California Solar Panel Incentives: Tax Credits, Rebates, Financing and
Net metering rules have changed, but the Golden State still offers residents additional motivations for going solar.
Sunny weather and a long history of supporting solar energy make California a leader in solar panels. But does the state encourage residents to convert to solar with financial incentives? Its recent decision to lower its net metering rates has some critics questioning the state’s commitment to residential solar systems.
California dominates the American solar energy market, deriving 28% of its electricity from solar. However, its current incentives for solar panels lag behind several other states.- California doesn’t make CNET’s list of states with the best incentives for solar panels.
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All Americans who purchase solar panels are eligible for the federal tax credit for renewable energy, but state and local incentives for solar vary across the country. Here are the local and state incentives for solar projects in California.
Note: These California incentives are for residential electric customers only. California has additional incentives for organizations, businesses and farms. The solar panel incentives listed below are also accurate as of May 26, 2023. Local government and utility programs change regularly, so check program websites to make sure they are still active.
Can solar panels save you money?
Interested in understanding the impact solar can have on your home? Enter some basic information below, and we’ll instantly provide a free estimate of your energy savings.
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.
Introduction to solar incentives
As the need for climate action has become ever more urgent, lawmakers across the country have stepped up to support solar power: the best form of energy generation there is (we had to say it). This support has come in many forms but is usually the result of legislative action.
Many state legislatures have passed laws called renewable portfolio standards (RPS) that require utility companies in the state to get a certain amount of the energy they sell from renewable sources. These laws often include funding for incentive programs to help home and business owners adopt solar. State public utilities commissions are often charged with designing these programs to meet the requirements outlined in the RPS law.
Solar incentives come in one of three major types:
- Tax breaks. Income tax credits are the most popular kinds of tax breaks, but state and local governments also commonly offer sales and property tax exemptions.
- Rebates. Usually offered directly to solar installers by utility companies using a pool of ratepayer funds specifically set aside to encourage solar development, rebates generally reduce the up-front cost of going solar.
- Performance payments. Performance payment programs offer a way for solar panel owners to make additional income based on the amount of energy their solar systems generate.
Here’s a bit more on each of the three main types of solar incentives:
Solar tax credits
People and businesses who purchase solar panels have long enjoyed tax credits that help ease the financial burden of going solar. Both the federal and state governments offer solar tax credits.
All federal and state income tax credits can be claimed when filing taxes in the year after installation. We’ve developed a helpful guide to claiming the federal solar tax credit using form 5695. State tax credits are usually fairly simple, and your tax software or preparer should be able to guide you through claiming them.
The federal solar tax credit
The current federal solar tax credit offers 30% of the costs of installing solar back to taxpayers in the year after the installation is completed. The federal tax credit is based on the purchaser’s income, and the credit can’t exceed the total tax owed in one year, but unclaimed credit can be carried forward to future years.
Say your solar installation costs 18,000 total. You are eligible for a federal tax credit of 5,400. Remember, the solar tax credit is non-refundable, so you can only claim the full 5,400 if you owe at least that much in taxes. If you owe less than that, you can claim the remaining tax credit value the following year.
This is where it gets complicated because the amount of tax you owe depends on your income, deductions, and other credits you qualify for.
Here’s a quick example: A married couple filing jointly with an income of 76,367, who take the standard deduction of 27,700 and qualify for no additional credits or deductions, will owe 5,400 in tax in 2023. Again, that tax changes based on whether the couple has dependents or qualifies for any other deductions and tax credits.
State tax credits
Many states also offer solar income tax credits, sometimes adding up to over half the cost of the system when combined with the federal credit.
Here’s a breakdown of the states that offer solar tax breaks, with links to each state’s incentive page on our site:
Find out what solar tax credit you qualify for
Tax exemptions
States and municipalities also offer sales and property tax exemptions for solar power. Sales tax exemptions reduce the upfront cost of going solar, and property tax exemptions prevent solar owners from paying more based on the value a solar installation adds to a property.
Tax exemptions differ from tax credits in that your eligibility is pretty much automatic if your state offers these incentives.
Your installer will take care of any necessary paperwork for sales tax exemptions, and property tax exemptions just mean the county assessor won’t be knocking on your door after you get solar installed.
States with tax exemptions
Do I Qualify for the Federal Solar Tax Credit?
The Office of Energy Efficiency Renewable Energy (EERE) states the following criteria to determine federal solar tax credit eligibility:
- Date of installation: You are a U.S. taxpayer who installed a solar system between Jan. 1, 2006, and Dec. 31, 2034.
- Original installation: Your solar project is new. Homeowners can only claim the credit on the original installation of solar equipment, not the repurposing or reuse of an existing system.
- Location: The solar system is located at your primary residence or secondary home in the U.S. You may also use your system for an off-site community project if the electricity generated does not exceed and is credited against your home’s electricity consumption.
- Ownership: You own the solar PV system. You cannot claim the credit if you are leasing or in an agreement to purchase electricity generated by the system, including a solar power purchase agreement (PPA).
- Type of residence: Homes, mobile homes, houseboats, condominiums and cooperative apartments are all qualifying residences for the ITC.
Can I Claim the Federal Solar Tax Credit On My Rental Property?
If your solar system installation is on a rental or vacation property that you own, you can only claim the ITC if you live at that property for at least part of the year. Even then, you can only claim the portion of the credit that reflects how much time you spent living there.
For instance, if the solar panel system on your rental property cost 20,000, then the full solar energy tax credit of 30% would be worth 6,000. However, if you live at that property 50% of the time (say six months out of the year), you’d only be eligible for 3,000, or 50% of the full credit value.
Does the Date I Install My Solar Panels Affect How Large My Credit Is?
The year that you install your solar panels can affect how large of a tax credit you earn:
What Does the Federal Solar Tax Credit Cover?
According to the EERE, the federal solar tax credit covers the following items:
- Solar panels: The credit covers solar PV panels or PV solar cells.
- Additional equipment: The credit covers other solar system components, including the balance-of-system equipment and wiring, inverters and other mounting equipment.
- Batteries: The ITC covers storage devices, such as solar batteries, charged exclusively by your solar PV panels. Coverage extends if you install battery storage with your solar system, add batteries to an existing system, or as of January 2023, install stand-alone energy storage.
- Labor: Labor costs for on-site preparation, assembly or original solar installation are covered. This includes permitting fees, inspection costs and developer fees.
- Sales tax: The credit also covers sales tax applied to eligible expenditures.
State and Local Solar Incentives
Tax credits, net metering and tax exemptions are three of the most valuable solar incentives offered on a state or local basis. These incentives can be used in tandem with the 30% federal solar tax credit to increase your savings. You can use the Database of State Incentives for Renewables Efficiency (DSIRE) to find rebates and state tax credits are available in your ZIP code.
Tax Credits
Some states have a statewide tax credit that you can apply in addition to the federal solar tax credit. These states currently include Arizona, Colorado, Hawaii, Massachusetts, Maryland and New Mexico.
Policies for eligibility and claiming state credits vary, so make sure to look on your local government website and speak with your solar installer to learn more.
Net Metering
A total of 41 states currently require net metering. If you live in one of these states, you can export excess energy generated by your solar panels back to the utility grid for bill credits. Some states, like Idaho and Texas, do not have mandated statewide net metering, but many utility companies still offer a program.
Tax Exemptions
Most states offer property tax exemptions for solar equipment, meaning you won’t have to pay taxes on the value added to your property when you install solar panels. Many states also offer sales tax exemptions for solar equipment. Your solar installer can help you fill out and submit any paperwork required for tax exemptions.
Garrett Nilsen, the deputy director of the U.S. Department of Energy’s Solar Energy Technologies Office, recommends the following when it comes to solar incentives:
“Incentives can vary across the country, so it’s important for homeowners to understand what they’re eligible for on the federal and local levels before going solar. An experienced local installer should be able to assist you in claiming any state and local incentives, as well as the ITC.”
