Greetings from sun-soaked New Mexico! As a solar industry analyst and long-time NM resident, I‘ve watched firsthand as solar energy has blossomed across our state over the last decade. Once a renewable frontier, New Mexico now ranks 9th nationally in solar jobs and has enough installed solar capacity to power 150,000 homes.
And thanks to policy incentives, rapidly declining solar equipment prices, and the fact we enjoy the second-highest solar energy potential in the U.S, the land of enchantment offers homeowners a golden opportunity to harness clean energy and fatten their wallets.
In this comprehensive guide, I‘ll map out the ins-and-outs of securing solar for your New Mexico home, with a focus on maximizing financial savings through incentives, tax programs and utility cost reductions. Follow along for pro-tips that can save you ~$22,000 over the life of your solar system!
Sunny Savings Outlook
With over 300 days of sun, expansive solar resources, and average retail electricity rates of 13.5 cents/kWh (18% above the national median), New Mexico presents an ideal recipe for solar savings:
- 15% projected solar capacity growth through 2026
- 126,000 homes forecast to have solar by 2030
- 20% higher solar output potential than U.S. median
Locking in affordable solar now hedges against future rate hikes in an increasingly fossil fuel averse regulatory climate.
Pro Tip: PNM, NM’s largest electric utility covering 75% of residents, just announced a 14% rate increase by 2027. Going solar shields you from impact!
This outlook combined with exceptional state and federal financial incentives makes clear why New Mexico is a glittering solar leader ripe for investment.
Claim the Federal Solar Tax Credit Before it Sets
The federal solar investment tax credit (ITC) lets U.S. homeowners deduct 30% of their solar system costs from their federal income taxes owed. This applies not just to your equipment, but also installation labor and permitting fees.
For a typical 5kW residential set-up running $15,000, that equates to $4,500 put back into your pocket!
Insider Tip: Solar tax credits reduce your tax liability, so make sure to crunch the numbers on exactly how much you can recoup based on what you owe Uncle Sam annually.
While juicy now, the ITC begins phasing down to 26% of costs in 2033 then dips to 22% in 2034. The credit expires entirely in 2035 if not renewed by Congress before then.
The phaseout schedule looks like:
| Year | ITC Percentage |
|---|---|
| 2022-2032 | 30% |
| 2033 | 26% |
| 2034 | 22% |
| 2035+ | 0% |
This makes now the optimal window to capitalize on the full 30% return. You must also purchase, not lease, equipment and install on a home where you have a tax liability.
Double Down with New Mexico Solar Tax Credits
Beyond Uncle Sam’s gift, the state further sweetens the solar deal by chipping in tax credits of its own. Homeowners can deduct 10% off their solar system costs, up to $6,000 max, directly from their state income tax bill over five years.
We’ll use our same 5kW, $15,000 solar set-up to demonstrate:
- Federal ITC tax credit = $4,500
- NM state tax credit (10% of $15k) = $1,500
Stack these incentives together and New Mexicans can defray $6,000 right off the sticker price of their solar investment. That’s 40% your costs recouped from tax savings alone!
Socking Away Further Savings from Net Metering
The sunniest perk enabling solar owners to maximize savings comes through net metering. Under state law, when your solar panels produce more juice than you currently need, the excess flows back into the grid and your utility meter spins backwards. This banked amount accrues as a credit that offsets your consumption from the grid during low-light periods (i.e. nighttime).
Monthly net excess generation rolls over indefinitely, including into the next calendar year. So if you overproduce one year, you’ll start the next already in the green!
Expert Tip: With smart orientation and minimal shading, most solar arrays in New Mexico produce excess annual generation thanks to our sun-drenched climate.
Once your credit balance hits zero consumption for a 12-month billing period, the utility cuts you a check for any leftover dollar value. This makes oversizing your solar system lucrative to maximize net metering credits.
Padding Your Solar Savings with SREC Sales
You can further monetize your sunshine bounty by selling excess solar production back to your utility through New Mexico’s Solar Renewable Energy Certificate (SREC) program. For each MWh your panels crank onto the grid, you’ll generate one SREC which can fetch around $2.50 on the open market.
Admittedly one of the country’s less lucrative SREC programs, but hey…a solar dividend is a solar dividend!
Real Talk: At $0.025 per kWh, you‘d need to pump out 100,000 kWh annually to net $2,500 in SRECs. That would require a massive commercial-scale array. As a residential solar producer, plan for several hundred dollars yearly, tops. But don‘t sniff at recurring passive income!
Tax Exemptions to Preserve Ongoing Savings
Rounding out New Mexico‘s solar incentive lineup are two key tax exemptions fo homeowners:
Property Tax Exemption
Adding solar increases your home‘s value, which normally triggers property tax reassessment. But under state statute, 100% of your solar array value is exempted. This foregoes an annual tax hike that could otherwise eat into long term savings from your system.
Sales Tax?
Unfortunately New Mexico does not offer a comparable state sales tax break for solar equipment or installation services. But hey, 4 of 5 incentives isn‘t bad!
Riding New Mexico‘s Rising Renewables Wave
Undergirding all these homeowner perks is an ambitious renewable energy target: 100% zero-carbon electricity by 2045. That puts New Mexico on the leading edge of state renewable goals nationwide.
To propel progress, state legislators continue expanding pro-solar policies like community solar, market-based incentives, and home battery subsidies. This steady tailwind suggests renewable energy savings for homeowners will compound for decades to come.
Weighing Solar Loans versus Leasing
For homeowners who lack the cash to purchase a solar system outright, both financing loans and solar leases present accessible options to go solar with little to no money down. Which route offers the best value?
- No money down
- Own the system and keep all incentives/credits
- Pay off principal + interest over 15-25 years
- Ultimately own asset and power
- Little to $0 downpayment
- Forego tax credits and incentives
- Pay monthly lease fee roughly = utility savings
- No eventual system ownership
With interest rates historically low, solar loans allow you to retain more long run value. Leases offer simplicity and less liability.
New Mexico‘s newest option – community solar – offers a fresh take for cost-conscious consumers. Shared solar gardens give households "solar ownership lite" by letting them subscribe to panels in a collectively owned offsite installation. This grants solar access without fielding panels on your own roof.
Mapping Your Path to Five-Figure Solar Savings
Now that we‘ve unearthed all potential solar savings avenues, let‘s tabulate projections for maximum possible value:
Cash Incentives
- Federal tax credit: $4,500
- State tax credit: $1,500
- SRECs: $500+
Avoided Lifetime Electricity Costs
- 25 years avoided utility purchases: *~$15,000**
TOTAL 25-Year Savings = $21,500
Accounting for the initial $15,000 system cost, a New Mexico homeowner could pocket ~$6,500 in positive net savings after 25 years of zero-fuel solar power generation.
Factoring your current utility rates, that likely gives a payback period around 7-8 years to recoup your initial investment through electricity and credit savings.
The verdict? New Mexico rolls out the red carpet for residents embracing home solar solutions. With best-in-class sunshine resources, rapidly growing solar infrastructure, and policies unlocking over $20,000 in lifetime consumer value, the state presents a Lone Star opportunity to profit from renewables while securing your family‘s energy future.
To determine exact solar savings based on your home specifics, use our Solar Calculator. Wishing you enduring sunshine days ahead!
