California Solar Incentives and Tax Credits (2023)
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California is known for being an environmentally conscious state and is committed to aggressive clean energy goals over the next 20 years. Officials plan to achieve carbon neutrality by 2045, one of the most ambitious renewable energy goals in the United States. With one of the country’s largest solar markets and several cost-saving solar incentives. California is an ideal place to go solar.
If you’re considering a move to solar, this guide can help you find the best statewide solar incentives to lower your investment costs. We also offer recommendations for the Golden State ’s best solar companies.
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Overview of California Solar Incentives
The chart below outlines the available federal, state, and local solar incentives for residential customers :
California Solar Incentives, Tax Credits, Rebates
California offers several solar programs and incentives for homeowners. These programs help lower the cost of solar panels and add-on battery storage. California also has programs designed to make solar more affordable for low-income households. Beyond financial incentives, the state protects homeowners ‘ right to own solar panels. Our team spent more than 80 hours researching applicable federal, state, and local incentives and laws that support residential solar owners. Below is an overview of California ‘s solar incentives. programs, and laws.
Disadvantaged Communities – Single-Family Solar Homes (DAC-SASH)
- You’re a current utility customer with Pacific Gas and Electric ( PGE ), San Diego Gas and Electric ( SDGE ), or Southern California Edison ( SCE ).
- You live in a qualifying low-income area, own your home, and live there full-time
- You live in affordable housing as outlined by Public Utilities Code 2852
- Your household income falls within or below 80% of your area’s median household income
You’ll begin by applying on the GRID Alternatives website. If approved, you could receive up to 3 per watt in solar rebates for a new system. If we apply those savings to an average 5 kilowatt-hour (kWh) system, you could save up to 15,000 on installation.
Our team reviewed the application process and learned that it requires several steps and significant paperwork. Some steps involved include verifying qualification, homeownership, income, and affordable housing status. Although you may feel discouraged by the lengthy process, it’s worth it to lower initial solar costs and benefit from long-term energy savings.
Additional resources: You can begin your application at the GRID Alternatives website.
Self-Generation Incentive Program (SGIP)
SGIP rewards homeowners for adding battery storage to their home solar system. California is prone to outages due to rolling blackouts or natural disasters, and solar batteries can help power your home in these emergencies. Created by the California Public Utilities Commission ( CPUC ), this program provides a one-time rebate of up to 200 per kWh of solar battery storage capacity. Adding high-capacity energy storage. such as the Tesla Powerwall. will extend your solar system’s energy efficiency. leading to more electricity bill savings.
The SGIP is a tiered-block program, meaning its value gradually decreases as more customers sign up. If you’re considering applying, you should act fast. Eligibility requirements include the following:
- You must be a PGE. SCE. SDGE. or Southern California Gas Company (SoCalGas) customer
- Your installation must be completed by an approved SGIP installer
- Your home must be located within the eligibility area
Most of the paperwork is handled by your battery installer, making this application process much easier than other incentive programs.
Additional resources : Check the CPUC website for further details.
Equity Resiliency Program
Another SASH program. the Equity Resiliency Program (ERP) offers energy storage rebates. The program is geared toward low-income families who live in high-risk fire areas or have experienced two or more Public Safety Power Shutoffs (PSPS). A PSPS, or deenergization, occurs when utility companies shut down electrical power to reduce electrical infrastructure fire risk. This may happen during natural disasters, such as wildfires or flooding.
SASH program participants can also qualify for ERP. Under this program, you could receive a rebate of 450,000 per kWh—almost enough to cover an average solar battery ’s cost.
Our team discovered that the ERP application was similar to the DAC-SASH programs. If approved for SASH. you won’t have to start the application from scratch, but you must supply additional paperwork detailing your installation address, professional installer, battery cost, and storage system capacity. Despite the tedious paperwork, this program nearly eliminates solar battery costs and helps you save even more on energy bills.
Additional resources: Review the Equity Resiliency Program (ERP) for more details.
Active Solar Energy System Property Tax Exemption
This tax exemption applies to all California solar residents and removes the burden of added property tax. Most home improvement projects result in a property value boost. A move to clean energy has the same effect, with solar panels raising your home value. As home value increases, so do your property taxes. However, in California. you’ll benefit from higher property value without the extra taxes.
