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Your Solar Strategy in New Mexico

Figuring out the best way to go solar in New Mexico can be a little daunting. From loans and leases to power-purchase agreements, there are a lot of options out there. To help you pick the one that might be best, we've created the handy decision tool below.

We'll ask you a few simple questions about you and your home. Once you're done, we'll recommend a good option. Further down this page, we provide cost estimates and example return-on-investment calculations for all the various options:

How to pay for solar panels in New Mexico

The chart above shows the 25-year returns for an investment in solar whether you choose to purchase a system with cash or pay over time with a loan or Power-Purchase Agreemement (PPA)One thing it's important to note is: solar makes you a lot of money in New Mexico. Yes, we said "makes!" You see, New Mexico gets so much sun, its relatively low electricity prices are no match for the awesome energy-generating ability of solar panels. Going solar in New Mexico starts paying off right away, and with great state and federal tax credits, solar has never been cheaper.

Now let's discuss that chart above. As you can see, the cash purchase option leads to the highest dollar-amount returns over time, but look a little closer. Taking a loan and paying for the system over time (the orange bars) means you'll spend thousands of dollars less over time, while reaping a big financial benefit in year 1.

That's because you'll be making low monthly payments for the system, but you still get all the benefits of paying up front. In New Mexico, that means a 30% federal tax credit and huge annual energy savings. With that tax credit, you'll actually come out way ahead after the first year. And even though you'll be making loan payments for 15 years, the first-year windfall is so big, you'll only begin spending your own money in year 9.

Finally, take a look at the blue bars. They represent a solar Power-Purchase Agreement (PPA), which is also called third-party ownership. With a PPA, the solar installation company puts panels on your roof at no cost to you, and you buy the electricity produced by the panels for cheaper than you can get it from the utility company.PPAs in New Mexico are awesome, because you start saving money right away. Your savings will start small but finish big, because the PPA cost will rise by less than the electric company's annual rate hikes. Third-party ownership is an excellent option even if you have equity or cash to put down, because it can save you tons of money!

Read more below about each of three very good options for solar in New Mexico.

Option 1: Paying cash for solar

An outright purchase used to be the only way to get solar, and it's still the option that provides the "biggest" financial returns. The reason we put "biggest" in quotes here is because it's technically true—with lower equipment costs and two tax credits, solar costs less than ever before, and a solar installation pays itself off in 13 years. But if you're interested in solar as an investment, taking a loan to pay for the system is a better option.

With a loan, you can make monthly payments instead of putting $20,000 down on a solar system, which means you save money on electricity as you pay down the cost of your panels. If you have equity in your home or can get a large loan with an interest rate of 4% or less, a loan is the option to go with. It's like being able to start a business that is sure to succeed, just by having a roof. Read about loans below.

If you've got cash and you prefer to pay up front, you'll have to plunk down $18,750, but tax breaks and energy savings will erase a bunch of that after just 1 year. Over 25 years, your system will have produced nearly $14,600 in income, after your system cost is paid back. The reason this works is that solar offsets your electricity costs—enough to save you $959 in year 1—and it just goes up from there. As the electric company raises rates, you save more and more, and more...

Here’s how the numbers work for a 5-kW rooftop solar system in New Mexico:

• Installing a typical 5-kW solar system should start at about $18,750. That's cheaper than solar has ever been, but it still might seem like a big investment. Don’t worry, because after a big tax break and your energy savings, your first-year costs will be considerably less than that.
• The Federal government offers a great income tax credit of 30% of system costs. That's $5,625 you won't be paying to Uncle Sam this year, and it brings your first-year investment down to $13,125.
• After that tax credit, we subtract your first year’s energy savings, which we estimate to be $959. That reduces your cost after the first year to only $12,166—a savings of about 33% off the cost of your system. That's a huge cost reduction!
• Those electricity savings will quickly pile up, and your system will pay for itself in year 13. But your panels carry 25-year warranties, and they'll likely keep on kicking out kilowatts for a few decades or more. You'll see a total net profit of $14,602 by the end of that warranty. The internal rate of return for this investment is a solid 7.1%. That's about the return of an investment in index funds, and it's more reliable, too!
• And here's a nice bonus to consider: your home's value just increased by $21,000, too (your expected electricity savings over 20 years).
• In addition to all that cash (and home value), you’ve created some green for the earth as well by not using electricity from fossil fuels. It's like planting 133 trees a year, every year your solar power system is humming.