Learn more about the solar incentives offered in your state and how to apply:
Solar Incentives by State
Alabama | Alaska | Arizona | Arkansas | California | Colorado | Connecticut | Delaware | Florida | Georgia | Hawaii | Idaho | Illinois | Indiana | Iowa | Kansas | Kentucky | Louisiana | Maine | Maryland | Massachusetts | Michigan | Minnesota | Mississippi | Missouri | Montana | Nebraska | Nevada | New Hampshire | New Jersey | New Mexico | New York | North Carolina | North Dakota | Ohio | Oklahoma | Oregon | Pennsylvania | Rhode Island | South Carolina | South Dakota | Tennessee | Texas | Utah | Vermont | Virginia | Washington | West Virginia | Wisconsin | Wyoming
Is Going Solar Worth It?
Installing solar panels is worth it for most homeowners. A solar panel system typically generates clean energy for 25 years or more and saves the average U.S. household 450,346 on energy bills annually.
Although solar is still a significant investment, the cost has decreased by more than 50% over the last decade — and the 30% federal solar tax credit further reduces how much you’ll pay. Many utility companies and state governments also offer solar incentives, including tax credits, rebates and net metering. You can combine these incentives with the federal solar tax credit to maximize your savings.
However, if you live in a state with few solar incentives, you may save less over the lifetime of your panels. Other factors like the climate and your roof’s features can affect whether or not solar is worth it for you. Because every solar array and roof is unique, your solar installer will survey your home to determine if solar panels are suitable for you.
We recommend reaching out to a solar professional today to help you decide if solar is worth the investment.
Project Sunroof
Your own personalized solar savings estimator, powered by Google Earth imagery. Approximate savings are based on national average rates, not Fort Collins Utilities rates.
Start with an Epic Homes home energy assessment. The assessment will provide a full report on your home’s efficiency and recommendations to improve it, including costs. Investing in efficiency can provide less expensive improvements and better financial returns than purchasing solar generation to offset energy bills.
Fort Collins Utilities also offers the new Epic Certificate to showcase your investments in efficiency and solar, providing a way for the real estate market to value the energy and solar PV upgrades. For the Epic Certificate to accurately reflect the homes improvements and the estimated annual energy savings from the solar PV system, the required energy assessment must be performed before the solar installation.
Sizing Your Solar PV System#
Solar PV system designers often choose a system size to meet a certain percentage of a household’s annual energy consumption. Though a solar PV system provides a portion of the energy your household consumes over the course of a year, it will sometimes produce more than needed and will produce less than needed at other times (nighttime or cloudy days). Your home will stay connected to the Fort Collins Utilities electric grid so you have reliable electricity during these fluctuations. How you select the right size for your solar PV system will be a balance of your priorities:
- Total cost budget, monthly payments and cash flow
- Goals for offsetting energy from the grid
- Available sunny space on your roof or property
Solar PV system size is limited to either 12 kilowatts or to one that produces no more than 200% of your average annual energy load (based on a 24-month period), including all dedicated generation sources. For solar systems that are not owned by the property owner, such as leased systems, maximum solar system sizing is limited to 120% of intended renewable energy offset.
If your home is new or you recently moved in, Fort Collins Utilities can provide a solar system size analysis based on other estimation methods. We also consider sizing adjustments upon request to account for significant changes to electric load, such as adding an electric vehicle.
You can share energy consumption history with solar contractors through the MyData platform or by sharing your bills.
Think Before You Cut#
While it’s important to properly manage trees to minimize shading on a solar array, Utilities does not advocate removing healthy trees to install solar. Please consult the City’s Forestry Department and work with a licensed ISA-certified arborist to ensure trees stay healthy as part of the solar installation process.
If tree work is required, the City’s Forestry Department website maintains a list of qualified, licensed arborists permitted to work in Fort Collins. Feel free to also contact the Forestry Department at forestry@fcgov.com if you have additional questions.
Trees around your home add significant value to your property and can play a very important role in reducing your energy and water consumption. Trees provide many benefits including:
- Removing carbon dioxide from the atmosphere
- Reducing energy costs (up to 50%)
- Shading
- Reducing heating costs by serving as winter wind barriers
- Reducing water usage
- Increasing your home’s property value (upwards of 20%)