Is solar worth it in New Mexico?

7 factors to consider before getting solar panels in New Mexico

With around 300 sunny days per year, New Mexico it a prime spot for harnessing solar energy. But it doesn’t work out for everyone. Here’s what to consider before making the switch.

1. Solar panel installation costs
2. New Mexico solar incentives
3. Your energy consumption
4. Net metering buyback rates
5. How long you live in your house
6. The solar company you hire
7. How you pay

1. Solar panel installation costs: $10,000 to $30,000

Before the federal solar investment tax credit (ITC), a typical residential system ranges from $15,650 to $31,300. That price drops to $10,955 to $21,910 after considering the full 30% tax credit.

Average solar panel costs in New Mexico are relatively expensive compared with those in other states. Most installers set the price according to the system's wattage, with a typical cost between $2.50 and $5 per watt. “Cost per watt” is a little like looking at the price per square foot when you buy a house. It helps you compare the value of solar energy systems in different sizes. In New Mexico, the average cost per watt is only $3.13.

Average solar panel installation cost by system size in New Mexico

2. New Mexico solar incentives: federal and state tax breaks

The 30% federal tax credit is usually the most significant solar incentive for New Mexico homeowners. There’s also a solar exemption on property taxes, but that doesn’t do much to offset your upfront costs.

The federal solar investment tax credit (ITC) is worth 30% of your total system costs, including equipment, labor and permits. That amount goes toward what you owe on federal income taxes.

For example, if you spend $10,000 installing a solar panel system, the ITC is worth $3,000. If you owe $15,000 in taxes, the credit reduces your debt to $12,000. The ITC only offsets your tax liability; you can't take advantage of it if you don’t owe taxes in the first place. However, any unused portion of the credit rolls over into future tax years.

» MORE: New Mexico solar incentives, tax credits and rebates

3. Your current energy consumption

Look at your most recent utility bills — how much electricity does your house need each month? This tells you what size and capacity your solar system needs to be. A typical New Mexico household needs a system with a capacity of 7.85 kW to offset its electricity needs with solar energy. You might need a larger or smaller system, depending on your current energy consumption.

Once you know your current energy consumption, you can calculate your potential savings and the time it should take for your solar installation to pay for itself. In New Mexico, solar panels usually pay for themselves within 6 years.

4. Net metering rates in New Mexico

Net metering is a system of give-and-take between you and your utility company. It lets you access power from the grid when your panels don’t generate enough electricity. Net metering also lets you earn credits for sending any excess solar energy to the grid. These credits can offset the cost of electricity consumed at other times.

In New Mexico, net metering is available to all qualifying facilities (QFs), making it accessible to residential and commercial users. There’s no statewide cap on the aggregate capacity of net-metered systems, so there’s ample room for growth. For systems up to 10 kilowatts, you get credits or payments for excess energy production. These credits can be carried forward, reducing future energy bills or providing a source of income.

However, New Mexico makes the net metering process a little tedious and doesn’t reward excess generation as much as some other states. The compensation for net excess generation (NEG) varies depending on the utility, and for larger systems (more than 10 kW), it's based on time-of-use rates. This makes it difficult to predict your financial returns. Central New Mexico Electric Cooperative, Public Service Company of New Mexico and El Paso Electric in southern New Mexico all have different rates.

5. How long you plan to stay in your house

Buying solar equipment is expensive, and it takes time to recover the initial investment through savings on electric bills. If you sell your house and move before then, you might not fully realize the financial benefits of your solar panels.

Solar panels typically pay for themselves within five to 10 years.

A Zillow study found that, on average, houses with solar panels sell for 4.1% more. Let’s say you spend $25,000 putting solar panels on a house that costs $400,000. It might sell for $16,400 more in a few years. Over 25 years, New Mexico homeowners with solar panels avoid an average of $68,335 in utility costs.

In other words, don't get solar panels just because you want to sell your house soon. Instead, consider a home improvement project with a better return on investment, like remodeling the bathroom or kitchen.

6. The solar company you hire

People have had mixed experiences with solar companies. In the best-case scenario, it’s easy and you’re happy with the system’s performance. In the worst-case scenario, you end up paying thousands for mid-tier solar equipment from a company with poor customer service and no follow-up or support.

One of the most common complaints is related to pushy sales reps who make promises that can’t be delivered. That’s why it’s so important to thoroughly research and verify claims made by sales teams before making a decision. Use the National Renewable Energy Laboratory’s PVWatts Calculator to estimate how much electricity a solar panel can produce over a year on your house — just type in your address. Project Sunroof is a free solar savings estimator powered by Google Earth imagery.

