When Molly McLaughlin and Zach Taylor set about making their new home more energy efficient, adding insulation and air-sealing the crawl space, one big-ticket item, rooftop solar, seemed to be years away — until they got a knock on their door.
Knocking was a door-to-door salesman for a solar installer. “We are financially establishing ourselves and we thought solar was something we couldn’t do for five or six years,” 36-year-old McLaughlin said. “But when we saw the rebates from the city and the federal tax credits available, we realized we could.”
The Fort Collins couple ended up going not with the door-to-door salesman but an established local installer, Sandbox Solar. They accessed thousands of dollars in rebates and credits and they paid cash for their 15-panel solar array.
In 2024, which has been a tough year for the residential solar market in Colorado and across the country, McLaughlin’s story contains three key economic elements: they paid upfront, used a local installer and tapped into local rebates.
For years, low-interest rates made financing projects with loans a key part of the market. “Two years ago, the rates were great so even if you could afford to pay, you’d take a loan,” said Nicole Burford, vice president of market development and sustainability for the Denver-based Clean Energy Credit Union.
Now Front Range solar installers say projects on credit have taken a hit from high interest rates set to wring inflation out of the economy. The Clean Energy Credit Union, which specializes in a variety of green-oriented loans, has one of the lowest solar rates — 7.99% on a 12-year loan.
“With interest rates being high, that part of the market has fallen off,” said Bill Clay, owner of Centennial-based Solar Power Pros. “Over the last two years business is down 30% to 40%.”
Just two of the last 10 projects installed by Proud American Electric & Solar in Colorado Springs were financed.“In general the people who are still buying are the cash customers,” owner Jesse Berkshire said.
“It’s feast or famine in solar”
Most of the photovoltaic or PV systems being installed are between 5 kilowatts and 10 kilowatts and range in price for a cash buyer from $14,000 to $35,000, depending on the size and design.
“We were shooting for 15 and 20 jobs a month,” Berkshire said. “In January we had eight. In February it was 12.” The company is averaging five a month.
Xcel Energy, the state’s largest electricity provider, said that it has averaged 845 applications a month for residential solar installations in the first half of 2024 — about 44% less than in the spring of 2023.
The result has been a wave of solar installation companies going out of business. Fifteen major installers across the county have gone bankrupt in 2024, including national companies such as SunPower and Titan Solar Power, according to Solar Insure, which provides warranties for home solar installations.
In addition, Solar Insure said 21 local companies in 12 states have closed shop, including Refresh Energy Group and EchoMark Solar in Colorado.
Nationally, the first quarter of 2024 was marked by a 25% decline in new residential capacity, 1,281 megawatts, compared to the first quarter of 2023 — a two-year low, according to the Solar Energy Industries Association.
Nevertheless, community-based installers, such as Proud American, Boulder-based Namaste Solar and the company McLaughin and Taylor chose, Fort Collins-based Sandbox Solar, are holding their own.
“It is feast and famine in solar,” Berkshire said. “We are doing electrical work at the same time, so we stay busy.” What also helps in the competition with the national companies, he said, is that local installers have “a strong hold on the market.”
Part of the local advantage comes from the financing mechanism some of the bigger, high-volume installation companies depended upon, Berkshire said. These companies offered what appeared to be low loan rates, but added a “dealer fee” that could be 30% to 38% of project costs, in essence folding the financing into the sticker price.
In the current environment those fees are cutting into margins. “I am watching these guys drop like flies,” Berkshire said, “mainly due to financial pressure from the financing models and the number of deals.”
What’s good for the installer, isn’t always good for the homeowner
It also may not be a good arrangement for the homeowner. “It looks like you are really getting good financing with a 1% interest rate, but all the financing costs are rolled into the system,” Clean Energy Credit Union’s Burford said.
One reason for this approach is that the 30% federal tax credit is calculated on the total system cost, but if buyers do not keep the installation or their homes for the lifetime of the array, they are basically paying all the financing costs upfront. “In that case it is not a great deal,” Burford said.
“There are a lot of people waiting right now, hoping rates will go down,” Clean Energy’s Burford said.
The nonprofit Colorado Clean Energy Fund has been helping credit unions offer lower interest rates by backstopping their loan loss funds. The fund is currently providing the Elevations Credit Union and the Westerra Credit Union with $1 million each in loan guarantees.
Still, the best rate Elevations can offer for a 10-year loan to a homeowner with a top credit score is 7.74%.
“We have seen a decrease in activity under the program ever since interest rates started rising,” said Emily Richardson, the fund’s residential program director. “We’re conferring internally about what could potentially be done to help the situation.”
The current downturn is part of a cycle, Jack Ihle, Xcel Energy’s regional vice president for regulatory policy, said. “We saw increases in 2023 and decreases in 2024, that’s not unusual. It has been part of the industry for a long time.”
The market, however, will continue to grow, Ihle said. About 700 megawatts of rooftop solar has been installed in Xcel Energy’s service territory, providing more than 3% of the utility’s total electricity and another 700 megawatts is forecast to be installed by 2030.
One sore point between installers and Xcel Energy has been long delays in connecting installations to the grid, even prompting a complaint filed with the Colorado Public Utilities Commission. But the utility has gotten the time down to an average of three weeks.
“Xcel has gotten better by leaps and bounds,” Berkshire said.
One advantage for local installers is being better able to navigate the question of volume, said Ian Skor, owner of Sandbox Solar. “The market swings have hurt most of the largest sales volume companies that go door-to-door depending on monthly payments,” he said.
