History of solar policy in New Mexico
With wide-ranging deserts and plenty of natural sunlight, the Land of Enchantment has successfully developed a mature solar industry for its residents. As of 2018, New Mexico has installed almost 800 megawatts of solar energy capacity, placing it 16th on SEIA’s national ranking in 2018. While its geography and solid solar resource has played an important role in the success of solar in New Mexico, the key driver of solar growth has arguably been the state’s effective policies over the years.
In 1977 and 1983, New Mexico policymakers implemented Solar Easements & Rights Laws. The purpose of these early solar policies was to establish that the right to use solar energy is a property right. Although this policy doesn’t provide any financial incentives, it effectively legitimized solar technology and the solar industry in New Mexico.
In 2004, New Mexico introduced its Renewable Portfolio Standard (RPS) program, which has been their most influential driver of solar growth to date. In fact, state energy requirements have been probably the most significant policy for clean energy development across the nation. For New Mexico, after strengthening their RPS in 2007 and 2014, the state ultimately mandated that investor-owned utilities supply 20 percent of retail electricity sales with renewable energy by 2020. Additionally, the state’s RPS specified in 2007 that utilities must generate 4 percent from solar energy by the same target date. New Mexico’s solar carve-out stands out as one of the strongest solar-specific goals in the nation.
The state’s RPS further benefits residents because utilities offer financial incentives to go solar in order to comply with the renewable targets. In New Mexico, solar performance payments have been offered through a Renewable Energy Credits (RECs) system by all the major utilities such as El Paso Electric, PNM, and Xcel Energy. El Paso Electric’s REC program is particularly robust, as it pays residents who generate solar energy $0.02 per kilowatt/hour (kWh) for the first eight years for systems up to 10 kW.
Much of this success, however, is predicated on New Mexico’s adoption of net metering in 2008. Throughout the nation, net metering programs have been crucial for the solar energy industry by allowing residents to store surplus net energy in the electric grid and receive compensation for it on their energy bill. In New Mexico, Xcel Energy offers the top utility net metering program in the state. New Mexico’s excess solar compensation is about average nationally, as utilities in the state offer the avoided cost rate instead of the retail rate.
Additionally, New Mexico provides further regulatory incentives to encourage solar development. For example in 2007, the state was able to enact the Sustainable Building Tax Credit as well as the Solar Energy Gross Receipts Tax Deduction to cut costs immediately when purchasing solar. Additionally, New Mexico has offered Property Assessed Clean Energy (PACE) financing since 2009, which effectively allows property owners to borrow money to pay for energy improvements. Finally, the state made solar more accessible to residents by legislating the Property Tax Exemption Act in 2010 to protect residents against increased property taxes that come with installing residential solar systems.