California Solar Incentives and Rebates: How to Maximize Your Solar Savings
With abundant sunshine and some of the nation’s highest electricity prices, it’s no wonder why over a million California homeowners have gone solar.
Rooftop solar is already a worthwhile investment in California, but a wide-range of federal, state, and local incentives can make the deal even sweeter. In this article, we’ll dig into:
California solar and battery incentives
For many California homeowners, going solar is already a slam dunk. However, there are federal, state, and local incentives that can maximize your solar savings.
The incentives fall into two broad categories: tax incentives and rebates. Let’s start by digging into the tax incentives.
Pro Tip: If you plan on moving out of California anytime soon, check out our list of other states incentives and rebates!
California solar and battery tax incentives
The following California solar incentives come in the form of tax credits, exemptions, and exclusions. Consult a licensed tax professional for advice regarding tax incentives.
Federal solar and battery tax credit
The first tax incentive to mention is the 30% solar investment tax credit – also known as the ITC or Residential Clean Energy Credit.
This federal tax credit is worth 30% of the cost of installing solar and battery storage systems. Thanks to the Inflation Reduction Act, the ITC will remain at 30% until 2032 and beginning on January 1, 2023 applies to battery storage that isn’t hooked up to solar.
Property tax exclusion
Studies by Zillow and Berkeley Lab found that solar panels increase home values by up to 4,000 per kW. And Californians know better than anyone else that higher property value means higher property taxes.
But thanks to California’s Active Solar Energy System Exclusion, rooftop solar systems installed before January 1, 2025 won’t be assessed in property valuations, and therefore won’t increase your property tax.
According to the California State Board of Equalization, this tax exclusion applies to solar systems “where the energy is used to provide for the collection, storage, or distribution of solar energy.”
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It does not apply to solar swimming pool heaters or hot tub heaters.
Property-Assessed Clean Energy (PACE)
Upfront cost is often the biggest hurdle to going solar, but the PACE program – known as the Home Energy Renovation Opportunity (Hero) program in California – is one way to go solar with zero money down.
Through the Hero program, your state or local government teams up with a local lender to fund the upfront cost of your solar project. Then you pay the project off through an increase to your property tax bill over an agreed upon term, typically 5 to 20 years.
The savings come when the increase to your property taxes is lower than the energy savings provided by your solar system.
California solar and battery rebates
California also has solar incentives in the form of rebates, which can help reduce the upfront cost of solar and battery storage projects. We’ve listed a few below, but we strongly encourage you to check for local rebates through your utility, city, or municipality.
Self-Generation Incentive Program (SGIP)
With frequent power outages and Time-of-Use rates, home battery storage is an opportunity for both energy independence and savings.
Through SGIP, eligible Californians can be reimbursed for 150 to 450,000 per kWh of battery storage installed – which, in some cases, covers the entire cost of the project.
The incentive amount depends on your utility, your wildfire risk, and special circumstances like having a life threatening illness, medical equipment, and an electric pump for well water.
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Disadvantaged Communities – Single-Family Solar Homes (DAC-SASH)
DAC-SASH is an upfront rebate to reduce the cost of going solar for qualifying low-income households.
To be eligible, you must meet all of the following criteria.
- Receive electrical service from
- Pacific Gas Electric (PGE)
- Southern California Edison (SCE)
- San Diego Gas Electric (SDGE)
DAC-SASH is scheduled to run through 2030. Visit GRID Alternatives to check your eligibility.
Local rebates
In addition to state rebate incentives, California also has several local rebates that can further maximize your solar savings.
For example, Rancho Mirage Energy Authority has a Residential Solar Rebate Program that offers a one-time 500 incentive for installing or expanding a residential solar system.
Similarly, Sacramento Municipal Utility District (SMUD) offers a 150 stipend for residential solar system installations.
Cost of going solar in California
While there are a variety of solar incentives in California, most homeowners will only qualify for the federal solar tax credit – and that’s okay. Even without incentives, the cost of going solar in California is already much cheaper than grid energy.
But, for many homeowners, the goal of going solar is to maximize your energy savings, so let’s see how the cost of going solar in California compares tobuying electricity from a utility provider.
