Are solar panels worth it in Colorado?

7 factors to consider before getting solar panels in Colorado

ConsumerAffairs has heard from thousands of solar customers who have already gone through the installation process, including hundreds from Colorado. Here’s what to consider before making the switch:

1. Solar panel installation costs
2. Your energy consumption
3. Colorado solar incentives
4. Net metering buy-back rates
5. How long you stay in your house
6. How you pay
7. The solar company you hire

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

Average solar panel costs in Colorado are comparable to the national average. Before the federal solar investment tax credit (ITC), a typical residential system ranges from $15,150 to $30,300. That price drops to $10,605 to $21,210 after considering the full 30% tax credit.

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 Colorado, the average cost per watt is only $3.03.

Average solar panel installation cost by system size in Colorado

2. Your current energy consumption

A typical Colorado household needs a 9.27 kW system to offset its electricity needs with solar energy. You might need a larger or smaller system, depending on your current energy consumption.

Look at your latest utility bills to see how much electricity your house needs each month. This tells you what size and capacity your solar system needs to be.

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.

3. Colorado solar incentives: federal and state

The federal solar investment tax credit (ITC) is a major incentive that reduces the upfront cost of going solar in Colorado. The ITC provides a 30% tax credit on your total system costs, including equipment, labor and permits. It will drop to 26% in 2033 and 22% in 2034.

Colorado residents may take advantage of more solar incentives, including:

• Tax breaks: In addition to the ITC, Colorado residents can take advantage of state and local sales tax, use tax and property tax exemptions.
• Rebates: Holy Cross Energy, Roaring Fork Valley, San Miguel Power Association, Aspen and Xcel all have rebates or other reward programs for going solar. Energy Smart Colorado also has a rebate up to $2,500 (available in multiple counties).

» MORE: Colorado solar incentives

4. Net metering rates in Colorado: retail rate

Net metering lets homeowners with solar panels sell any excess electricity they generate to their local power grid. In Colorado, if you have installed a grid-connected solar photovoltaic system at home, you can take advantage of net energy metering programs.

Here's how it works: If your solar system generates more electricity than you use (up to 10 kilowatts), you’ll get paid the full retail rate for every extra kilowatt-hour your system sends back to the grid.

Getting enrolled in net metering shouldn’t be too difficult. “There was a little bit of confusion with our power company on how they were modifying the process,” Donald in Colorado Springs, Colorado, told us. “Other than that, I’m really happy with my decision to go solar, and I’ve been tracking my system's performance carefully.”

» GREENEST STATES: Colorado ranked 36th in 2024

5. How long you plan to stay in your house

It takes years for electric bill savings to make up for the initial cost — about 9 years on average in Colorado. If you sell your house and move before then, you might not fully realize the financial benefits of your solar investment.

Solar panels last 25 to 30 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, according to Zillow. But you miss out on some of that $53,986 in total avoided utility costs over 25 years.

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. 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; plus, you don’t have to pay interest on a loan. Of course, cash isn’t always an option. That’s when loans, leases and other agreements come into play.

• Loans: Solar loans work like any other type of loan. They have relatively low fixed interest rates. Once you pay it off, you own your system outright.
• Leases: 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.
• Home equity loans or lines of credit (HELOC): Eligible homeowners can borrow against equity in their house to finance a solar panel system. These often have variable interest rates, meaning monthly payments can increase over time.
• Power purchase agreements: 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.

7. The solar company you hire

People have mixed experiences with solar companies. In the best-case scenario, it’s easy to make the switch 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 NREL’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.

Solar payments vs. savings

Think of going solar in terms of your monthly costs. Given rising energy costs in Colorado and elsewhere, financing solar panels makes sense as long as your monthly loan payment is less than what you would be paying the utility company anyway.

Is my house a good candidate for solar panels?

Going solar ends up being worth it for many homeowners as long as their house is a good candidate to support a solar panel installation. Here’s what to think about before you commit:

• How old are my appliances? The first step is to ensure that your electrical loads are as small as possible. If you have an older refrigerator or air conditioning unit, for instance, it’s smart to upgrade those before investing in solar panels. That way, you can get a smaller system, which will be cheaper overall.
• How much sunlight do I get? Solar panels need regular exposure to sunlight to produce the most energy possible. Colorado averages 5 to 6.5 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 my roof? Colorado (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 my 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 Colorado

It’s a common misconception that solar panels will 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 Colorado

• Cheaper energy bills: The average homeowner in Colorado 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). Solar panels also protect you from future energy cost increases.
• 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.
• 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.

Drawbacks of solar panels in Colorado

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 Colorado. 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. 
• Energy production varies: Solar panels are dependent on weather conditions and seasonality. Solar panels still work on cloudy days, but less available sunlight does affect how efficiently they produce energy. Snow cover may also temporarily reduce efficiency until it's removed or melts off.

» MORE: Solar energy pros and cons

Find solar companies in Colorado

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

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

Going solar in Colorado might be easier than you think. The main obstacle to going solar is the high upfront cost of purchasing and installing solar panels, inverters and other equipment. For a lot of homeowners, it ends up being worth it as long as their cost savings over time outweigh the initial investment. Others are happy to go solar for the environmental benefits alone.

Solar costs vs. savings: Colorado and nearby states