7. How you pay

If you can, it’s often financially strategic to pay for the whole thing upfront. You own the system from day one and receive the benefits of available tax credits, and you don’t have to pay interest on a loan. Of course, paying cash is not always an option. That’s when loans, leases and other agreements come into play. Eligible homeowners can also borrow against equity in their house to finance a solar panel system.

• Loan: Solar loans work like any other type of loan. They have relatively low fixed interest rates. Once you pay yours off, you own your system outright.
• Lease: Leasing panels is one way to get the benefits of solar energy without the high upfront cost. A solar lease works like a car lease — you get to use the panels but don’t own them. Leasing can be good if you have limited savings. Solar lease agreements typically last 20 to 25 years.
• Power purchase agreement: Similar to leasing, a power purchase agreement (PPA) lets homeowners install solar panels without the upfront costs. You sign a long-term contract with a solar services provider to purchase the electricity generated by the panels at a predetermined rate. The provider owns and maintains the panels throughout the agreement, which usually lasts 10 to 25 years.

» SOLAR PANELS: Lease vs. buy

Is my house a good candidate for solar panels?

In New Mexico and elsewhere, going solar ends up being worth it for many homeowners as long as their home is a good candidate to support a solar panel installation. Here’s what to think about before you commit:

• How old are your appliances? The first step is to ensure that your electrical loads are as small as possible. For instance, if you have an older refrigerator or air conditioning unit, it’s smart to upgrade those before investing in solar panels.
• How much sunlight do you get? Solar panels need regular exposure to sunlight to produce the most energy possible. New Mexico averages six to seven peak sun hours each day. However, lots of shading — like trees or tall buildings above your roof — could make your solar system less efficient.
• What is the size and angle of your roof? New Mexico (and the rest of the United States) is in the Northern Hemisphere, so solar panels perform best on south-facing roofs. The worst place to install would be on north-facing roofs, especially if those roofs have a high pitch. For example, if the only place you can install is a north-facing roof with a 30-degree pitch, your costs will likely go up by 30% to 40%.
• What is the condition of your roof? If you have to replace your roof, do that before you install solar panels. Solar panels are designed to last up to 30 years, so you want your roof to last just as long. Otherwise, it could cost thousands to remove the panels, fix your roof and reinstall the panels.

Pros and cons of solar panels in New Mexico

It’s a common misconception that solar panels always completely eliminate your monthly power bill — this is not always the case. Still, you’ll likely be paying much less than you would for traditional utility bills.

Benefits of solar panels in New Mexico

• Better for the environment: Traditional energy sources like coal and natural gas release carbon dioxide and other harmful pollutants into the air. Solar panels generate electricity from sunlight, a clean and renewable energy source. Installing solar panels on your roof helps the environment primarily by reducing greenhouse gas emissions and dependence on fossil fuels.
• Higher home resale value: Installing solar panels can significantly increase a home's value. According to the study mentioned above, houses with solar panels sell for 4.1% more on average. The exact increase in value varies by location, with homes in active solar markets sometimes seeing even higher boosts.
• Cheaper energy bills: The average homeowner in New Mexico uses a lot of power, which adds up to a lot of savings when you switch to solar. Going solar now means that your monthly energy expenses will be more predictable (and very often significantly lower). It also protects you from future energy cost increases.

Drawbacks of solar panels in New Mexico

• Solar equipment is expensive: Even with rebates and other financial incentives, the price typically starts between $10,000 and $30,000. It’s even more expensive if you want a solar battery for energy storage. Solar battery costs are generally between $7,000 and $18,000. Getting a solar battery might be strategic if net billing rates continue to decline in New Mexico. That way, you can store energy at home instead of tapping into the local grid when you need to.
• Potential roof leaks: The installation process involves drilling holes into the roof to anchor the panel mounting systems. If not done correctly, this can lead to leaks or structural damage. Nhi in Albuquerque, New Mexico, said it took three months and several thousand dollars to get a new roof after installing panels.
• Energy production varies: Solar panels are dependent on weather conditions and available sunlight, meaning their performance can fluctuate with cloud cover or shading from trees and buildings. Seasonality also affects how much energy they can produce. Anecdotally, Brett in Albuquerque said his bill is just $7 every month, and Judith in Rio Rancho, New Mexico, said her bill is up to $55 in the winter.

» MORE: Solar energy pros and cons

Find solar companies in New Mexico

A good solar company helps you navigate local incentives, permitting and net metering policies. Compare our picks for the top solar companies in New Mexico to learn more.

Bottom line: Is going solar in New Mexico worth it for you?

The ConsumerAffairs Research Team conducted an in-depth analysis to determine how much it is to go solar in New Mexico and the average costs in other states. For a lot of homeowners, solar panels are worth it as long as their cost savings over time outweigh the initial investment.

Solar panel costs and savings in New Mexico vs. nearby states