Your 2019 guide to getting solar panels for your home in New Mexico
This page is a complete guide to the complicated and sometimes confusing process of installing solar panels on your New Mexico home. Since there's a lot to consider, we've separated the page into sections to help you find what you are looking for. If you find this page useful, please share it with someone who might also find it interesting!
** What's new for 2019 **
The Land of Enchantment is doing some good things to keep captivating residents and visitors alike with its mountains, deserts, lakes, and forests. The New Mexican legislature has been hard at work enacting solar and renewable energy programs to protect the natural beauty all around the state. This legislation will help preserve Pueblo and Aztec ruins, as well as many other great outdoor wonders.
Questions? Our network of solar experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page. You can get discounted on-grid pricing as low as $4,000/kW! This is paired with the New Mexico solar incentives you see below.
The Solar Strategy section is focused on the 3 ways of paying for solar in New Mexico, so you can decide which is best for you. We've created a tool that asks you a few questions and recommends whether you should pursue a solar lease, loan, or outright purchase. Then, we provide detailed analysis of how each works.
The Policy Information section contains all our latest research on the rules set by lawmakers and the Public Utilities Commission, which determine how easy it is to go solar in New Mexico. These policies and rules govern everything from renewable energy mandates to interconnection, and have a huge effect on the viability of solar.
Finally, the Solar Incentives section includes information about money-back rebates and grants, tax credits, and tax exemptions for going solar in New Mexico.
Click any of the boxes below to go to that section of the page, or scroll down to read the page in order.
|Your New Mexico Solar Strategy|
|Comparing Solar Investment Options|
|Paying Cash for Solar in New Mexico|
|Solar Loans in New Mexico|
|Solar PPAs in New Mexico|
|Solar Purchase Payback Time in New Mexico|
|New Mexico Solar Policy Information|
|Renewable Portfolio Standard (RPS)|
|RPS Solar Carve-Out|
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:
20% by 2020
A Renewables Portfolio Standard (“RPS”) requires utilities in the state to eventually source at least a certain percentage of their electricity from clean, renewable sources like solar panels. New Mexico has a not-too-aggressive RPS, mandating that 20% of all energy must come from renewable sources by 2020.
New Mexico’s RPS establishes separate standards for the big investor-owned utilities, and the smaller rural electric cooperatives. Investor-owned utilities must generate 20% of electricity from renewable resources by 2020. For rural electric cooperatives, the requirement is only 10% of retail electricity sales by 2020.
The New Mexico RPS is critical to strong renewable energy policy. Utility companies aren't really all that gung-ho about you producing your own power. After all, it costs them money when you use less of their electricity. They also don’t naturally want to give you big payments for energy you're feeding back into the grid. The main reason the utilities are aiding your transition to lower electric bills and offering you incentives to put solar on your roof is because the state forces them to. If the utilities don't hit their RPS numbers, they have to pay large fees back to the state.
What's an RPS? Your state legislature paves the way for strong solar energy incentives to flourish by setting standards for renewable energy generation within their territories. Those standards are called the state’s renewable portfolio standard (RPS). If utility companies do not meet these standards, they must pay alternative compliance fees directly to the state. Many utilities then determine the best ways to source their energy from renewable sources that are less expensive than this fee.
An RPS is a mandate that says "Hey utilities! Y'all now have to make a certain percentage of your electricity from renewable sources. If not, you'll have to pay us huge fines." The consequences are good, because utilities usually try to meet these RPS standards by creating solar power incentives for you, the homeowner. Read more about Renewable Portfolio Standards.
RPS solar carve out
4% by 2020
Investor-owned utilities must also generate 4% of retail electric sales from solar power by the 2020 target date. That’s one of the strongest solar carve-outs we’ve seen! In addition to the solar carve-out, 0.6% of total energy must be generated from small-scale distributed generation power; i.e., from sources like your residential solar power system instead from giant earth-killing power plants.
What's a solar set aside? A solar set aside guarantees a specific portion of the overall renewable energy mix generated comes from the sun. For those states with progressive standards, high alternative compliance payments, and clear solar carve outs, the faster those areas become ripe for solar.
Some states have higher alternative compliance fees than others, and some states have more progressive alternative energy standards and deadlines than others do.
For instance, New Jersey has an overall RPS of 22.5% by the year 2021. That requires local utilities to source 22.5% of their energy mix from renewable sources by the year 2021. Pretty good. However, New Jersey also has a specific solar set aside of 4.1% by 2028. That’s the type of firm commitment which really gets the industry rolling forward. No wonder why New Jersey is one of the hottest solar markets right now!
New Mexico Electricity Prices
New Mexico pays an average of 13 cents/kWh of electricity. That’s just a tad below the national average of 13.6 cents/kWh. Here at Solar Power Rocks, we actually think the national average is too cheap, so we think energy in New Mexico is currently too cheap as well. We know you hate high electric bills, but hear us out.
Right now most of our electricity still comes from burning millions of tons of fossil fuels. The cost of those fossil fuels in dollars and cents may be low (for now), but the environmental costs are astronomically high. Switching to solar power now saves you money (and helps save the planet). When scarcity and environmental costs drive up the monetary costs of fossil-fuel based energy, the early switch to solar power is going to be saving you stacks on stacks of money. You can thank us later.
