The Complete Guide To Solar Panels In New Mexico
6 - Minute Read
Nov 7, 2022
New Mexico is making a strong push to use more renewable energy sources to power its electrical grid. The state’s Renewable Portfolio Standard (RPS) launched in 2004 and has been updated several times, resulting in more than 6% of the state’s energy coming from solar.
What are the incentives behind these policies, and how much more affordable do they make solar panels? Let’s look at the data from the Land of Enchantment can help you decide whether installing a photovoltaic (PV) array can lower your electric bill and carbon footprint.
Is New Mexico Good For Solar Panels?
New Mexico is sunny 75% to 80% of the time. That means plenty of solar radiation beaming down for solar panels to turn into electricity. According to the Energy Information Administration (EIA), New Mexico ranks third behind Nevada and Arizona in solar energy potential.
Incentives and policies can also make one state better than another for solar panels. As we explore net metering, rebates and other factors related to going solar in New Mexico, you’ll be able to better determine whether installing solar panels makes financial sense for your situation.
What Is the Average Solar Panel Cost In New Mexico?
New Mexico homeowners should expect an out-of-pocket average price of approximately $13,400 for a 5-kilowatt (kW) grid-tied solar panel system. That’s about $2.68 per watt.
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Top 6 New Mexico Solar Incentives For Homeowners
According to the Database of State Incentives for Renewables & Efficiency®, New Mexico has more than 20 incentives for home solar installations. Combined with the federal solar tax credit, these incentives can make it attractive for New Mexico residents to go solar.
The programs below are some of the most significant incentives.
1. Federal Solar Tax Credit
The federal solar tax credit is a key incentive for homeowners nationwide to install solar. The credit – otherwise known as the solar Investment Tax Credit (ITC) – was originally going to expire beginning in 2024, but Congress extended it for more than a decade.
The ITC, which Congress not only extended but raised via the Inflation Reduction Act of 2022, lets eligible homeowners deduct 30% from the cost of solar energy systems installed through the end of 2032. The credit – which is retroactive to the beginning of 2022 – dips to 26% in 2033. It later dips to 22% in 2034 before going away completely in 2035 unless Congress extends it again.
The ITC covers labor and equipment costs (solar panels, inverters, mounting hardware and battery storage) and may also shoulder the fees associated with upgrading the home’s electrical panel.
2. Net Metering
Net metering programs allow utility companies to reward solar homeowners for extra power they produce and ultimately funnel into the utility grid. The New Mexico Public Regulation Commission requires utility companies under its jurisdiction to offer net metering. This excludes municipal utility companies, which may still offer net metering.
Net metering compensation varies by utility company. Xcel Energy, for example, lets excess energy accumulate in a customer’s “virtual bank.” Once the amount is $50 or more, the customer receives a check when the billing period is over. The amount paid per excess kilowatt-hour (kWh) depends on the Locational Marginal Price (LMP).
3. State Property Tax Exemptions
Solar panels often increase home value. Typically, a higher home value means higher property taxes.
Under most circumstances, home solar systems are exempt from property tax assessments in New Mexico. If the property is sold, future property tax assessments can include the solar energy system. It may help New Mexico homeowners to consult a tax professional to better understand the potential benefits of installing a PV array on their home.
4. Renewable Energy Certificates
Renewable Energy Certificates represent one megawatt-hour of energy generated by renewable sources. These certificates – often called RECs or Solar Renewable Energy Credits (SRECs, pronounced ess-rex) – can be bought and sold so that those unable to otherwise produce clean energy can support clean energy projects.
According to SRECTrade, a platform that trades SRECs, New Mexico “does not currently have a viable SREC market.”
Some New Mexico utility companies pay solar homeowners a small amount for each kWh they generate so the company can get credit for supporting renewable power. The amounts fluctuate greatly from business to business. PNM, one of the state’s largest utility companies, pays a marginal rate for every megawatt-hour (mWh) a homeowner generates. Homeowners may also need to pay an application fee for REC programs in New Mexico. Check with your installer for details about selling RECs.
Also, compare these SREC terms from New Mexico to the ComEd utility company in Illinois, which currently offers homeowners an average upfront payment of $7,900 for up to 15 years’ worth of SRECs.
If you sell your SRECs, you may no longer be able to claim that your home is renewable. Other terms, such as a minimum contract length for selling SRECs to your utility company, may apply.
To sum up SRECs in New Mexico, the value depends on what your utility company offers and whether there’s an application fee. Read the fine print carefully, crunch the numbers and decide whether it’s worth it for you.
5. Sustainable Building Tax Credit
Homes that meet certain renewable energy standards in New Mexico may qualify for state tax credits through the Sustainable Building Tax Credit (SBTC). To qualify, homes must be:
● Certified Build Green Gold or higher
● Certified LEED-H Gold or higher
● Energy Star-certified
● Broadband- and electric vehicle-ready
The amount of the tax credit depends on the building’s square footage, the level of certification and whether it’s low-income/affordable housing.
6. Solar Market Development Tax Credit (SMDTC)
The New Mexico Energy, Minerals and Natural Resources Department (EMNRD) oversees the SMDTC, which may provide a tax credit for projects completed in 2022 or later. The SMDTC provides a tax credit of 10% of the purchase price and installation costs of qualifying solar technology, with a cap of $6,000 per taxpayer, per year.
The program has already reached its $12 million funding cap for projects completed in 2021 or earlier. EMNRD recommends applying as soon as possible for projects completed in the remaining months of 2022 or further into the future.
Solar Companies Are Growing In New Mexico
New Mexico solar companies – which include at least 13 manufacturers, 40 installers and 16 other support businesses – have installed more than 40,000 solar projects, according to the Solar Energy Industries Association® (SEIA). Providers include national companies like Palmetto and local installers such as NM Solar Group.
The solar industry in New Mexico employs more than 2,000 people. SEIA predicts that the state will grow from about 1,400 megawatts (mW) of installed solar capacity to have an additional 4,300-plus mW in the next 5 years.
FAQ: New Mexico And Solar Panels
Here are a few common questions New Mexico homeowners might have about solar panels.
Do I need a backup battery for a solar home?
Some homeowners are choosing hybrid solar systems, which pair a grid-tied solar home with backup batteries. The number of hybrid solar projects has quadrupled in recent years.
New Mexico isn’t known for extreme weather that can cause power outages. The state had only three reported “electric disturbance events” in 2021. That might mean that New Mexico homeowners don’t need energy storage like a battery system as much as solar homeowners in Texas.
If you’re considering batteries, though, it can be less expensive and easier to include them when installing the system rather than as a retrofit.
Is solar worth it in New Mexico?
New Mexico residents have an average yearly utility cost of $1,040. A home solar array will pay for itself in 12 years, on average.
The full cost of your solar panel system, the amount of energy you produce, your personal energy needs, your utility company’s net billing rates and electricity prices set by local companies all affect your savings.
Can I make New Mexico greener by going solar?
It requires resources, some of which are toxic, to manufacture solar panels. In the long run, though, solar power can reduce an area’s emissions. During their expected lifespan of 30 years, they produce no emissions and use no water after being manufactured.
The exact environmental impact of solar panels also depends on the current sources of energy in your area.
The Bottom Line: Solar Power Offers Great Potential In New Mexico
Government agencies and utility companies in New Mexico are making an aggressive push to use more renewable energy sources. Combine their goals with the state’s generous amount of sunshine, and you have great potential for solar panels to be a wise investment that can save money on energy bills.
Rocket Solar does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.
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