Exploring Solar Power In New Mexico: Potential, Incentives And Costs
Although New Mexico has excellent renewable energy resources, its electricity portfolio is dominated by coal and natural gas. However, the use of coal for electricity generation has been dropping, while the use of clean energy is increasing significantly. Solar power and wind energy use are ramping up thanks to multiple factors, which is excellent news for both solar businesses and the environment.
A state Renewable Portfolio Standard (RPS) requires electric companies in New Mexico to provide 100% carbon-free electricity to customers by 2045. Because New Mexico ranks #3 in the United States for solar energy potential due to its sunny climate, utility companies are relying heavily on solar power to meet this target. The Community Solar Act was signed into law in April 2021 and will help eliminate hurdles for developing community solar farms. In addition, New Mexico offers net metering programs through electricity companies, a state solar tax credit, and a solar property tax exemption program.
As a result, the New Mexico solar industry is growing rapidly. Transitioning to solar power and phasing out the use of fossil fuels creates numerous opportunities for solar energy professionals to help residential and commercial clients dramatically reduce energy bills while reducing their carbon emissions.
Current State Of Solar Production In New Mexico
There are 1,601 megawatts of installed solar energy capacity throughout the state. In fact, New Mexico has enough installed solar energy capacity to power over 371,000 homes, according to the Solar Energy Industries Association.
Just over 6% of New Mexico’s electricity is generated from solar panels, and growth in the residential solar market has been steady in recent years. In 2022, New Mexico's solar capacity increased the most in the residential and utility-scale market segments. However, the amount utility-scale solar varies significantly from year-to-year.
By contrast, solar panel installations in the commercial and community solar markets have been slower. But, recent legislation will likely spur community solar development, which can benefit residential and commercial utility customers. Community solar farms are ideal for utility customers in New Mexico that rent, have shaded roofs, or cannot take advantage of the federal tax credits.
There are over 2,000 solar jobs in New Mexico, and 83 solar companies operate there. Of these companies, 45 are solar installers, contractors, or developers. Although there are solar companies across New Mexico, many are concentrated in Albuquerque and Santa Fe.
Considerations For Installing Solar Panels In New Mexico
New Mexico's ample sunlight and natural solar energy potential make it an ideal location for solar as it reduces the payback period of solar energy systems. However, before installing a photovoltaic system for New Mexico clients, consider factors like shading, roof age, and sun number. Despite an excellent solar resource, properties must be well-suited for solar panel installations.
Assess potential PV module shading to optimize efficiency, evaluate roof age for longevity, and examine the sun number for solar viability. A potential customer with a highly shaded roof might be a better candidate to join a community solar farm. Also, an essential aspect of the sun number is the electricity bill savings from installing a solar array, which depends on local electricity rates from utility companies.
In addition, many commercial customers can benefit from positive publicity and reducing carbon emissions from installing solar panels, which might align with corporate marketing goals.
How Much Does It Cost To Go Solar In New Mexico?
The average cost per watt for installing a residential solar panel system in New Mexico is between $2.79 and $3.77 before the federal solar tax credit and other rebates, according to EnergySage. The average cost per watt of commercial solar PV projects is usually lower due to economies of scale. The average payback period for a home solar panel system is 10.2 years, and the lifespan of most solar projects is around 30 years. This means residential solar customers can enjoy a couple of decades of “free” solar power.
Electricity bill rate hikes make installing solar panels more cost-effective, especially when power rates increase more than inflation. The average cost for electricity in New Mexico is 13.3 cents per kilowatt-hour (kWh) for residential customers, which is a bit lower than the national average of 16.1 cents per kWh. However, residential electricity rates have increased recently in New Mexico and beyond. By contrast, commercial electricity rates have remained constant in New Mexico at an average of 10.3 cents per kWh, but going solar is still an excellent way for businesses to reduce operating costs.
Also, installing solar systems helps residential and commercial customers alike to hedge against rising electricity prices. When electricity costs increase, so do the electricity bill savings.
New Mexico Solar Power Incentives
Several solar incentives reduce the total cost of installing solar panels. Some of these programs are only available to New Mexico residents or businesses.
Federal Income Tax Credit
A 30% federal solar tax credit, also known as the investment tax credit (ITC), is available to residential and commercial solar customers. A tax credit is a dollar-for-dollar reduction in taxes owed to the federal government for qualified customers. The tax credit can be applied to the total system cost, including the solar panels, inverter, labor, permitting, and other installation expenses.
Although it is helpful to explain that there are solar tax credits, beware of giving tax advice because not all solar systems and customers qualify. For example, renters are not eligible for the solar tax credit, and the homeowner or business must own the solar panels. Therefore, customers with solar leases and power purchase agreements (PPAs) aren’t eligible for the tax credit. Therefore, recommend that your customers speak with a tax specialist to ensure they qualify.
State And Local Programs
There are various local solar incentives to help New Mexico reach the clean energy goals specified in the Renewable Portfolio Standard. The New Mexico Solar Energy Association is a good source of information on this topic.
The state offers a 10% solar tax credit of up to $6,000 for residential and commercial solar installations. The New Mexico Energy, Minerals and Natural Resources Department must certify the solar system to qualify for this statewide solar incentive program.
New Mexico has a net metering program, so solar homeowners and businesses can receive compensation for the surplus solar power they feed to the electric grid. In addition, New Mexico also offers a property tax exemption for residential solar power systems. Therefore, installing a home solar system will not cause property taxes to increase, despite the array increasing the property value.
New Mexico Has Huge Solar Potential – Which Means Potential For Your Installation Business, Too
Although New Mexico isn’t a national leader in solar installations, like California, Florida, and Texas, it is poised for significant growth. New Mexico state incentives provide a 10% tax credit, and utility companies must offer net metering programs for grid-tied solar customers. Also, its sunny climate means solar arrays generate plentiful amounts of renewable power, unless the property is shaded.
Because it has an excellent solar market, there are opportunities for solar professionals to grow their businesses and partner with GreenLancer. Our network extends to all 50 states, so we assist solar companies operating in New Mexico and beyond to complete successful projects.