Why are electricity prices so important? Because that is what solar power is directly competing against. The cost to produce power with solar is relatively constant (of course how much sun hits your area has an effect), so if you are paying $0.40 per watt for power, then you make FOUR TIMES AS MUCH as the guy or girl paying $0.10 per watt electricity.
The caveat here is that if the $0.10 per watt person has a HUGE rebate, they may be better off than the $0.40 per watt person. Because of that, states without any renewable standards tend to be heavily reliant on cheap coal for electricity, and also have very low electricity prices. When electricity prices are artificially low, that hinders the ability of solar energy to achieve meaningful payback in the state.
New Mexico Net Metering
New Mexico have lots of sun and strong goals for installing solar, but that doesn't mean much unless there are also strong rules in place to protect solar owners from the shadier side of selling electricity to the utility company. Luckily, New Mexico does a pretty good job with that!
The state's net metering laws are some of the best in the country, but for one thing (which we'll get to in a moment). The rules provide for generators (that's you if you have solar panels) to retain control of any renewable energy credits they earn from their systems, and also to be credited for their excess generation—a credit which is carried over indefinitely.
The one place where the state's rules miss the mark is safe harbor rules for customer-generators. Without those rules, utility companies can impose fees and additional charges on net metering customers, which can make solar much less viable for smaller systems.
What is net metering? Net metering is the billing arrangement where you can sell excess electricity back to your utility for equal the amount you are charged to consume it. The more customer friendly net metering policies, the higher the grade.
The grade here specifically reflects individual solar system capacity, caps on program capacity limits, restrictions on “rollover” of kWh from one month to the next (yep just like cell phone minutes), metering issues (like charges for new meters), Renewable Energy Credit (REC) ownership, eligible customers and technology (the more renewables the better), being able to aggregate meters across the property for net metering, and safe harbor provisions to protect customers from solar tariff changes.
New Mexico Interconnection Rules
New Mexico's interconnection rules are nearly ideal for homeowners who want to go solar. The state guarantees net metering, doesn't require additional homeowners' insurance or expensive external disconnect switches, and offers a simplified process for small systems. All that adds up to a really easy, inexpensive process to get your panels connected to the grid and making you money!
Interconnection rules are a little technical, but they basically allow you to “plug in” to the electric grid with solar panels on your roof. The more complex, out of date, or nonsensical the state rules are for plugging into the grid, the lower the grade.
Specifically, the grade reflects what technologies are eligible, individual system capacity, removing interconnection process complexity for smaller systems, interconnection timelines and charges, engineering charges, prohibiting the requirement of unnecessary external disconnects, certification, spot interconnection vs. wide area interconnection, technical screens, friendliness of legalese, insurance requirements, dispute resolution, and rule coverage.
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:
New Mexico Solar Power Rebates
There are currently no up-front rebates available on the installation of a solar power system in New Mexico. Especially with three of the big utilities offering ongoing performance payments, the legislature is missing a golden opportunity to promote clean, efficient, and reliable solar power. Even a small solar power rebate can go a long way when New Mexicans know those Solar Renewable Energy Credit (SREC) payments will kick in once the system is up and running!
How do solar rebates work? Similar to getting a rebate card from your local big box store for a dishwasher purchase, state legislatures also provide rebates for solar panel purchases to spur on investment and create new jobs. If you purchase the solar panel system yourself, you qualify for this free cash, which many times is a lump payment back to you. Some solar installers like to take this amount directly off the total installed price, and they'll handle the paperwork for you to make things a lot less complex.
The availability of state and utility rebates were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The better the rebates, the higher the grade.
New Mexico Solar Power Tax Credits
Sadly, 2016 is the year New Mexico ended its great personal solar tax credit on the purchase and installation of a residential solar power system.
Still, you'll benefit from the 30% Federal Solar Tax Creditl. There's no cap on the federal tax credit and fortunately for New Mexico, having no state rebate to deduct means a larger tax credit coming your way.
About state solar tax credits: State tax credits are not technically free money. However, they are 'credits' and not 'deductions' which means that if you have the tax appetite to take advantage of them, then they can be a 1-to-1 dollar amount off your taxes instead of a fraction of the cost of the system. So that means they can be an important factor to consider. In certain circumstances, state tax credits can provide a very powerful incentive for people to go solar.
(Keep in mind, we are not tax professionals and give no tax advice so please consult a professional before acting on anything we say related to taxes)
The availability of personal tax credits for solar energy were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the tax credit amount, the higher the grade.
Solar Power Performance Payments
$0.02/kWh EPEC, $0.0025/kWh PNM
Three New Mexico utility companies currently offer performance payments, called Solar Renewable Energy Credits (SRECs), for the production of solar energy. All three programs are structured identically, but the numbers vary a little bit from utility to utility:
First, El Paso Electric Company’s REC Purchase Program will pay its net-metered customers $0.02/kilowatt-hour (kWh) for the first eight years of systems up to 10kW. These payments are built into the net-metering program, and do not replace it. REC payments will start as a credit on your next month’s bill. Every time the rolling credit goes above $30, the electric company will cut you a check.
