Solar Panels in Colorado: Costs and Incentives in 2024

Installing residential solar panels in sunny Colorado tends to be less expensive than in other states, due to lower average energy consumption and smaller average solar installations. Eco-friendly policies in this state also make solar a good way to save on electricity bills long-term.

The typical cost for an average-sized solar panel system in Colorado is $28,933 before incentives, and as little as $20,253 after the federal solar tax credit. This total is based on the state’s median dollar-per-watt cost of installing a solar system and average residential system size, which was a low 9.3 kWs in the second half of 2023.

The median cost per watt of installed capacity, $3.10, is one of the more expensive options in the U.S. But the average system size in Colorado is on the lower end at 9.3 kW. This may be influenced by Colorado net metering rules that specifically allow net metering for systems under 10 kW. Average monthly consumption of electricity is also relatively low in Colorado, with the average household consuming 572 kWh of energy per month, according to EnergySage ^[0]

Some Colorado customers have found that their local power grid won’t support interconnecting solar panels to the utility grid without costly upgrades. For example, Xcel Energy, Colorado’s largest utility company, told a homeowner he’d need to pay $7,000 for a new transformer to get his solar panels connected to the grid because his neighborhood’s system couldn’t support another solar installation, The Colorado Sun reported.

“Interconnection is really important,” says Mac Scott, communications director for Colorado Solar & Storage Association (COSSA). “Homeowners have run into being responsible for upgrades required to make renewable energy possible. Somebody could get to the end of this investment and find out that there is an unexpected cost.”

The good news is that Senate Bill 218 ^[0]

Colorado’s net metering agreement offers one-to-one credit when you sell back solar energy to the grid for residential systems up to 10kWs. Net metering is a billing convention that gives you credit for excess power your system produces during the day, which can be applied to electricity costs during dark or cloudy times of day when your system is using more power than it’s producing. One-to-one net metering means you get 1 kW of credit toward your electric bill for every 1 kW your solar panels generate. This policy, designed to encourage people to go solar, makes it easy for residents with solar to keep electricity bills as low as possible. Not all states offer net metering, much less one-to-one net metering.

In Colorado, if you produce more electricity than you use, you could end up with a negative net usage balance for electricity and credits on your account. These credits roll over indefinitely until you terminate service with your utility, at which point any remaining credits are lost.

As more solar panels are installed in Colorado, net metering agreements may change.

A $156 million grant from the Environmental Protection Agency called Colorado Solar For All allows income-qualified candidates to apply for and receive access to solar power. The structure of the plan and application process is still in development at the time of publishing.

Colorado also has a variety of locally administered rebates and incentives, some of which residents can apply for through Energy Smart Colorado. The available incentives vary based on location. In the Roaring Fork Valley, for instance, residents can get rebates for 25% of a project’s cost, or up to $2,500, for both residential solar panel systems and storage systems.

However, many utilities don’t participate in Energy Smart Colorado. To cover your bases, it’s worth asking your utility provider if it offers incentives or rebates. You can also search the Database of State Incentives for Renewables & Efficiency (DSIRE) , a project maintained by the North Carolina State University, to find out about benefits.

Solar batteries, which allow you to store the electricity your home generates, add substantial cost to a solar panel installation. Since Colorado has one-to-one net metering, batteries might not save you much on your electric bill. But they can provide backup power in the event of an outage, which can be especially useful in remote areas with harder-to-access power utility lines.

Colorado’s average installed battery cost ranges from $16,575 to $22,425 before the federal tax credit kicks in, according to 2024 EnergySage data. This can add many years to the payback period for your solar panel system.

The state of Colorado offers a 10% tax credit toward the purchase price of energy storage systems like battery backups. It is applied the point-of-sale, so your battery storage installer will typically apply the discount when you pay.