Does Xcel Pay You For Solar Panels?

Net metering is an arrangement where solar panel system owners receive credits from their utility for excess electricity generated by their system. Xcel Energy, which provides electric service to customers in Colorado, offers net metering to compensate solar customers for the extra power they add to the grid.

With net metering from Xcel, any surplus solar energy produced by your panels flows back into the utility grid. This spins your home’s electricity meter backwards, reducing the amount of electricity you need to pull from the grid. You receive a credit on your bill for those excess kilowatt-hours (kWh). This helps offset the cost of power drawn from Xcel during times when your solar panels aren’t actively producing energy, like at night.

Essentially, through net metering, you can “bank” your extra solar generation with Xcel. Whenever you use grid power, you’ll first draw on those banked kWh credits before having to pay the utility for additional electricity.[1]

Table of Contents

Xcel’s Solar Rewards Program

Xcel Energy offers an incentive program in Colorado called Solar Rewards that pays customers for electricity generated from their own solar photovoltaic (PV) systems and sent back to the grid. The program aims to encourage the installation of solar PV systems on homes and businesses within Xcel’s Colorado service territory [1].

The Solar Rewards program allows customers with solar PV systems to interconnect to Xcel’s grid and participate in net metering. This means customers earn credits on their electricity bills for any excess power fed into the grid. The size of the incentive payment depends on the customer’s rate class and when the solar PV system was installed. There are higher incentives for systems installed earlier in the program’s history [2].

The Solar Rewards program is administered on a first-come, first-served basis with increasing incentive levels over time. There is a limited budget allocation each year, so early applicants receive the highest payments. Incentives are awarded through a lottery system for each incentive level batch. Once the budget is depleted for a level, the incentives decrease for the next batch [3].

Details on Net Metering

Xcel Energy’s net metering program allows customers with rooftop solar panels or other renewable energy systems to get credit for any excess electricity they generate and send back to the grid. This helps offset the customer’s electricity usage from Xcel when their system is not generating electricity.

Here’s how Xcel’s net metering works:

When your solar panels produce more electricity than your home is using, the excess is fed back into Xcel’s grid.

Your electric meter spins backwards as electricity goes into the grid, tallying up credits for the excess energy.
At night or when your solar system isn’t generating enough, you pull electricity from the grid as normal and your meter spins forward.
At the end of each billing cycle, Xcel nets out your usage vs. credits. If you sent back more than you used from the grid, your bill credits roll over.

So in effect, net metering allows you to “store” your excess solar energy in the grid to use later. Xcel will keep track of credits month-to-month, offsetting your bill for energy drawn when your system isn’t meeting your full usage needs.

Calculating Bill Credits

Xcel Energy uses net metering to calculate bill credits for excess solar generation from rooftop solar panels. This means that any excess kilowatt-hours (kWh) generated by the solar panels are fed back into the grid and credited on the customer’s monthly bill.

Specifically, Xcel calculates bill credits based on the total kWh of energy used during the billing period. Any excess kWh generated by the solar panels are credited at the same retail electric rate that the customer would pay Xcel for electricity from the grid.

For example, if a customer uses 500 kWh in a month but their solar panels generate 600 kWh, they would receive a 100 kWh credit on their bill. This credit would be calculated based on Xcel’s retail electric rate and deducted from the total amount owed that month.

At the end of each year, any unused kWh credits are carried over to the following year. Customers with excess credits at the end of a year can opt for a check from Xcel for the credit amount. Xcel does not pay customers directly for excess solar generation, but rather provides bill credits based on the retail rate.

Value of Solar

Xcel Energy uses a Value of Solar (VOS) rate to determine the bill credit customers receive for excess solar energy sent back to the grid. The VOS rate aims to quantify the benefits that distributed solar provides to the grid, customers, society, and the environment [1]. This rate is generally higher than Xcel’s retail electricity rate. For example, in 2019 the VOS rate was $0.1109 per kWh, compared to the retail rate of around $0.12 per kWh [2].

While most utilities use net metering to compensate solar customers, Xcel has adopted the VOS rate as an alternative. The rate aims to more accurately value the grid, environmental and social benefits of distributed solar generation [3]. However, Xcel has sought changes to the VOS rate methodology as it is set to increase substantially in coming years.

