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Our guide to installing solar panels on your home in Denver, Colorado

Avatar for Dave Llorens
Written by
Published on 05/25/2012
Updated 08/13/2018
Skyline of Denver, Colorado

The numbers below are estimates for the average home in Denver. Your home is unique, and your financial estimates depend on that uniqueness. If you’d like to get personalized solar estimates for your home, our network of solar experts are on call to assist you.

Simply sign up for personalized assistance on our special solar deals page.

The Mile High City continues to soar when it comes to solar power. Denver solar is not quite as far ahead of the pack as it was a few years ago, but, for the moment, policies here still ensure a strong return on your investment. Careful though, because Denver’s high marks are resting precariously on the current state of Xcel’s performance payments and solar rebates. When Xcel hits the next tier in its solar incentives program those payments will decrease, and Denver is going to lose its high rankings unless someone or something else picks up the pace.

Important numbers for solar on the average Denver home

Hey, those numbers look pretty good! The system outlined above can eliminate most of your power bill and provide you with decades of clean electricity. The panels are under warranty for 25 years, during which time you’ll save $21,500 (but solar panels often last longer than that).

Those numbers really are pretty good, and they can get even better depending on your installer and increases to Xcel or United Power’s rates. Keep in mind, those numbers are for an average home in Denver, and many factors determine how much you could save. You home is unique, and while using our estimates can be instructive, the only way to get a true estimate of the solar savings potential for your home is to connect with a solar expert in the Denver area, who can look at your roof and electricity bills to recommend a solar system that’s just right for you.

But hey, if you’d like to learn more about going solar in Denver, including tax credits, other incentives and how we got the numbers above, read on! Here’s our guide to the ins and outs of going solar in and around Denver, Colorado:

Average solar system size for a home in Denver, Colorado

The average household in Colorado uses about 9,050 kilowatt-hours (kWh) per year, and spends about $1,050 on electricity bills. A solar system designed to meet those needs would consist of about 13 350-watt panels, for a total of 5.6-kilowatts (kW) of generating power.

Over the course of a year on the average Denver roof, a 5.6-kW solar system would generate about 9,200 kWh, and save homeowners about $1,000 off their electricity bills, leaving a net bill of just $50 per year (source: PVWatts).

Cost of solar panels for a Denver home in 2018

Solar systems are sold based on a dollar amount per watt of generation ability. In 2018, the average 5.6-kW system in Denver would cost $3.10 to $3.30 per watt, for a total average cost of just under $18,000. That’s before incentives, which can reduce the cost of the system greatly over time.

The federal solar tax credit

A fanned-out stack of a few 1040 tax forms

The most important solar incentive available to homeowners in the Denver area is the federal solar investment tax credit, also known as the ITC. It provides a tax credit of 30% of the total cost to install the solar system, so our example system, priced at $17,920 would earn you a tax credit of close to $5,400, bringing the cost after one year down to about $12,500.

That’s great news, and it gets better:

Denver solar incentives

Colorado offers a couple other excellent solar incentives. The first is a state sales tax exemption, meaning you won’t pay a penny more for you solar system than it’s worth. The second is a state property tax exemption, which ensures that the value solar panels add to your home is exempt from additional property taxes.

Yes, you read that right, solar adds value to your home. Study after study has confirmed that homes with solar sell for more, and sell faster than non-solar homes in the same markets. The average increase in home price is about 70% of the gross cost of the system, meaning the 5.6-kW system needed for the average home would increase that home’s value by $5,400!

Xcel Energy’s Solar*Rewards program

If you’re lucky enough to live in Xcel energy territory (most of the Dallas metro, including all areas of the city proper), you qualify for a special program that means you’ll get paid a little extra for every kWh of electricity your system makes. In 2018, everyone who signs up under Xcel’s Solar*Rewards program will earn an extra $0.005/kWh for the next 20 years, which will earn you about $800 in that time.

That’s not a huge dollar amount, but every little bit helps, and the program means you’ll earn back the cost of your system about a year faster than if you have United Power for your provider.

How much money you can save with solar over 25 years in Denver

So now we know that a 5.6-kW system will wipe out most of the average Denver home’s electricity bill every year, at a cost of $12,500 up front. But now we have to determine whether that’s a good deal.

