Guest Blog: New Programs Make Solar Energy Good Investment

This is a guest blog by Bill McCamley, former Doña Ana County Commissioner, and Mark Westbrock, PV Systems Designer at Positive Energy. Both are residents of Las Cruces, New Mexico.

“To truly transform our economy, protect our security, and save our planet from the ravages of climate change, we need to ultimately make clean, renewable energy the profitable kind of energy.” --President Barack Obama

Communities in the State of New Mexico receive more direct sunlight every year than almost anywhere else in the world. This resource gives every homeowner a chance to provide power to their homes through solar energy, allowing them to both save money over the long term and contribute to the nation’s renewable energy infrastructure. However, two major problems have hampered the spread of individual solar systems: high up-front costs and the inability of solar owners to link the value of solar equipment to the value of their home. Recent policy developments at the local, state, and federal levels seek to remedy these issues. 

The first of these is a new program implemented by the New Mexico Public Regulation Commission available to all PNM and El Paso Electric customers. Currently, if an individual installs a solar system on their home, the electricity provider will pay the individual $0.13 per kilowatt hour (the unit used to measure electricity) for all energy produced by the solar system.  These payments are not for the actual energy, but for a renewable energy certificate (REC), the vehicle by which the state is asking companies to incentivize the use of renewable energy. These REC payments are in addition to the benefit that customers already receive through net metering, the process by which the electric company credits the customer for the energy produced by their solar system.

So, if you buy a solar system for your home, large electric companies will send you a check every month for the power your system is producing.

On top of these provisions, there are three solar tax incentives offered by both the federal and state governments. Effective at the beginning of 2009, you can count 30% of the total cost of any solar system as a credit against your federal taxes. Next, the New Mexico legislature just passed a bill that provides a 10% state tax credit on top of the federal credit, bringing the total state tax credit up to 40%.  Finally, if you purchase a solar system you will not pay any state gross receipts taxes on it.

Taking into account the tax credits, net metering benefits, and REC payments, a solar system now makes financial sense.  Three Las Cruces residents who recently had solar systems installed on their homes independently calculated that they will receive between 6-8% annual return on investment.

Though these policies make the cost of a system affordable over the long run the up-front system price, which is comparable to a modest new car, remains too high for many homeowners. To address this, the New Mexico legislature just passed three bills, sponsored by Representatives Egolf and Rodefer and Senator Wirth.  These bills would allow local governments to create solar financing districts where if enough people voluntarily sign up, the government would use its bonding authority to borrow money and install solar systems on homes.

Government bonds generally have low interest rates, and with many people participating bulk purchases would create lower prices. In return, the volunteers would agree to raise their property taxes for a set amount over a specific time to pay back the government bond. This contract would be transferred to any new homeowner if the home is sold, allowing the original purchaser to account for the cost of the system if the ever decide to sell. In December of 2008, the Doña Ana County Commission voted to approve a resolution advocating for the passage of this type of bill.

To be clear, this is a voluntary program that will not affect the taxes of those who choose not to participate.

Under this program, a homeowner today would pay about the same amount for their increased property tax as they would have paid for their electric bill, assuming that electric rates remain stable.  As electric rates continue to rise following increasing demand and the supply of oil, gas, and coal becoming more limited, the benefit to the homeowner will increase. Most photovoltaic modules are warranted for 25 years, so the loan will be paid off well before the useful life of the system is over.  Once the loan is paid off, they will benefit from free, clean electricity for the life of the system.

So, what does all of this mean for the average New Mexican? Basically this: if you own your home and want to stay in it for awhile, live in a district where PNM or El Paso Electric provides your electricity, and are located in a county that chooses to participate in the new financing program, then a solar photovoltaic system is one of the safer long-term investments you can make.

This is a guest blog by Bill McCamley and Mark Westbrock of Las Cruces. If you'd like to submit a piece for consideration as a guest blog, contact me by clicking on the Email Me link on the upper left-hand corner of the page.