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There is no application process required. This is an automatic benefit for residential solar owners.
Additional resources : Complete tax exemption details are on the California State Board of Equalization website.
California state solar tax credits and incentives
Several incentives, credits and rebates are available to all Californians who invest in solar energy systems. Other incentives in this list apply to multiple California counties or to lower-income energy customers.
Property tax exclusion for solar energy systems
California is one of 32 states that provide protection against property tax increases for homeowners who install solar panels. Under California law, all qualifying active solar energy systems will be excluded from the assessment of your property, meaning that installing solar panels will not impact your property taxes one way or another.
This property tax exclusion is currently scheduled to expire on Jan. 1, 2025.
California Self-Generation Incentive Program
Utility customers of the four major investor-owned utilities.- San Diego Gas Electric, SoCalGas, Southern California Edison and Pacific Gas Electric.- are eligible to receive rebates for installing solar batteries using California’s Self-Generation Incentive Program. The California Public Utilities Commission offers a 200 rebate for each kilowatt-hour of your solar storage system.
A fairly midsized battery like the LG Resu 16H Prime, one of the top picks in CNET’s list of best solar batteries, provides 16kWh of storage, which would result in a 3,200 rebate under the current rules in California. The battery itself will cost about 10,000 to 13,000 with installation, per CNET’s sister site SaveOnEnergy.
Disadvantaged Communities – Single-Family Solar Homes program
California’s DAC-SASH program provides solar incentives for low-income customers in disadvantaged communities. Administered by GRID Alternatives, the program offers Californians 8.5 million in incentives annually.
The California Public Utilities Commission says that eligible customers can receive up to 3 per watt in incentives for solar installations. The current cost per watt of solar panels in California is 3.93, so DAC-SASH participants could save about 75% on solar installations.
California net metering incentives
Net metering allows homes with solar installations to receive money back for contributing surplus solar energy to the broader electricity grid. New rules for net metering reduce the amount of money back for excess energy by 75%. While earlier net metering participants earned about 30 cents per kilowatt, new participants will get about 8 cents per kilowatt.
The new net metering plan comes with higher electricity rates for times when demand is high and access to renewable energy is low, making solar batteries more valuable.
PACE financing for solar panels
Property Assessed Clean Energy programs provide financing for solar installations that allows residents to pay back loans for solar panels with their property taxes. While commercial PACE loans are common throughout the US, only three states.- California, Florida and Missouri.- offer residential PACE programs.
Unlike mortgage loans, PACE loans usually require no down payment or monthly payments. Instead, borrowed money is repaid through homeowners’ property tax bills over a term of 10 to 30 years. However, a lien is placed on your home until the loan is fully paid off, which makes selling a home more complicated. Some lenders may not want to provide a mortgage for a home with an attached PACE lien.
Local communities may provide PACE-style financing of their own. The Sonoma County Energy Independence Program functions similarly to state-licensed PACE programs, letting participants pay back solar installations via their property tax bills over 10- or 20-year terms at 7.49% interest.
Local solar tax credits and incentives in California
Beyond the solar incentives at the state level, many cities, towns and municipalities offer additional incentives for residents who invest in solar energy projects.
Alameda Municipal Power income-qualified solar rebate
Residential customers of Alameda Municipal Power can get a small rebate for installing solar panels. You’ll get 500 back for any qualifying solar installation if you earn less than 106,000 and your home was built before Jan. 1, 2020. This incentive is designed to offset any fees involved with installing solar panels.
CleanPowerSF Solar Inverter Replacement Program
The San Francisco Public Utilities Commission and CleanPowerSF are currently running a program to help customers replace old, damaged solar inverters. The program is only available to existing GoSolarSF customers with a solar installation that’s at least 10 years old and no longer covered by warranty.
If your solar inverter needs replacing and you use a participating installer, you can receive up to 3,000 to cover the cost of the replacement.
While the solar inverter replacement program appears to be still active, the CleanPowerSF fact sheet notes that participating installers are current as of May 2022.
Lancaster Energy Power Choice
Residential customers of Lancaster Energy who can’t afford solar panels or don’t want to pay for them can get them installed for free by Tesla with the electric company’s Power Choice program. Tesla will install rooftop solar panels and a Tesla Powerwall Battery for no money at all, and customers will pay for energy usage and storage via their usual electric bill.
However, customers don’t get the tax incentives from the solar panels and can only leave the program by buying out the solar equipment and battery. Also, if a home in the Power Choice program is sold, the contract transfers to the new owner, which could make selling more complicated.
Los Angeles Department of Water and Power Solar Rooftops Program
LADWP’s Solar Rooftops Program gives its customers another way to contribute to solar power generation without spending anything for solar panels. LADWP installs, connects and maintains the solar panels on a homeowner’s property at no cost, and gives the homeowner an annual payment of 240 to 600 each year for 20 years. Customers’ electric bills are otherwise unaffected.
Sacramento Municipal Utility District solar stipend
Along with 7.4 cents per kW back for your surplus solar energy, SMUD also provides a 150 stipend for solar panel installations. The money is targeted to pay for the production meter and other solar equipment for the interconnection, but you’ll need to act quickly. The solar stipend expires on May 31, 2023.
San Diego Green Building Incentive Program
The city of San Diego will waive building permit fees and plan check fees for the installation of residential solar panels.
Silicon Valley Power Low Income Solar Grant Program
Publicly owned Silicon Valley Power.- which mostly serves the city of Santa Clara.- provides grant money for solar panels to residential customers enrolled in its Financial Rate Assistance Program. Eligible customers who own their own solar installations can get 3.50 per watt for solar systems up to 3 kilowatts of power. Solar systems must produce at least 3,800 kWh annually.
SoCalGas Solar Thermal Water Heating System Rebate
SoCalGas customers in Central and Southern California can get a rebate of 5000,500 to 4,000 on qualifying solar water heaters. Your system must have a Solar Uniform Energy Factor of 1.8 or higher, and you’ll need to install a new Energy Star certified water heater along with your solar installation.
Local solar attic fan rebates in California
Many local energy providers offer rebates for energy-efficient appliances, including solar attic fans. These fans usually connect directly to dedicated solar panels to power themselves and cool down attics. Here are the publicly owned electric utilities that are currently offering rebates for solar attic fans.
Azusa solar fan rebate: Customers of Azusa Light and Water can get up to 150 as a credit on their electric bill with the purchase of a qualified solar fan for their attic or home using this application (PDF).
Glendale Water Power solar attic fan rebate: GWP customers who install solar attic fans can get 100 for each, or 125 if the fans were purchased in Glendale. Customers are limited to two rebates every 10 years at the same residence, and can apply for the rebate online.
Gridley solar attic fan rebate: The City of Gridley Electric Utility gives customers
Federal solar tax credits and incentives for Californians
The federal solar tax credit might be more valuable than any of the state and local incentives currently offered in California. It gives you 30% back in tax credit for expenses related to installing solar panels and batteries.
The official name of the federal solar tax credit is the Residential Clean Energy Credit, and though it was expected to expire in 2022, the Inflation Reduction Act extended the tax credit until 2035.
Applying for the federal solar tax credit is simple. Fill out IRS Form 5695 and include it with your tax return for the year in which you installed your solar system, or let the best tax software handle it for you.
The Inflation Reduction Act of 2022 keeps the federal solar tax credit at 30% until 2033, when it will drop to 26%. The credit will further decrease to 22% in 2034 and expire completely in 2035.
The solar tax credit is nonrefundable, meaning the credit you receive cannot be more than the amount you pay in taxes. You can, however, carry over any additional credit beyond your tax burden into future tax years.
.45 per cubic feet per minute back for solar attic fans as a rebate. Fill out the application (PDF) and mail or email it to the electric department.
Imperial Irrigation District solar attic fan rebate: Residential electric customers can get a 125 rebate for solar attic fans using this application (PDF).
Lodi solar attic fan rebate: The Lodi Electric Utility offers a rebate for solar attic fans that’s based on the capacity of your fan.-
Comparing California solar incentives
Values of incentives are based on a national 24,000 solar installation average (5000.99 per watt for a 8kWh system). State property tax is estimated at 1% of home value.
.15 per cubic feet per minute. You’ll need to complete this form (PDF) to apply for the rebate.
Modesto Irrigation District solar attic fan rebate: Residential customers of MID can get some money back (PDF) after purchasing a solar attic fan.- 100 for appliances with 20 watts of power or greater; 50 for fans with 10 to 19 watts. The application form (PDF) must be snail mailed back to the electric company.
Pasadena solar attic fan rebate: If you’re a Pasadena Water Power customer, you can get 80 back on a rebate for solar attic fans, plus another 20 if you purchased the fan in Pasadena. You’ll need to sign into your online account to apply for the rebate.
Riverside solar attic fan rebate: The electric company of Riverside provides a number of rebates for energy-efficient appliances, including solar attic fans. To claim the 100 rebate for a solar attic fan, complete and mail or email this form (PDF).
Ukiah solar attic fan rebate: Ukiah also provides a rebate for solar attic fans based on the capacity of the appliance. The city utility pays
California power purchasing agreements
If you don’t want to install solar panels yourself, a solar power purchasing agreement lets another company install solar on your property then charge you a predetermined amount for that solar energy.
Solar power purchasing agreements are an easy way to get solar power at no cost upfront, but you won’t get any of the tax incentives related to solar panels, and you’ll need to watch out for potential rate hikes over time.
Here are a few of the local public solar power purchasing programs available in California.
Santa Barbara Home Power Program
All Santa Barbara County residents can now get solar power installed in their homes at no cost upfront and without a lien on their property. Instead of paying for solar installations, participants in the Santa Barbara Home Power Program have solar panels installed for free and then pay for the energy generated by them.
The program is only available to residents without existing solar systems. Customers currently pay 24 cents per kWh for the first year of service, with rates increasing 2.9% annually.
Santa Clara Solar Water Heating Program
For homeowners who don’t want to install their own solar water heaters, the city of Santa Clara leases and maintains solar water heating equipment for its residents. Homeowners pay an installation fee and a monthly utility fee for the equipment, and the city takes care of the rest.
.20 per cubic feet per minute. Residential customers can apply for the solar attic fan rebate with this form (PDF).
Community solar programs in California
California has allowed community solar programs by law since 2013. Community solar projects let people use solar energy without installing solar panels on their property. The electricity comes from a large shared solar installation.
California recently passed the Community Renewable Energy Act, a law that aims to make community solar projects more accessible for renters and homeowners who cannot afford solar panels.
The Community Solar Green Tariff program provides a 20% discount on community solar energy for people living in disadvantaged communities. Also, some municipal power companies in California, such as the city of Anaheim, provide community solar discount programs for residential customers.
Get Up and Turn Off the Lights
Energize Your Home with Energy Star Appliances and Products
Turn Down Your Thermostat
Update Your Households Lighting
- Compact Fluorescent Lamps (CFLs) and Light Emitting Diode (LEDs) use at least 75% less energy than other light bulbs
Participate in Energy Efficiency Programs from the City or Utility Agency for Free!
- For example, Low-Income Home Energy Assistance Program (LIHEAP) and Low-Income Energy Efficiency (LIEE) help increase a homes energy efficiency
Neutralize Your Excess Energy Consumption
- Turn off and unplug TVs, computers, etc. They use energy even when they are plugged in. Use a power strip to make this easy.
- Clean air filters and coils for heating and cooling equipment so they can operate more efficiently and effectively
Address Your Leaks and Insulate Your Home
- Caulking, roof and wall insulation, and sealing ducts will decrease air leakage. About 20% of the air that moves through the duct system is lost due to leaks and holes.
Verify Your Settings on the Dishwasher and Washing Machines
Educate Your Family and Friends about the Need and Benefits of Energy Savings
Misconception: It takes more energy to heat up the house again than just keeping it at a constant temperature. Or It takes more energy for light/computer/TV to turn back on than you saved by turning it off.
Truth: It is always better from an energy standpoint to turn things off
Misconception: Now that I have solar, it doesnt matter how much electricity I use, because it is all free.
Truth: The solar panels will only produce a certain amount of electricity, and the homeowner will still pay for the rest. So, if they use more, they will pay for it, and if they save more energy, they save more money.
Misconception: Weatherizing a home can lead to health problems because no fresh air will be able to get in the house.