To do that, we need to estimate what the value of that electricity is this year and for the next 25 years, which represents that warrantied lifespan of the solar panels. Then we can determine how many years of bill savings it’ll take to pay back the initial cost, and what the final net profit will be at the end of the panels’ life.

So let’s start with how much you can save this year.

Xcel energy rates in 2018

Xcel Energy logo

Xcel Energy covers the whole city of Denver, and many nearby areas. They started offering tiered residential rates based on the time of year and household usage back in 2010, and that continues to this day. As of 2018, Xcel’s current residential rates are $.0969/kWh for all energy during the winter period (Oct 1st to may 31st), and the same for the first 500 kWh during the summer period, with a charge of $.1414 for every kWh over 500. There is a fixed monthly charge of $7.71 added to all bills for service and metering.

Over the course of a year, the average Denver home uses about 9,050 kWh, for a total of $1,060, and an effective per-kWh rate of $.1171 for the whole year. Of course, different homes use different amounts of energy, and your costs may be more or less than that based on your unique usage patterns—especially if you use a lot of air conditioning during the summer months. That summer charge adds up quick!

Fortunately, your solar installation makes more electricity during the summer months, too, meaning it’ll all even out over time. In fact, the 5.6-kW system we recommend here is enough to make 9,196 kWh in the first year, which is about 150 more than the average home uses. Xcel energy will let you “bank” the extra kWh your system produces to use as credits on future bills, which means you can reduce your electricity bill down to the minimum $5.41 charge, and roll-over credits throughout the year.

Here’s what the first-year electricity bills look like for a typical home in Denver after solar power:

Estimated 1st-year savings for a 7.7-kW system in Denver

MonthkWh neededBill before solarSolar kWhBill after solarSolar bank
The table shows the estimated monthly savings for the first year from a 5.6-kW solar installation on an average Denver home.

*Any amount of kWh over usage is credited to the customer's account and used to reduce future months' bills.

That looks pretty good! You can save nearly $1,000 on electricity bills in one year, and have another $19 and change to roll over to the next year. And don’t worry that you’ll never be able to use that credit balance. Your system will keep producing kWh for at least 25 years, but over time, the amount it produces will decrease a bit, by about 0.5% per year.

Over 25 years, as Xcel raises rates at the historical average of 3.5% per year, you’ll save more and more every year. Your system will pay off its initial $12,500 cost in just 10 years, and earn you a net profit of $24,500 over the warrantied lifespan of the panels. Here’s how that looks in a chart:

25-year net returns for solar installation in Denver

25-year savings with solar in United Power territory

United Power Service territory Denver area

United Power Service territory near Denver

Well the savings you see from solar definitely depends on your electric provider, and it holds true here, as well. While Xcel charges higher rates in the summer, United Power doesn’t. And while Xcel offers you a tiny payment for your solar energy, UP doesn’t, and while Xcel allows you to roll over your excess credits indefinitely, UP—you guessed it—doesn’t.

Instead, United Power has a monthly service charge of $19, and a per-kWh rate of $.1076/kWh. The company allows banking of kWh, which it rolls over until the end of March, when it performs a “Settlement,” paying for any excess kWh still in the “bank” at its wholesale rate (somewhere between 3 and 4 cents per kWh).

That changes the calculations a bit, leading to a different savings picture. The final result of that is around $946 in savings on around 9,200 kWh produced by solar, which averages out to a savings of 10.28 cents/kWh. That’s less than retail price, and actually quite low compared to Xcel’s rates.

Of course, the real question is how much you can save over 25 years. At that estimated $.1028/kWh, with growth estimates of 3.5% per year, going solar on a typical home in United Power territory pays back its cost after 12 years, with a 25-year net profit of $18,500. That’s quite a bit different than what Xcel customers can see, but it’s actually still a respectable return on investment when you look at the large picture.

Here’s a look at the cumulative annual net returns from our example solar system in United Power territory:

25-year net returns for solar installation outside Denver, in United Power's service area.

Once again, the numbers above are estimates for the average home in (or just outside) Denver. Your home is unique, and your financial estimates depend on that uniqueness. If you’d like to get personalized solar estimates for your home, our network of solar experts are on call to assist you.

Simply sign up for personalized assistance on our special solar deals page.

Last modified: August 13, 2018

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