How Much Can You Save on Solar in New Mexico?
New Mexico receives up to 5,642 kilojoules of sunlight annually making it the second sunniest state in the United States. The state also has about 45 solar installations with a total capacity of 1,483 megawatts (MW).
Wind energy, biomass, geothermal energy, and solar energy are the primary renewable resources in the state.
New Mexico aims to achieve 50% and 100% renewable energy standards by 2030 and 2050, respectively.
State and Federal Solar Energy Incentives in New Mexico
|New Mexico Solar Incentives||State or Federal||Program Overview|
|Federal Solar Tax Credit||Federal||The U.S. Government grants taxpayers 30% credits on all solar systems until 2035.|
|Renewable Energy Production Tax Credit (REPTC)||State||The tax credit gives energy production companies that generate electricity from wind, solar, and biomass sources specific financial incentives.|
|Sustainable Building Tax Credit (SBTC)||State||The SBTC program rewards residents who use sustainable building practices and energy-efficient products.|
|New Mexico Property Tax Exemptions||State||Solar units will not increase homeowners’ property taxes. This exemption is only for residential homes.|
|Net Metering||State||Net metering allows solar users to sell their excess energy to the utility company. The credits or payments help to reduce or cut the consumers' utility bills.|
|The Solar Market Development Tax Credit (SMDTC)||State||This income incentive covers 10% of the system and installation up to $6,000.|
|New Mexico Sales Tax||State||The state exempts solar panels and equipment from sales tax.|
As of 2023, New Mexico's total energy consumption per capita is 330.4 million Btu. Household consumption is 59.7 million Btu, while commercial consumption is about 55.0 million Btu.
How Cheap or Affordable is Solar Energy in New Mexico?
According to a US Energy Information Administration (EIA) report, the average retail price of grid electricity is about 9.79 cents/kWh (as of 2021). In comparison, New Mexico had an average solar panel cost of $3.38 per watt before the federal solar tax credit.
|State||Number of solar Installations||MW Installed||Average cost for grid power (2021)||Average cost per watt|
|New Mexico||45||1,483||9.79 cents/kWh||$3.38|
On average, installing a 6kw solar system in New Mexico costs $20,280. However, the Federal Tax Credit or Investment Tax Credit (ITC) gives homeowners a percentage back when they adopt solar.
As of 2023, the credit rate is 30%, which means solar array owners get a thirty percent credit on their installation.
Using the credit, homeowners get to save $6,084 for a 6kw system costing $20,280.
|State||Cost of installing a 6kw system||Federal tax credit value 2023 (30%)|
Renewable Energy in New Mexico
According to the United State Energy Information Administration (EIA), New Mexico gets two-fifth of its electricity from renewable energy.
Wind energy, biomass, geothermal energy, and solar energy are the primary renewable resources in the state. However, the most significant percentage comes from coal, followed by wind energy.
The state also has a 522-megawatt wind farm with an ongoing 1050-megawatt Western Spirit wind project to put this resource to more use. But, New Mexico does not have a hydroelectric plant or offshore wind resources because its terrain is best for wind and coal.
Twenty-one states in the U.S., including New Mexico, have adopted the Utility Green Tariff. This tariff allows utility companies to give industrial and commercial properties 100% renewable energy at a discounted rate. The idea is to encourage large energy consumers to meet their renewable energy goals.
The Federal Solar Tax Credit or the Investment Tax Credit (ITC) is a tax claim on an installed solar system. Taxpayers can claim a percentage of the cost of the PV system from their annual income taxes. For homeowners in New Mexico, this reduces their income taxes. It can also increase the refund rate from the annual tax.
The rates change according to the year residents installed their units. For example, solar systems placed on a property from 2020 to 2021 get a 26% credit, while units installed from 2022 to 2032 earn a 30% tax credit.
Systems in place on or before December 19, 2019, also get 30%. Nevertheless, this will reduce to 26% for PV installed in 2033 and 22% in 2034. The federal solar tax credit will end in 2035, though Congress might renew it.
This incentive covers the panels, cost of installation, and storage device up to 3(kWh). It also includes expenses from supporting equipment such as wires, inverters, conduits, and mounting systems.
However, rebates from utility companies are not calculated with their taxes because they get deducted before taxes.
The ITC does not affect other state or local solar incentives.
There are specific criteria residents must meet to access this tax credit. They include the following:
The following are steps to claim the Federal Solar Tax Credit:
Step 1: Check for eligibility
Residents must ensure their eligibility status, as not everyone can claim this incentive. For example, those who got solar units through purchase agreements or leases cannot claim ITC.
Step 2: Complete Form 5695
Homeowners can claim this renewable energy tax credit by filling out Form 5695 (Residential Energy Credits) from the Internal Revenue Service (IRS). Ensure all vital information is in the file, such as the energy generated and the cost of the solar system.