Keep in mind, the numbers above are based on an average home in New Mexico. If you're ready for a custom quote for a solar panel system, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.

Option 2: Using a loan to pay for solar

You don't need $19,000 sitting around to pay for solar. As long as you have equity in your home, you can still own solar panels and reap all the benefits. Heck, even if you do have the cash, getting a loan to pay for solar is by far the best option when it comes to percentage return on investment.

That’s because, in New Mexico, using a loan to pay for solar is like investing in a business that's sure to succeed, and also earns you a tax break. You'll come out thousands ahead this year, and you'll see a spectacular profit over the 25-year life of your system. The reason this works so well is that you're paying over time, but reaping all the benefits now. Your yearly energy savings will nearly offset the loan payments, which might sound like it's too good to be true... so let's take a look at the numbers.

A solar purchase like this will make sense for you if the following is true about you and your current situation:

• You can qualify for a solar loan or home-equity line of credit (HELOC) for $18,750, with a fixed rate of 4% or lower and a 15-year repayment period. Don't be put off if you're offered a higher rate. It just means a tiny bit less of the thousands of dollars you'll make with solar.
• You love making money without much risk.

Here’s how the numbers pencil out for a New Mexico homeowner who makes a solar purchase with a loan:

• Installing a typical 5-kW solar system should start at about $18,750. That's how big your loan will need to be to cover it.
• The electricity you'll save in the first year of operation would have cost $959, but your annual loan payments will be $1,664, meaning you would spend $705 on solar this year, but...
• You'll get a huge tax break! Uncle Sam will give you 30% of the cost of your system back as an income tax credit, which in this case means $5,625 you won't be paying the Feds this year. You'll actually come out $4,920 your first year as a solar owner.
• Your yearly net cost (electricity savings minus loan payments) for solar will be $696 in year 2, and will shrink as the cost of electricity rises but your loan payments don't.
• By the time you've paid off your loan in 2031, you'll be seeing yearly savings of over $1,100. After 25 years, your total profit will be $8,388!
• On top of the green that will stay in your pocket, your system will mean green for the environment, too—133 trees-worth, every year!

Keep in mind, the numbers above are based on an average home in New Mexico. If you're ready for a custom quote for a solar loan, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.

Option 3: Buying the electricity, not the panels with a Power Purchase Agreement (PPA)

A PPA is a great way to go solar if you haven't got stacks of cash or oodles of equity in your home. It's possible to get solar panels for $0 down and see big savings over 20 years!

As for PPAs in New Mexico: the electricity costs here aren't very high—we're actually a bit lower than the national average—but the sun shines brighter here than almost anywhere else in the country! That means a PPA saves you money starting on day 1. For now, the payments for the electricity produced by a 5-kW solar system should be around $815 per year, but the same amount of energy from the utility company would have cost you $959. That's $144 you get to keep in your pocket this year, just for saying yes to solar!

And those savings will only get larger over time. As the utility company raises rates, your costs will go up by a smaller amount, meaning you'll see greater annual savings. Over 20 years, our estimate shows a total savings of $4,825. And the best part is the panels will be owned and maintained by the installation company, so all you have to do is brag to the Joneses down the street about your green habits!

Here's a little more about how a New Mexico solar PPA works:

Keep in mind, the numbers above are based on an average home in New Mexico. If you're ready for a custom quote for a solar PPA, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.

New Mexico Solar Policy Information

Ever wonder why solar seems to be everywhere in some states, but not in others? We did too.

State legislatures and public utilities commissions can enact rules to make solar power accessible for everyone. Favorable rules explain why some of the cloudiest states—New York, New Jersey, and Connecticut, are doing so well with solar, and yet some of those with the most natural solar resources—like Alabama, Mississippi, and Georgia—are doing so poorly.

Below is important information about the public policy, rules, and economic reasons that affect your ability to go solar here in New Mexico:

Solar Incentives in New Mexico

Next to high electricity prices and net metering, solar incentives have traditionally been the most important factor for whether home solar power makes financial sense in a state. In the past, some states with otherwise lousy policy had tremendous incentives that drove down the up-front cost of going solar so much that homeowners could save oodles of money even without net metering or a good RPS.

These days, the big incentive most people can get is the Federal Solar Tax Credit that earns you 30% of your costs back after just 1 year. State incentives play less of a role than in the past, but some really good ones are still out there, ready to help homeowners go solar and save money before you know it.

Let's see how New Mexico measures up: