Ultimate Guide to Renewable Energy In New Mexico

New Mexico is the nation’s second-sunniest state, with an average of 3,415 hours of sunshine each year. The state has strong winds, too, giving it the third-highest potential for wind energy in the country. That puts the Land of Enchantment in an ideal position to use cheap, clean renewable energy. But until recently, New Mexico hasn’t taken advantage of this natural bounty, getting most of its electricity from fossil fuels.

In the past decade, though, all that has changed. From 2015 through 2022, the amount of renewable electricity generation in New Mexico grew more than fivefold. Clean energy in New Mexico is on a tear, and residents have many opportunities to come along for the ride.

The history of renewable energy in New Mexico 

New Mexico’s renewable energy journey began in the year 1977, when the state passed the Solar Rights Act. This established the right to use solar energy for a home or business as a property right. A year later, the state passed a net metering law. It required utilities to give solar users credit for sending excess power to the grid.

However, renewable energy didn’t start to take off in New Mexico until the early 2000s. In 2004, the state passed its first Renewable Portfolio Standard (RPS). It required the state’s investor-owned utilities to get 20% of their power from renewable energy by the year 2020. Rural electric cooperatives had to meet a lower standard of 10% renewable energy. The state also required utilities to offer their customers a way to choose green power for their homes and businesses.

Aided by these policies, wind and solar power in the state began to grow. In 2000, New Mexico got only 1% of its electricity from renewable sources. By 2022, 42% of all power produced in the state came from renewable energy.

How can New Mexico residents take advantage of renewable energy? 

Using renewable energy for your home or business is a win-win. Not only does it reduce your carbon footprint, it can help you cut your electric bill at the same time. And in New Mexico, there are lots of state programs to make it even easier and more cost-effective.

Net Metering in New Mexico 

New Mexico’s Public Regulation Commission (PRC) requires all utilities under its jurisdiction to offer net metering. That means they must credit owners of grid-connected renewable energy systems for the power they send to the electric grid. They can pay for the power at wholesale rates or let each kilowatt-hour produced offset one drawn from the grid. Check with your utility to see what its rules are.

These rules don’t apply to municipal utilities, which are independent of the PRC. However, one municipal utility, Farmington Electric, has established its own net metering rules. Farmington Electric customers receive credit for the power they produce at the full retail rate. They can also roll over their unused credits at the end of each year.

Tax Exemptions

In New Mexico, businesses don’t pay sales tax. Instead, they pay a gross receipts tax based on their total earnings for the year. However, contractors don’t pay this tax on money they earn selling or installing solar power systems. Many solar contractors pass on these savings to customers, shaving around $1000 from the cost of a solar setup.

New solar installations are exempt from property taxes, as well. Adding solar panels to your house increases its value, but in New Mexico, it won’t increase your property tax bill. This exemption can save the average New Mexico homeowner $137 per year.

Tax Credits

Going solar can also reduce your tax bill directly. With the federal Investment Tax Credit, you can deduct up to 30% of the cost of a solar installation from your federal taxes. That’s about $5,649 in savings for the average New Mexico homeowner.

The New Solar Market Development Tax Credit offers similar savings on your state income taxes. You can deduct 10% of the total cost from your state tax bill, up to a maximum of $6,000. That can save the average homeowner an additional $1,883.

Solar Easements and Rights

New Mexico state laws guarantee your right to sunlight for your solar panels. You can claim the solar right on your property by filing a claim at the County Clerk’s office. Once your claim is approved, your neighbors can’t plant trees or put up buildings that would block your sunlight. Also, towns and homeowners’ associations can’t ban the use of solar panels except on homes in historic districts.

Green Power Programs

If you can’t install your own solar panels, you should be able to buy renewable energy through your utility. All investor-owned utilities (IOUs) in New Mexico are required to offer their customers a clean energy plan. Public Service Company of New Mexico (PNM) calls its plan Sky Blue, and Xcel Energy offers Solar*Connect. However, the state’s other IOU, El Paso Electric (EPE), does not offer a clean power plan as required by law. It’s also failing to meet the state’s RPS targets in its regular power plan.

Wind and solar capacity in New Mexico 

New Mexico ranks ninth in the nation for wind power capacity, with about 4,400 megawatts (MW) installed. In 2022, wind power provided 35% of the energy generated in the state—more than any other source. That’s more than double the share of New Mexico’s energy that came from wind just two years earlier.

Solar power in the Land of Enchantment isn’t on the same scale. At the beginning of 2023, the state had about 1,600 MW of solar power supplying 6% of its electricity. About 1 MW of that came from rooftop solar panels. That makes New Mexico twentieth in the nation for solar power capacity.

Reducing reliance on natural gas in New Mexico through renewable energy 

New Mexico’s use of natural gas to generate electricity has fallen in recent years. It provided about 35% of the state’s power in 2020 but fell to 26% in 2022. However, that’s still much higher than its 2004 low of just 9%. That’s good news in one way, since much of that gas took the place of even dirtier coal. But it shows that the state still has a long way to go on its path to 100% renewable energy.

New Mexico also relies heavily on natural gas for heating. Currently, about 60% of residents heat their homes with gas. To eliminate this fossil fuel usage, the state will need to electrify more buildings while continuing to decarbonize the grid.

Renewable energy sector employment in New Mexico 

According to a 2021 study by the environmental group E2, wind and solar power provide 4,094 jobs in New Mexico. Adding jobs in other clean energy fields, such as energy efficiency, brings the total to over 11,000.

However, given how fast renewable energy is growing in the state, those numbers may already be out of date. The Solar Energy Industries Association (SEIA) reports that solar power alone employed 2,013 New Mexicans in early 2023.

Recent legislation on energy policy in New Mexico 

New Mexico has seen a spate of new energy legislation in the past few years. The 2019 Energy Transition Act upped the state’s RPS guidelines to 50% renewable energy by 2030 and 80% by 2040. All IOUs must get 100% of their power from carbon-free sources by 2045. Rural electric cooperatives get an extra five years to reach this target.

In 2020, New Mexico authorized new funding options to expand and update the electric grid. It also renewed the 10% tax credit for residential solar. In April 2021, the state established a community solar program, allowing residents to purchase their power from local solar farms. And in 2023, it passed a law calling for more renewable energy projects on state-owned land.

The future of New Mexico solar 

New Mexico has more than met its initial RPS goal of 20% renewable energy, including 4% solar energy, by 2020. Now it needs to focus on the new targets set by the Energy Transition Act. That law doesn’t specify what percentage of the state’s electricity mix needs to come from solar power. But for New Mexico’s solar sector to keep pace with renewable energy as a whole, it must provide 8% of the state’s energy by 2025 and 10% by 2050.

Fortunately, at the rate solar power in New Mexico is growing, it should be easy to meet these goals. The SEIA projects that the state will add 4,168 MW of new solar capacity over the next 5 years. That’s would more than triple the amount of solar capacity the Land of Enchantment has now. If those projections are right, solar will play a big part in New Mexico’s clean energy future.