Check 3: Attach the form to tax returns
After completing the form, residents should submit it with their tax returns to claim their solar tax credit.
Net metering is a billing style that allows solar users to sell their surplus energy back to the grid. PV systems sometimes generate more energy than the house uses. If a property opts for net metering, the owner can convert this excess energy into credits.
A utility company will credit the customer for extra energy generated or pay the customer at the utility's rate. Also, unused credits roll over from month to month.
New Mexico operates a net metering system available for renewable energy systems. To qualify for NEM, residents must connect to a power grid. They must also connect a bi-directional meter that helps calculate the total power generated. Using net metering with a solar system saves money on utility bills yearly.
Net metering also reduces the grid's distribution and transmission infrastructure burden. When residents use solar energy instead of power from the grid, it lessens the power drawn. Also, excess energy from solar systems goes to non-solar customers, which reduces the burden on utility power plants. Another benefit of net metering is that homeowners will recover their investment costs faster and save more on electricity bills.
To enroll for net energy metering in New Mexico, here are some steps residents can take:
Step 1: Reach out to a utility company
Residents must connect to approved solar power grids to use net metering. Hence contact a utility company to inquire about their net metering program. Utility companies in New Mexico that offer NEM are PNM Resources (Public Service Company of NM), Xcel Energy (Southwestern Public Service Company), and El Paso Electric Company.
Step 2: Check the eligibility requirements
Homeowners must ensure they are eligible for net metering in New Mexico. Qualifying Facility requirements include being a residential or commercial customer of a certified energy company. Meeting the system capacity of 80 MW, but there is no limit cap to energy generation.
Step 3: Submit an application
Residents should apply to their utility company through their website or mail. The application may need information about the property's energy usage and the solar system.
Step 4: Wait for approval
The utility company will review the application and notify the approved applicants.
Step 5: Install a net meter
The utility company will install a special meter to use net metering on the property. This meter will measure the electricity the property generates and consumes from the grid.
In New Mexico, residential solar energy systems are exempt from property tax assessments. The state government does not deem residential solar systems as physical improvements. Therefore, installing a solar energy system will not increase the property's tax value.
House Bill 233, enacted in 2010, provides for this exemption. If the owner sells the property, the value of the solar energy system can add to future assessments.
The exemption applies to solar energy systems that provide space heat, water heat, or electricity to the property. It does not apply to solar windows, dark-colored water tanks, or non-vented Trombe walls.
The property tax exemption for solar energy systems will automatically apply yearly on the property. Residents do not need a certificate to enjoy this benefit while the system is viable. The local tax assessor will ignore the system’s value when calculating the property's taxable value.
Property Assessed Clean Energy (PACE) financing in New Mexico allows property owners to borrow money for energy improvements such as solar panels or geothermal systems. The homeowner repays the loan via a special property assessment over some years, usually ten to twenty years.
In 2009, New Mexico passed two bills allowing local governments to offer PACE financing programs.
These bills are:
Property owners who join the program receive financing, which they repay as an assessment of their property tax. The district board manages these financing programs.
The Solar Energy Improvement Special Assessment (SEISA) Act: Allows a county's governing board to establish a SEISA on a property. Proprietors must voluntarily request the SEISA and pay a fee for solar energy improvements. This fee finances the installation of solar technology on eligible properties within the county. The aim is to encourage solar adoption among property owners by offering financing options.
The region does not provide funding to property owners. Instead, it creates rules for certifying certain private banks and financing institutions. These institutions then give residents loans for renewable energy. The loan repayment is through the property tax assessment, which becomes a lien on the property.
The interest rates for PACE financing in New Mexico vary depending on the lender and the loan terms. PACE financing offers competitive interest rates. These rates are lower than credit card rates but are often comparable to home equity loans.
Property owners must meet the following criteria to qualify for New Mexico PACE:
New Mexico offers a sales tax rate of 5% on all purchased goods and services. Sales tax exemptions are waivers on specific items which lower their price.
The solar sales tax exemption is a benefit some states offer residents who buy and install solar equipment. This benefit forgoes sales tax on the panels and equipment. Thus, it reduces the upfront cost of installing a solar energy system.
New Mexico gives such sales tax exemption for renewable energy. It exempts homeowners and businesses from paying extra state sales tax on their solar panel systems. This benefit is one of the New Mexico renewable energy rebates. But, the unit has to provide space heat, hot water, or electricity to the property to be eligible for this solar tax credit.
New Mexico tax credit for solar panels also covers solar installation from utility companies. Several US solar companies offer installation and maintenance services for solar panels.
Customer reviews, expertise, and industry awards are ways to evaluate the best US solar energy companies. The New Mexico solar tax incentives assist residents who want to adopt solar panels.