“We are finding pretty good success emphasizing the value of solar and the future value of energy,” Skor said. “There are a lot of homeowners with good mortgage rates on their homes who want to invest in their homes and are cash buyers.”
Sandbox Solar has also filled the gap with more commercial solar installations, Skor said, and working with Colorado State University on projects combining solar panels and agricultural crops, so-called agrivoltaics.
May we interest you in battery storage?
Another trend that is buoying local solar developers is the push to add battery storage to solar installations. “Even though we are selling fewer systems, we are seeing people adding energy storage,” Solar Pros’ Clay said. “Some people want backup power if the power goes down with the utility … so they can operate independently from the grid.”
This has become more of an issue since the Marshall fire, the state’s costliest and most destructive wildfire, and Xcel Energy’s use of preemptive blackouts to reduce fire risk. “Everything homeowners are doing in the wake of the Marshall Fire is to be proactive,” Clay said.
Another driver for solar and batteries is avoiding peak charges on homes using time-of-use rates. Xcel Energy’s peak time-of-use rate, between 3pm and 7pm, is 32 cents a kilowatt-hour compared to an overnight and morning rate of 12 cents a kilowatt-hour.
“Batteries can help decrease electricity bills,” Clay said. “We’ve seen the battery market move from 5% of our jobs last year to more than 20% this year. It is becoming a bigger ticket item and that has helped.”
Xcel Energy is offering up to a $5,750 rebate to homeowners installing a Tesla Powerwall 3, which costs about $8,500 plus installation — provided the utility can draw on the battery during peak periods. Fort Collins has a $3,000 battery rebate, while Denver offers a $500 rebate for a standalone battery and $2,750 for a battery in a home with a heat pump.
“We are selling a lot of batteries in the Xcel market in North of Denver because Xcel has such huge battery incentives,” Skor said.
And the rebates can be combined. Anna Perry, Namaste’s director of residential sales, said that about 60% of the company’s solar installations now include batteries.
“Batteries,” Berkshire said, “that is the future of the industry.”
Another trend that is feeding the solar market is home electrification — switching to electric water heaters, stove tops and heat pumps, Perry said. “Home electrification has started to change the market and it will change it even more in the future.”
After a slow start, Namaste is set to increase installations year-over-year in 2024, with the hope of installing about 500 projects with a total of 4,265 kilowatts of capacity, Perry said.
Generous local incentives are helping in Denver and Fort Collins
The third element, and one that was key for McLaughlin and Taylor, was strong local incentives from Fort Collins bolstering the federal tax credit. Denver also has some generous programs. “Those cities have been really solar friendly,” Namaste’s Perry said.
Denver acts as a matchmaker between installers and homeowners in the city and six neighboring local governments with its Solar Switch program. Interested homeowners sign up, Denver’s Office of Climate Action vets installers interested in the program then pairs the two.
Customer acquisition is one of the difficult and expensive parts of the business for installers and verifying installer credentials is a big concern for customers. The Solar Switch program takes care of both.
By packaging many projects, the program also has been able to negotiate on price. “I think in 2023 we saw about a 20% discount for folks,” said Lee Valenzuela, Denver community energy programs administrator. “So that was an especially good year.”
In general, the discount has been between 10% and 15%. “That’s a discount you get by being part of a group program,” Valenzuela said.
In 2023, 3,535 people expressed interest and there were 115 installs, which is about average. So far this year more than 1,300 have expressed interest.
In addition to Denver, residents of Westminster, Northglenn, Wheat Ridge, Thornton and Adams County can participate in Solar Switch.
Denver also makes available solar rebates of $8,000 for up to 40 families earning below the average median income each year. Residences that already have heat pumps can get up to $4,000 to add solar under the city’s Climate Action Rebate program.
Fort Collins has offered rebates on solar arrays since 2008 and rebates on batteries beginning in 2020, but when the market appeared to be flagging in late 2023 the city upped its incentives under a program it called BOOST.
“The intention with the BOOST was to spur the local market and customers to add more PV and battery storage to help meet our OCF (Our Climate Future) goals,” Nick Combs, a spokesman for the city, said in an email.
The city has a 2030 goal of cutting its greenhouse gas emissions 80% below 2005 levels and getting 100% of its electricity from renewable sources. The city estimates that 5% of that power could come from residential solar.
Under BOOST, which ran from January to June, a homeowner could get a rebate of up to $1,500 for a solar array, $3,000 for a battery and up to $6,000 for solar and battery installation.
“Because of the BOOST program we saw a ton of customers adding batteries to existing systems,” Skor said.
Availing themselves of both the city and federal incentives, McLaughlin and Taylor got a about 37% discount on their system, bringing the cost down to $14,500.
The discount could have been bigger, but the couple oversized their array, at 6.7 kilowatt, in anticipation of more home electrification. What electricity they don’t use will be put on the grid and they will get a per kilowatt-hour credit from Fort Collins Utilities.
Over the 25-year life of the solar installation McLaughlin and Taylor are projected to save $35,000 after the payback for the initial investment. During the summer months they are expecting their electricity bills to be zero.
The couple’s previous house in a tree-shaded area of Fort Collins was not suitable for solar, but their new home, in a suburban area on the west end of the city, was a good candidate.
“We have a great roof and we are going to make electricity and we are going to save money,” McLaughlin said.