoid paying Colorado’s 2.9% state sales tax on their solar installation costs and equipment. You may still have to pay local city or county taxes, such as in Denver or Fort Collins. We recommend checking your city’s local sales tax policies. 

More resources: Check the Colorado Department of Revenue website for full details about the tax exemption for solar systems.

Property Tax Exemption for Residential Renewable Energy Equipment

Installing a solar system boosts your property value. According to the National Renewable Energy Laboratory (NREL), your home value increases by $20 for each $1 saved on annual electricity bills. For example, a solar energy system that saves you $400 annually will add $8,000 to your home’s value.

Higher property value usually means more property taxes owed on your home. However, Colorado’s property tax exemption prevents homeowners from having to pay taxes on this additional value.

More resources: Review the Colorado Department of Local Affairs to learn more about the property tax exemption. 

Net-Metering

It’s common for solar panels to generate more energy than your home needs. This excess energy can be stored in solar batteries for later use. But some states, including Colorado, offer net-metering programs. These programs allow homeowners to sell their excess energy back to the power grid for credits on their utility bills, offsetting your electricity costs.

Colorado has one of the country’s best net-metering policies, thanks to new guidelines introduced in Senate Bill 261 in 2021. Here are some of the program’s highlights:

• The Colorado Public Utilities Commission (PUC) requires investor-owned utilities (IOUs) to offer net-metering to their customers.
• An increase in the net-metering cap from 120%–200% allows customers to receive more payouts for their excess energy. Many other state programs offer a much lower cap. 
• Colorado allows its residents to earn indefinitely, unlike other states that limit credit accruals to a calendar year. 

Net-metering programs vary between each company but offer excellent benefits. Xcel Energy and Black Hills Energy are two of the state’s largest investor-owned utility companies (IOUs) and offer net-metering program details on their websites. 

More resources: Visit the Database of State Incentives for Renewables & Efficiency (DSIRE) to learn more about Colorado’s net-metering program. We recommend checking with your local utility company for additional details on its net-metering program. 

Local Solar Rebates and Programs

Cities and municipalities offer additional rebate programs to their residents. We’ve highlighted a few programs below. 

• Black Hills Energy Solar Power Program: Limited to Black Hills customers, this program offers payouts at 3 cents per kilowatt (kW) for system sizes up to 20 kW. 
• Colorado Springs Utilities Renewable Energy Rebate: Colorado Springs Utilities customers earn rebates for up to 10 cents per watt for rooftop solar systems up to 15 kW. 
• EnergySmart Colorado: This rebate is available for residents in several counties, including Eagle Valley, Pitkin, and Summit County. The rebate varies by location and ranges from $400–$2,500. Check the EnergySmart website for a full list of eligible counties. 
• Holy Cross Energy: Holy Cross Energy offers $500 for the first 6 kW with lower payouts for larger systems. This rebate is based on a per kW payout. 
• Xcel Solar*Rewards Program: Customers receive up to half a cent per kWh, cashback, for solar systems under 25 kW.

Some areas also offer special programs for low-income families to help make solar more accessible, such as the following:

• Colorado Energy Office (CEO) Incentive for Low-Income Individuals
• City of Boulder Solar Grant Program

More resources: Check DSIRE for a complete list of rebates and incentives offered in Colorado. 

The federal solar investment tax credit (ITC) provides Colorado residents with additional savings on their solar installation costs. You could receive up to 30% of your installation cost as a tax credit. This credit applies to your federal tax liability to reduce or eliminate your owed balance. If you don’t have any liability or have remaining credit, the balance can be rolled over to the next tax year. 

In 2022, Congress approved an ITC extension until 2034. It is now known as the Residential Clean Energy Credit (RCE). You’ll qualify for the credit if your system is installed between 2022 and 2032. The credit reduces to 26% in 2033 and drops to 22% in 2034.

You must legally own your system to qualify for incentives. Ownership is determined by which solar financing option you select. Cash payments or solar loans make you the legal owner. Other options, such as solar panel leasing and power purchase agreements (PPAs), will disqualify you from receiving incentives because your solar company will retain ownership of the system. Consider this when weighing your payment options.

Colorado’s clean energy commitments and generous solar incentives make it an excellent state to go solar. Residents should review available incentives, rebates, qualifications, application process details, and potential roadblocks before purchasing a system. Keep in mind that your selected financing option could impact your eligibility for incentives and your long-term savings.

Request free quotes from at least three installers and compare their products and services. Below is a list of our three top Colorado solar companies:

• Sunrun: This installer offers various payment options, such as cash payments, loans, leases, and prepay offerings. 
• Palmetto Solar: The company’s tiered Palmetto Protect program includes priority customer support, panel maintenance, and other solar services. 
• Blue Raven Solar: This installer has in-house solar financing and offers new customers 18 months of free solar.

The This Old House Reviews Team is committed to providing comprehensive and unbiased reviews to our readers. After over a thousand hours of research on solar companies, interviews with experts, and common customer needs, we’ve created a detailed rating system for solar providers based on six factors:

• Solar equipment, installation, and services (25%)
• Warranty and performance guarantees (25%)
• Brand reputation and certifications (15%)
• Financing options (15%)
• Experience (10%)
• Availability (10%)

Total scores are divided by 20 for a final 5-point rating scale.

To share feedback or ask a question about this article, send a note to our Reviews team at reviews@thisoldhousereviews.com.