Second, PNM’s Performance-Based Solar PV Program offers an eight year purchase contract at $0.0025/kWh for systems up to 10 kW. Again, REC payments will be applied to your next bill until the credit exceeds $20, at which point the utility cuts you a check for the full amount. Sadly, this only applies if you have a current contract with PNM, as systems under 100 kW (way bigger than home size) are no longer able to subscribe.
Finally Xcel Energy’s Solar Rewards Program used to offer twelve year contracts at $0.08/kWh for systems up to 10 kW in size, but the program is fully subscribed. 10 kW is pretty large for a home solar system, but if you have a good deal of land or a really large roof space, you can still get payments of $0.05/kWh.
Please note that all three of these are tiered programs. That means that as certain goals are met (i.e. as the utilities convince enough people to switch to solar power to keep on target with their RPS mandates), the rates currently being offered will be lowered step by step. That means less money for you -- so the sooner you sign up, the better!
And, as always, connect with local installers to get expert guidance on how best to go solar in your area.
Explanation of performance payments: Performance payments represent a big chunk of the financial rationale for going solar, and in many instances they make your decision a wise one. For certain states, if you’ve got solar panels on your roof, not only will you be cutting your electric bill down to size, but you'll be getting paid additional cash from your utility company. Pretty awesome, huh? Not only are you generating electricity for yourself, freezing your own popsicles with sun, and feeling like you’re doing something smart for your children or any of the other 4 reasons people go solar, but you are getting PAID!
Utility companies are paying people with solar panels on their roofs because their states say they have to, otherwise they will pay a fee. Therefore, the payment amount to homeowners is typically a little bit less than the amount they would be billed for by the state. For states with these alternative compliance fees, Solar Renewable Energy Credit (SREC) exchanges have popped up. In the above chart, we outlined an estimate of yearly payments a homeowner might expect from the utility company for the SREC credits from their solar energy system.
Expected SREC payments were calculated by using the latest trade values in the SRECtrade database. The availability of feed-in tariffs were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the expected monthly payments, the higher the grade.
We've got a great article if you like to read more about what SRECs are and how to earn them.
Property Tax Exemption
The legislature has also built tax exemptions into the laws here, saving you money both up-front and every year thereafter for the life of your new solar power system.
New Mexico’s property tax exemption will keep you saving money every year. When you install a solar power system, your home goes up in value by about twenty times your annual electricity bill savings. That adds up to a lot of money in most cases! Normally you’d pay taxes on that increase in value, but thanks to this exemption, your property taxes stay the same.
About solar property tax exemptions: Property tax exemption status is a pretty big factor when putting together your investment considerations. Some argue that solar power adds approximately 20 times your annual electricity bill savings (if you are owning the system and not leasing). Other studies seem to indicate a home price premium about equal to the cost of installing the system, minus any incentives like the federal solar tax credit.
For many average-sized solar power systems on a house, that can mean adding $20,000 to your home value. And if you don't believe us, believe the bean counters: Many banks and solar financing companies now offer traditional style equity-based home loans for installing solar. An additional $20,000 in property tax basis in many states amounts to a big chunk of change owed back to the state. However, many states have complete exemptions from added taxes when you install solar on your home!
The availability of a property tax exemption for solar energy was sourced from the Database of State Incentives for Renewables and Energy Efficiency. Grades in this category are basically all-or-nothing. Either you got it or you don't. Thankfully, many states have "got it.".
Sales Tax Exemption
In addition to the property tax incentive, you save up-front on solar in New Mexico because the state exempts solar equipment from its gross receipts tax. Businesses that sell solar equipment should be building that tax discount into the price they pass on to you – this saves you money on day one. For more detailed information on this exemption, check out this handy guidance document.
What's the deal with solar power sales tax exemptions? When states give you a sales tax break on solar, we notice. You should too. State sales tax exemption status for the purchase of solar energy systems were sourced from the Database of State Incentives for Renewables and Energy Efficiency. Sales tax exemptions, if present, were all 100%. A handful of states are completely exempt from sales tax regardless, and therefore received ‘A’ grades by default (OR, DE, MT, AK, and NH).
The consensus on New Mexico solar power rebates and incentives
The overall solar outlook is pretty sunny here in New Mexico. Part of that is because we get so much of that glorious sunshine here, so our potential for solar power production is tops in the nation. Solar policy is strong, but not quite as strong as it could be. All of the right foundations are in place with a solid RPS, strong net metering, and sensible, solar-friendly tax policies. All that’s missing is a stronger up-front solar power rebate, or a more extensive statewide performance payment incentive. Lawmakers are currently doing a passable job, but are missing the chance to truly harness one of New Mexico’s greatest resources. For now, that strong solar carve out promises good incentives for a while, so we’ll give New Mexico an “A.”
Again, if you are confused about how these numbers work and would like some personalized assistance or a quote of your own, simply connect with our network of solar experts. They’ll help sort out all the pricing, get you access to special deals, and they’re super friendly to boot!