Cost of solar vs grid electricity in the Los Angeles metro area
The figures below are from a real quote presented to a solar.com customer in Buena Park, Cali. for a 6.4 kW solar system under NEM 3.0 solar billing.
With California’s abundant sunshine, a 6.4 kW solar system can be expected to produce:
- An average of 9,770 kWh of electricity per year
- A total of 244,250 kWh of electricity over 25 years
If you divide the net cost of the project by the lifetime production, the cost per kilowatt-hour of home solar for this Los Angeles-area customer comes to:
- 7.8 cents per kWh with the 30% solar tax credit
- 11.2 cents per kWh without the solar tax credit
Now, let’s compare the cost per year electricity from home solar to the cost of grid electricity:
Even without the 30% federal tax credit, grid electricity is 118% more expensive per year than home solar – and that’s before factoring in the constantly rising cost of grid electricity
According to the Bureau of Labor Statistics, the average cost of grid electricity has increased by over 6% per year since 2017 in the Los Angeles metro area – but let’s use a 4% annual increase to be conservative.
Here’s how the cost of solar versus grid energy in Los Angeles compares over the 25-year warrantied life of a solar system:
Even NEM 3.0 solar billing, this solar.com customer near Los Angeles is looking at a payback period around 9 years and over 60,000 in energy cost savings over 25 years.
California’s residential solar rules overhauled after highly charged debate
After a unanimous vote today by the CPUC, homeowners get smaller payments from utilities, which solar companies say will slow construction of new rooftop solar projects. But new state incentives will be available.
The California Public Utilities Commission today overhauled the state’s rooftop solar regulations, reducing payments to homeowners for excess power but providing nearly a billion dollars in incentives to encourage more solar projects for low-income homes.
Commissioners called the new rules — adopted unanimously after hours of highly charged public Комментарии и мнения владельцев that were almost entirely opposed — a much-needed course-correction to California’s 27-year-old residential solar rules.
Both the power companies and the solar industry criticized the new rules that outline details of the financial incentives to encourage people to build rooftop solar. Utilities did not get all the concessions they hoped for to lower bills for non-solar customers. And solar developers say the rules will discourage people from installing solar panels.
A victory for the solar industry came earlier this year, when the commission dropped an unpopular plan to charge homeowners an 8% per kilowatt-hour tax for new solar systems.
In remarks before the vote, commissioners acknowledged how divisive the matter has been. Commissioner John Reynolds said the decision was a “heavy one,” saying “nothing in energy policy is black and white, and nothing in this decision has been.”
Commissioner Clifford Rechtschaffen said the agency faced “competing and challenging priorities.” He called it a “responsible and forward-looking decision.”
- For new customers, reduce the amount utilities pay them for excess power by at least 75% compared to current rates, starting in April. The change would not apply to residents with existing solar systems.
- Fund 900 million in new incentive payments to residents to help them purchase rooftop solar systems. Two thirds of the funds, 630 million, will be set aside for low-income households. The remainder provides funding for paired solar-battery storage systems.
- Set rates that aim to shift all consumers’ use of power to the times of day that improve grid reliability.
California’s original rules, called Net Metering, were implemented in 1995. They established a framework for utilities to buy excess solar energy from homeowners and supplement power to the grid.
The overhaul comes as California needs to lean more heavily on renewable energy to meet state targets to produce zero-carbon electricity by 2045 and end use of fossil fuels.
About 1.5 million rooftop solar systems are installed on California’s houses, schools and small businesses. About 14% of California’s total electricity comes from large-scale solar projects; another 10% of the state’s power comes from rooftop residential solar.
Solar companies and environmental groups say the policy could undermine the state’s booming solar industry by raising the costs of operating panels on homes and small businesses. They say that in states where similar rate shifts have been adopted, solar system installation has plummeted.
Bernadette Del Chiaro, executive director of the California Solar Storage Association, called the decision a backward step.
“The CPUC’s final proposal is a loser for California on many levels,” she said in a statement. “For the solar industry, it will result in business closures and the loss of green jobs. For middle class and working class neighborhoods where solar is growing fastest, it puts clean energy further out of reach.”
Woody Hastings, The Climate Center’s energy program manager, said “California needs more solar power — not less.”
