Colorado solar 101: must read before you buy solar panels

Last updated 05.27.22

Colorado State 52 solar panels available

  • $2.13 / W Average gross price of a solar power system as of September 2023
  • 8 years Average system payback period
  • $36 401 Average savings from going solar in Colorado
  • 6 ¢ / kWh Levelized cost of solar energy
  • 3.62 kW Recommended system size

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Solar laws, incentives and rebates in Colorado you need to know

Save 30% of your PV system cost with Federal Solar Tax Credit

The US government wants more people to go solar: it’s a modern and green way of getting energy. This is why the Solar Investment Tax Credit (ITC) program was developed. It allows American citizens to claim 30% of the cost of their installation as an income tax deduction. The cost here is not only solar panels, but also shipping, installation expenses and more. For example, if your system overall made you spend $10,000, the government returns you $3,000. To claim the ITC, complete all the necessary forms and submit them when filing your taxes.

Gain credits and pay your bills with Net Metering

Solar laws in Colorado enable customers of all utilities with more than 5,000 customers to join Net Metering programs. Hence, residential solar owners have an option to send the excess electricity back to the grid instead of storing it with battery banks. When you sell your solar power to the utility, you receive credits that can be used to offset your next bills. In Colorado their value is equal to full retail electricity price. If you have unused credits after a 12-month period, you can either choose to roll them over indefinitely or receive a payment at the utility's average hourly incremental cost. Keep in mind that investor-owned utilities require participating systems to be sized below 120% of the customer's annual average consumption.

Save additional $300 to $1,000 a year trading RECs

Renewable Energy Credits are certificates granted to any person or entity upon generation of each MWh of clean electricity. Unlike with Net Metering, you don’t need to sell any electricity to get credits. The value of RECs is always changing, which makes them similar to stock market assets. Based on the available data, selling RECs could mean anywhere from $300 to $1,000 annually for a 10 kW solar system. To participate, first you may want to contact the Colorado Energy Office for relevant details. After that, you can create a REC account with the Western Renewable Energy Generation Information System (WREGIS) to begin storing and selling your credits.

Save up to $2,500 with solar rebates from electric companies in Colorado 

To encourage the switch to renewable energy, electric companies in Colorado are willing to help their customers with the purchase of solar equipment. By applying for their solar rebates, Colorado residents can lower the cost of a PV installation. 

One of the examples is the Renewable Energy Rebate Program by San Miguel Power Association. SMPA pays $0.25 per each watt of installed capacity with a maximum rebate amount of $750 for residential installations and $2,500 for commercial systems. Ask the contractor you hired to install the system to apply for rebates on your behalf. All the questions can be addressed to SMPA Member Services at (970) 626-5549 or

Another electric company that offers rebates to its customers is Colorado Spring Utilities. It is possible to get $0.10 per watt both for residential and commercial systems with their Solar energy program. Home installation capacity must range from 500 W to 15 kW and commercial systems are eligible as long as they are under 100 kW. To apply for the program, complete all the required papers and email them at

Earn up to $60 per year with Xcel Energy’s Solar Rewards Program

Customers of Xcel Energy can participate in its Solar Rewards Program. The electric company sends to their customers monthly or quarterly payments which depend on the size of the installation.

  • Small program is designed for systems under 25 kW, and the utility pays $0.005 per kWh with the program's annual capacity limited to 12 MW.
  • Medium program applies to systems with a capacity between 25 kW and 500 kW. Utility pays 0.0375/kWh. Program’s capacity is 24 MW with half of it allocated in January and the other half in June.
  • Large program for commercial systems bigger than 500 kW doesn’t have a fixed REC price (Bid by request for proposal) and is limited to 26 MW per year plus 4 MW for systems between 500 kW and 1500 kW.

Read the instructions for the program carefully and start the application process here.

Black Hills offers up to $0.06 per kWh through their Solar Power Program

Black Hills electric company also has a performance-based incentive, called Solar Power Program. Eligible installations must be under 500 kW, new and warranted for 20 years minimum. The company offers $0.03 per kWh for systems under 30 kW and $0.06 per kWh for installations bigger than 30 kW. The contract is signed for 10 years. Find more details on their website.

Property taxes stay the same even after adding solar panels 

To make sure that citizens don’t pay for solar panels more than necessary, the state doesn’t raise property taxes after the installation of photovoltaics. According to solar laws in Colorado, the production capacity of an installation should be less than 100 kW to be exempted from taxes. While you don’t pay anything to the state, a solar system does increase the value of your home on the market. 

Sales and use tax exemption makes solar panels 3-8% cheaper

Solar systems in Colorado have been exempted from sales and use taxes since 2006. It allows retailers to put up their products for sale at a lower price. Some cities and counties have their own taxes, but overall this incentive makes panels 3-8% cheaper than in other states. The prices for photovoltaics dropped by 45% over the last 5 years, so buying solar panels in Colorado is usually a good deal. 

Buy your first solar system with solar loans from Elevation credit union

Elevation credit union offers loans for Colorado citizens that are specifically aimed to help people to go solar. The minimum size of a loan for residential customers is $500 and for businesses it’s $1,000. The loan term can range from 36 to 180 months with an annual percentage rate from 2.75% to 8.125%. Learn more about energy loan rates and apply here

Get a permit to install a solar system in Colorado

Generally, to install a solar system in Colorado, you need a permit. However, the process of getting it isn’t standardized and varies across the state. Before purchasing your panels, consult with your local county or municipality and check their website for information on your particular case. For example, here’s what you need to install a system in Denver:

  • Contractor's License or having passed Homeowner’s Exam
  • Landmark Certificate of Appropriateness
  • Zoning certificate if you install panels at an unusual angle
  • Electrical permit

Fees for all the papers usually depend on the size and cost of installation. Electrical permit fee for panels in Denver is capped at $50. When all the papers are submitted, it is perfectly legal to install solar panels on your home in Colorado. 

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