Selling Back to Grid

Xcel Energy’s net metering program allows customers with rooftop solar panels to sell any excess electricity they generate back to the grid. This helps offset the cost of installing and maintaining the solar panels. Here’s how it works:

When your solar panels produce more electricity than your home is using, the excess energy gets fed back into the grid. Your electric meter actually spins backwards when this happens, tracking how much extra energy you’ve generated. At the end of each billing cycle, Xcel credits you for any excess kilowatt-hours (kWh) at the full retail electricity rate [1].

For example, if you produced 406 kWh more than you used, and the retail rate is $0.12/kWh, you would receive a $48.72 credit from Xcel on your bill for selling back that excess solar power. This credit helps offset your electricity purchases at night or during less sunny weather.

The net metering program makes rooftop solar more financially viable, since you can recoup the cost of your system over time through utility bill savings and credits. Under net metering, Xcel essentially purchases your surplus renewable energy generation.

Federal Tax Credits

The federal government offers tax credits to homeowners who install solar panels to help offset the costs of going solar. The most notable is the federal Investment Tax Credit (ITC), which allows homeowners to deduct 26% of the cost of installing a solar energy system from their federal taxes through 2032. After that, the ITC drops to 22% in 2033 then 0% in 2034 [1].

The ITC applies to both residential and commercial solar installations. There is no cap on the credit, so it can be claimed on the full cost of installing a solar system. The credit is non-refundable, meaning taxpayers can only claim the credit up to the amount they owe in taxes. Any unused credit can be carried over to the following tax year. To qualify, the solar system must provide electricity for a home or business located in the U.S. that the taxpayer owns [2].

The ITC has helped drive substantial growth in solar adoption since it was first introduced in 2006. Industry experts warn that the scheduled decline and eventual expiration of the ITC could slow the pace of solar installations. For now, the generous credit makes installing solar panels much more affordable.

Xcel’s Time-of-Use Rates

Xcel Energy offers time-of-use rates in Colorado that charge different prices for electricity depending on the time of day and season (Xcel Energy). During peak hours when demand is high, rates are more expensive. During off-peak hours when demand is low, rates are cheaper.

For solar customers, this pricing structure creates opportunities to maximize bill savings. By shifting electricity usage to daylight hours when solar is producing, customers can avoid paying higher peak rates in the evening. Solar production offsets more expensive peak rate usage. Excess solar generation fed back to the grid earns credits at the same peak rates.

However, Xcel’s winter peak period from November-March falls after sunset when solar isn’t producing (Re-EnergizeCO). Solar customers lose the peak pricing benefit during these months. Overall, time-of-use rates combined with solar can reduce bills, but savings are maximized by shifting usage to align with solar production.

Community Solar

Xcel Energy offers community solar programs that allow customers to subscribe to a shared solar array and receive bill credits for the energy generated (https://mn.my.xcelenergy.com/s/renewable/solar-rewards-community). The largest program is Solar*Rewards Community, which is one of the biggest community solar programs in the nation. Customers receive bill credits based on the output of their subscribed portion of the community solar garden.

Xcel provides resources for developers interested in building community solar gardens, including information on interconnection agreements and low-to-moderate income options (https://my.xcelenergy.com/s/renewable/developers/community-solar-gardens). The community solar model allows customers to benefit from solar energy without installing panels on their own property.

Conclusion

To summarize, Xcel does have programs in place to compensate customers for the solar energy they generate. Their main program is Solar Rewards, which provides financial incentives through bill credits for installing solar panels at your home or business. The key factors that determine how much you will earn from your solar panels are net metering, the valuation rate Xcel uses for solar energy, and time-of-use rates.

With net metering, any excess solar energy you produce is fed back into the grid, and you receive credits on your bill to offset energy you consume from Xcel at times when your panels aren’t producing. The valuation rate, also called a solar credit, determines the monetary value of the energy you contribute to the grid. Xcel currently uses a valuation rate between 2-3 cents per kWh in Colorado. Time-of-use rates mean you will maximize savings by using energy during peak times when electricity costs more.

You also have options beyond net metering like joining a community solar project. And at the federal level, tax credits are available to help make solar installations more affordable. Overall, installing solar panels can lead to significant long-term savings on your energy bills with Xcel’s solar compensation programs.