New Mexico State Solar Tax Credit Offers a Promising Addition to the Growing Industry

Published by Caroline Gallegos on Tuesday, July 7, 2020
Journal Cover Thumb July 2020

According to the Solar Energy Industry Association, solar power is among the fasting growing industries. While the COVID-19 pandemic weighs heavily on the solar industry, legislation passed in New Mexico offers a promising future. 
New Mexico Gov. Michel Lujan Grisham signed S.B. 29 March 3 to create a state solar market development income tax credit. The legislation provides a credit worth 10 percent of the purchase and installation of solar thermal or photovoltaic systems, with a taxpayer cap of $6,000 per year. The systems purchased and installed from March 1, 2020, through Dec. 31, 2027, are eligible for the credit and the statewide cap is $8 million per year. This new tax credit is the revival of the New Mexico solar tax credit that expired in 2016. 

High Standards
“We passed the original solar tax credit in 2007 and we put a sunset of 2016 on it,” said New Mexico state Sen. Mimi Stewart who helped introduce and sponsored the 2020 solar tax credit bill. “Usually you have to put a sunset on these types of tax credits in order to get them passed, and we were unable to extend it in time, so it expired in 2016.” 

Lawmakers including Sen. Stewart, Rep. Matthew McQueen and Sen. Peter Wirth, introduced bills to extend the state solar tax credit in each legislative session for five years and found support each year, but the proposals could not overcome certain obstacles. 

“The solar tax credit was up for consideration in 2019, but didn’t end up getting across the finish line because of other negotiations,” said John Ammondson, state director for Environment New Mexico. 

In 2019, the state Legislature was focused on passing a renewable energy portfolio standard. 

“In 2019 we passed the Energy Transition Act,” said Sen. Stewart. “We were able to get very good renewable energy portfolio standards enacted for New Mexico. By 2030, 50 percent of our energy will come from renewable sources and 100 percent of our energy will come from renewable sources by 2045. The solar tax credit is going to go a long way toward helping us reach these goals.” 

“The bigger picture for why this legislation got passed is the dedication from the bill sponsors, from the environmental community, and all of the other advocates for renewable and solar energy,” said Ammondson. “Many different stakeholders have been advocating for this bill for a long time, and even when it didn’t get across the finish line, it brought more understanding that it was something everyone wanted.”

Industry Growth
When the credit lapsed in 2016, New Mexico saw significant job loss in the solar industry. 
“We had almost 3,000 solar jobs in the state [before the credit expired in 2016],” said Sen. Stewart. “We lost about 25 percent of those solar jobs. We think that with this new tax credit we’ll see more jobs and companies come in to do solar installations.” 

“We lost 25 to 30 percent of our solar jobs after 2016,” said Mark Gaiser, program manager for the New Mexico Energy, Minerals and Natural Resource Department’s Energy Conservation and Management Division. “A lot of installers had a hard time maintaining business in 2017. It shows that there’s a lot of value in that 10 percent credit. In New Mexico, solar resources have a market in every county. [With properties] like an oil patch or farm land, you have to have the right resources. Solar works everywhere.” 

The tax credit is available for both residential and commercial installations and can be combined with the federal investment tax credit. 

“This is an opportunity for everyday folks who think that solar is awesome to use it and install it in their homes,” said Ammondson. “It’s an opportunity for people who want to be involved in the growth of renewable energy to get involved. Before the credit lapsed, 77,000 taxpayers used the credit. When you look at the future of clean energy, this is a good thing for everyone involved.” 

“I expect to see solar growth over the next eight years [and beyond],” said Gaiser. “I’m not sure what it will look like this year with the pandemic, but I still expect to have a good year for this tax credit.” 

According to a March 13 article in The New York Times, renewable energy production and use is set to surpass coal in 2020. 

“I saw The New York Times article about the decline of coal,” said Ammondson. “The big takeaway for me from the article and New Mexico’s experience is that the decline of coal and rise of renewable energy was happening before and will continue after the pandemic. As economics continue to make renewable energy more affordable, we’ll continue to see growth in the industry.”