Inhabitants of the Southwest discovered the utility of passive solar generations ago with dwellings designed to exploit the energy provided by the sun. However, as the nation became more industrialized, it became clear that sun was not the only abundant energy resource available in New Mexico. Between the Permian Basin in the southeast and the San Juan Basin in the Four Corners area, New Mexico’s oil and gas industry is able to produce much more than needed for the residents in our state alone. In fact, severance taxes from the industry contribute about 30% of New Mexico’s general fund annually. Clearly, the energy industry plays a critical role in New Mexico.
Despite the obvious solar resource, the solar industry in New Mexico has yet to reach full maturity. To provide some background, in 2006 Governor Bill Richardson signed the New Mexico Solar Market Development Tax Credit into law. This bill provided a 10% income tax credit for the purchase and installation of solar PV or thermal systems in a residence, business, or agricultural enterprise.1 This credit is in addition to the 30% tax credit offered by the federal government. Installing a residential photovoltaic (PV) system a decade ago was an expensive and novel investment, and the tax credit was necessary to get the solar industry off the ground in our state. When I began high school in 2008 and my interest in engineering was born, PV systems were still expensive enough that installing a system was not feasible for most homeowners.
However, advancements in recent years have pushed PV technology further into the mainstream. From 2008 to 2014, the amount of power generated by residential PV systems increased by over 2000%, and the median cost of power generated using PV modules fell 63%.2 In addition, inverter costs and labor costs have also declined over this period making systems as a whole cheaper. In total, New Mexicans invested almost $200 million in residential PV systems from 2008 to 2015 for a grand total of over 40 MW. This has not only created a thriving solar industry in New Mexico, but we are now among the top ten states nationally in distributed solar PV capacity (PV modules that are used to generate electricity at or near the location the energy is used).3
This is a significant accomplishment for the state and has caused some people to argue that the solar industry has reached maturity here. After a bill extending the solar tax credit from 2016 to 2024 passed the legislature in 2015 with bipartisan support, some Republicans voiced opposition to the measure. Rep. Larry Scott felt that sun-generated energy would be cheaper without subsidies, and Rep. James Strickler said that the solar industry should develop on its own without the support from the government.4 It is important to note that both of these representatives sit on the House Energy, Environment & Natural Resources Committee (Rep. Strickler is currently the chair) and deal directly with this policy area on a regular basis.
Governor Susana Martinez must hold similar views and did not sign the extension of the solar tax credit into law after the end of the 2015 regular session. I had the opportunity to intern for a short time with the legislature during the 2016 session in February, and the only whisper I heard of the tax credit during the week that I was there was a petition to extend the tax credit on tables within the Rotunda for part of one day. The combination of the Governor’s veto of the bill last year and the lack of money that the state is faced with this fiscal year certainly ensured the death of the tax credit. It will expire on the last day of 2016.
The question now is where does New Mexico go from here? Will the market become stagnant and cause New Mexico to fall from our high positon on the list of distributed PV capacity? I sincerely hope that the answer is no! The cost of generating electricity using PV modules has fallen to within striking distance of paying for electricity generated using conventional fossil fuels, and with potential EPA regulations looming in the near future, the economics of residential PV will remain competitive. Furthermore, the Federal tax credit still covers 30% of purchase and installation of residential PV systems ensuring that those who do invest in solar will continue to see a return on their investment. The end of state subsidy for residential PV has come sooner than I would have liked, but I am convinced that the industry still has a bright future in our state.
One final note: if you’re considering installing a residential PV system in our state, the time has never been riper than now – the Energy, Minerals, and Natural Resources Department estimates that they will stop receiving tax credit applications on July 29, so get on your horse and claim some of the last $2 million New Mexico still has to dole out in the name of solar.
References and Further Reading
1S. 269 (2006) (enacted). http://www.nmlegis.gov/Sessions/06%20Regular/final/SB0269.pdf
2"New Mexico's Solar Tax Credit16." EMNRD Energy Conservation and Management. N.p., 16 Mar. 2016. Web. 04 Apr. 2016. http://www.emnrd.state.nm.us/ECMD/RenewableEnergy/solar.html
3"New Mexico State Profile and Energy Estimates." U.S. Energy Information Administration, 17 Dec. 2015. Web. 04 Apr. 2016. https://www.eia.gov/state/analysis.cfm?sid=NM
4White, Margaret. "Legislature Votes to Extend Solar Tax Credits." NM Political Reprot. N.p., 20 Mar. 2015. Web. 4 Apr. 2016.http://nmpoliticalreport.com/2687/legislature-votes-to-extend-solar-tax-credits/