Xcel Energy customers in Colorado can take advantage of new and revamped incentives for solar and storage

In September 2022, Xcel Energy Colorado reached a settlement agreement with eight other groups of stakeholders in a proceeding before the state Public Utilities Commission. The settlement laid out the details of Xcel’s 2022-2025 Renewable Energy Compliance Plan (also known as the “RE Plan”), which contains funding for programs designed to help Xcel meet its obligation to serve 100% carbon-free electricity by 2050.

The settlement contains a long list of incentive programs intended to spur the adoption of home solar batteries, low-income solar projects, and medium- to large-scale solar installations throughout the state. Together, the programs will receive tens of millions of ratepayer dollars per year, and will be administered by Xcel.

The process to reach this settlement was long and arduous, and the result is far different from the initial RE Plan that Xcel proposed in December 2021. Through the hard work of groups like the Environmental Justice Coalition, Energy Outreach Colorado, and the Colorado Solar and Storage Association (COSSA), the final RE Plan contains a number of provisions that especially benefit some of Colorado’s most vulnerable populations.

We’re especially grateful to COSSA, who was the voice of the solar industry in the settlement talks and provides information and analysis about the proposal as a benefit for its members. Let’s jump into what Coloradans can expect from the RE Plan going forward.

More details on Xcel incentive programs

The programs included in Xcel’s RE Plan represent a commitment to expand access to the benefits of solar power to more Coloradans than ever before. That means that the incentives here are focused less on subsidizing all homeowners and more on creating an expanded variety of offerings for people who qualify as “Income Qualified” (generally, at or below 80% of Area Median Income), or who live in Disproportionately Impacted communities (as defined by state law).

Here’s a rundown of the programs included in the RE Plan:

For all homeowners

Beginning in 2023, Xcel’s existing Solar*Rewards Battery Connect pilot program will expand and change its name to “Renewable Battery Connect.” 

The program will offer $500 per kilowatt (kW) of battery output, not to exceed 50% of the total cost of the battery. For example, a Tesla Powerwall+ would qualify its owner for a $2,900 payment with its 5.8 kW output rating. That $2,900 is around 25% of the Powerwall’s estimated $11,500 cost of installation. If you choose a less-expensive battery, the maximum incentive is 50% of the battery cost, but make sure to confirm that the battery you’re considering is eligible for the incentive.

In exchange for the rebate, a battery must be 100% charged by solar energy, and the owner must agree to let Xcel discharge their battery during up to 60 annual events. These events occur for up to 3 hours at a time when demand on the grid is very high, and allow Xcel to use the customer’s battery to reduce the strain on the grid. 

The incentive program will run through 2025 with a $6.5 million total budget. This is first come, first served, so when the money's gone, the money’s gone. Act fast! 

As the Battery Connect program runs, Xcel will run a pilot battery incentive program of a different kind, on a “pay-for-performance” model. That program will not replace the Renewable Battery Connect program during the period covered by the RE Plan, but could become the successor to the plan if it’s determined that its methods are more effective at encouraging battery deployment.

This program represents an up-front rebate payment, so it will reduce the cost basis of the battery for the purposes of calculating both the 30% federal clean energy tax credit and Colorado’s own 10% battery storage tax credit. That means these tax credits will be based on the $8,700 estimated cost after the rebate, for a maximum federal incentive of $2,610. Together, the rebate and two tax credits would eliminate 55% of the cost to install the Powerwall at this price! 

If you’ve been considering a home battery in Colorado, get your ducks in a row ASAP to take advantage of these incentives.

For low-income homeowners

Income Qualified and Disproportionately Affected (IQ/DI) homeowners will receive a special version of the Renewable Battery Connect program that pays $800/kW ($4,640 for a Tesla Powerwall+). That $4,640 represents about 40% of the cost to install a Powerwall, and can be combined with the federal clean energy tax credit. Unfortunately, the federal credit can only be claimed by people who have tax liability, so its impact would likely be reduced for homeowners at or below 80% of AMI. 