30% Solar Tax credit. The New 2022 Law YOU MIGHT NOT BE ELIGIBLE
Truth: This can be a problem in new, tight houses. It is important to have some air circulation to prevent odors and harmful gases to build up. However, most old houses are so leaky that doing standard weatherizing measures, like caulking and weather-stripping, will just reduce the drafts, but there will still be plenty of fresh air to prevent health problems.
Misconception: I shouldnt use CFLs because they have mercury.
Truth: CFLs do contain small amounts of mercury, which is toxic. However, the amount of mercury emissions that a CFL will offset during its life is greater than the amount of mercury in the CFL. Due to the mercury, it is important to learn proper disposal measures of CFL bulbs. Burned out bulbs should be recycled and broken bulbs should be handled with care (ventilate area and do not directly touch broken pieces). Recycle at your local hardware store.
Misconception: Now that I have solar, I will save money by switching to an electric dryer.
Truth: Heating (air or water) with electricity is expensive and should be avoided.
Misconception: I have solar and decided to put in a pool. My electric bill should not increase.
Truth: The solar panels will only produce a certain amount of electricity. Depending on the size of the system, adding more items that use electricity, like a pool, might not be covered by the amount of electricity produced. Therefore, you will have to pay for the gap in electricity that will occur.
Property Tax Exemption
Although California no longer offers its own state tax credit for solar, it does offer a very appealing property tax exemption for solar systems. Solar panels have been shown to increase property value and, thanks to the property tax exemption, California residents will not have to pay additional property taxes despite the value of their home increasing. This is just another perk of going solar and, perhaps, one that you may not consider at first.
The SASH program is one of California’s incentives intended to benefit low-income communities and encourage the adoption of solar in these communities. This incentive is for single-family homeowners, and qualifying customers will receive an upfront incentive of 3 per watt. If you scale this rate up alongside the cost of a typical solar system. it could effectively cover the entire system cost.
To take advantage of the SASH program, you must be a customer of one of the following utilities:
- Pacific Gas and Electric (PGE)
- Southern California Edison (SCE)
- San Diego Gas and Electric (SDGE)
In addition to the utility requirements, you must also own live in your home, reside in a house that is considered ‘affordable housing’ by the California Public Utility code, and have a household income which is 80% of, or below, the area-median income.
The Multifamily Affordable Solar Housing (MASH) Program
The MASH program is another incentive aiming to boost solar energy in low-income communities. Those who own a multi-family housing complex could qualify for a grant program which allows them to retrofit these housing developments with solar panels. The rate on offer varies from 450.10 to 450.80 depending on project type. For grant rate information, eligibility requirements, and further details about the California MASH Program, please consult our recent blog post.
Although this incentive is for solar battery storage and not just solar panels, it’s still an appealing prospect as solar-plus-storage is becoming increasingly common. Residential battery storage systems smaller than 10kW are eligible for an incentive of
Local Utility Rebates
Certain California municipalities offer solar rebates. Depending on the utility service area in which you are based, you may be eligible for a solar rebate. These rebates may be offered as either lump sum payments, or on a per-watt basis. The following table, courtesy of Solar Reviews. details the different rebates on offer from different municipalities.
.25 per watt hour of storage installed. You can take advantage of this incentive if you are based in the service area of:
California Renewable Portfolio Standard (RPS)
Although this is not a direct incentive available to California solar customers. the ripple effect of the program should lead to benefits in the future. The RPS has set a target of 100 percent of electricity production coming from renewable resources by the year 2045. This ambitious climate goal should lead to financial incentives for consumers, as it puts pressure on utilities who will be liable to pay large fees if the goal is not met. The RPS target will, hopefully, lead to more clean energy initiatives across the state of California, and greater savings for solar customers.
These are just some of the best incentives available for those going solar in California in 2021. To learn more about California solar, or discuss your own project, get in touch with YSG Solar today. Send us an email or call at 212.389.9215 to learn more.
YSG Solar is a project development vehicle responsible for commoditizing energy infrastructure projects. We work with long-term owners and operators to provide clean energy assets with stable, predictable cash flows. YSG’s market FOCUS is distributed generation and utility-scale projects located within North America.