Still, a family of four in Denver could make up to $89,400 per year and qualify. If they have federal tax liability, the 30% clean energy credit would make their federal tax credit $2,058 (30% of the $6,860 cost after the Xcel rebate). The previously-mentioned Colorado energy storage tax credit requires no tax liability because it can be assigned to the seller. 

So even if a homeowner could only take the IQ/DI battery rebate and 10% state tax credit, the incentives would represent 46% off the cost of the battery. If the customer did have tax liability to take the federal credit, all the incentives would account for over 64% of the cost to install the battery. 

$1.6 million of the total budget for the Renewable Battery Connect program is reserved for IQ/DI customers. All other stipulations for the program listed under the heading above apply. 

Another incentive available to IQ/DI homeowners is the Solar*Rewards Income-Qualified program. This program offers $1 per watt of installed solar as a rebate to qualified homeowners. Given an average cost of solar in Colorado of around $3.50 per watt, this incentive would reduce the cost by close to 29%. Add the federal tax credit of the remainder, and the two incentives would cut the cost to go solar in half. 

That’s a pretty good deal, and combined with Colorado’s statewide RENU loan program, the incentives can offer income-qualified families a way to go solar cheaply and start saving money on their electric bills.

Community solar for renters and homeowners

The RE Plan creates a bucket of $4.6 million in annual funding for community solar, with most of that dedicated to new community solar that specifically serves the IQ/DI community. The new program will provide a minimum of 30% and a maximum of 100% energy bill savings for income-qualified participants.

The new program will expand the capacity of existing community solar by 300 megawatts (MW) in the coming years. IQ/DI customers who qualify for assistance from Energy Outreach Colorado, the Colorado LEAP Program, or a municipal Housing Authority will be eligible for membership.

Incentives for businesses

The Solar*Rewards C&I (Commercial and Industrial) program already exists, but the RE Plan settlement includes more funding and rule changes to make it more advantageous for businesses in the state. The minimum system size to participate in the program is now just 8 kW (down from 25 kW), which means very small businesses can now take advantage of the incentives.

The program pays system owners a little extra for every kWh of electricity produced by their solar panels. In exchange for the payments, the system owner signs over the right to the Renewable Energy Credits (RECs) earned for generating clean energy. These payments are in addition to the electricity bill savings from the solar system.

The payments included in the new plan are based on system size. Given an estimated solar production of 1,400 kWh per kW (flat roof-mounted modules) the annual REC payments would be as follows:

System size	per-kWh payment	Estimated yearly payment
8 - 250 kW	$0.04	$56/kW ($464 - $14,500)
251 - 500 kW	$0.0375	$52.50/kW ($13,178 - $26,250)
501 kW - 1 MW	$0.035	$49/kW ($24,549 - $49,000)

In addition to the REC payments, there is a $0.15/W rebate available to those businesses who serve IQ/DI communities. This rebate is based on the cost to install the system. As mentioned above, the cost of small solar in Colorado is around $3.50 per watt, meaning the $0.15/W incentive only reduces the cost to install by about 4%. Cost per watt goes down as systems get larger, so that $0.15/W can represent a larger portion of the price for large systems.

Conclusion

Xcel’s 2022-2025 RE Plan is now final. Incentive availability will open in early 2023 and be here through 2025. The funding for these programs is on a first-come first-served basis in each program year, so when the money's gone, it’s gone.

Any unused incentives from each of these programs in any given year will be rolled forward to the next year, and if it turns out that the programs aren’t successful (or if they’re too successful), there are stipulations that allow the incentives to be adjusted to compensate.

Money has also been set aside in the RE Plan to provide for outreach and publicity to ensure IQ/DI communities have knowledge of the incentives available to them. The settlement reached by the parties in this case will set Colorado up to be a leader in helping all citizens access the promise of solar power.