“Just as more middle and lower-income Californians are putting solar panels on their rooftops, the new rules adopted by the CPUC today threaten to slow the growth of clean energy across the state,” he said.
The years-long fight was played out across social media and opinion pages. The complex process of revising the rules elicited tens of thousands of public Комментарии и мнения владельцев and was, at one point, arbitrated by Gov. Gavin Newsom.
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Some callers made the point that the provision to nudge consumers to install solar systems with batteries will have the unintended consequence of quashing new solar systems because the cost of storage systems is beyond the financial reach of many homeowners. Only about 15% of current rooftop systems currently have storage, the commission said.
California commission overhauls rooftop solar proposal
The CPUC’s scaled-back plan eliminates consumer fees. The original was abandoned after criticism from the governor and solar advocates that it could hurt the transition to renewable energy.
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What are California’s rates and for net metering?
PGE’s net metering program for solar customers is known as NEM 2.0. Under this program, solar customers receive a credit for the excess energy they produce and feed back into the grid. The credit is applied to the customer’s bill at the retail rate, which includes both the cost of energy and the cost of delivery.
In PGE’s net metering program, the amount you get credited for sending energy back to the grid is based on your property’s electricity rate structure. The structure is simple: you get a credit on your bill for each kilowatt-hour (kWh) you feedback to the grid at the full retail value of that kWh, minus a few cents per kWh for non-bypassable charges (NBCs) that all customers pay for. These charges support environmental benefit programs.
However, starting April 15, 2023, PGE will switch to a new program called NEM 3.0 or the Net Billing tariff (NBT). Instead of getting credits based on the total retail rate, you will receive credits based on the “avoided cost rate,” which reflects how valuable it is not to use electricity during a specific time. This means the price PGE will pay you for the solar energy you send to the grid will drop by around 75%.
SCE rates and for net metering
Southern California Edison (SCE) determines rates and pricing for net metering based on your property’s electricity rate structure. For every kilowatt-hour (kWh) of energy you give back to the grid, you’ll receive a credit on your bill for the same value as a utility-generated kWh, minus a few cents for non-bypassable charges (NBCs). These charges are mandatory and support environmental benefit programs that all SCE customers pay for, regardless of solar usage.
There have been changes to the SCE net metering program, including the current NEM 2.0 that began in 2016 and the upcoming NEM 3.0 (also known as the Net Billing tariff, or NBT) that will start on April 15, 2023. With NEM 3.0, credits will be based on the “avoided cost rate,” meaning that the credits’ value will depend on how valuable it is not to use electricity during a specific hour. As a result, the price that SCE pays for solar energy fed back to the grid is expected to decrease by around 75%.
San Diego Gas Electric (SDGE) rates and for net metering
SDGE’s rates and for net metering depend on your property’s electricity rate structure. For each kilowatt-hour (kWh) you send back to the grid, you will receive a credit on your bill for the total retail value of that kWh minus a few cents per kWh for non-bypassable charges. However, SDGE’s net metering program is changing to NEM 3.0 on April 15, 2023, which will credit you based on the value of not using electricity during a particular hour, resulting in a significant decrease in the price SDGE pays for solar energy sent to the grid.
What is the net metering cap in California?
A net metering cap refers to the maximum amount of electricity that can be generated by renewable energy systems and fed back into the grid while still being eligible for net metering credits. In other words, it’s the maximum amount of electricity that a utility company is required to credit a customer for.
PGE net metering cap
In the past, PGE limited the amount of excess solar energy that customers could sell back to the grid to 5% of the total electricity demand during peak hours in their area. However, since June 2016, there has been no limit to the amount of solar energy customers can sell back to PGE.
SCE net metering cap
Southern California Edison used to have a limit on how much electricity its customers could generate through net metering, which was set at 5% of the total amount of electricity used during peak hours in the utility’s area. However, since June 2016, there has been no limit on net metering in the area served by Southern California Edison.
SDGE net metering cap
In the past, California had a rule that limited the amount of net metering that SDGE could use to 5% of the highest amount of electricity they needed at any given time. But starting from June 2016, there is no longer any limit to the amount of net metering that SDGE can use in their area.
What will happen to my PGE NEM credits?
If you have a solar panel system that produces more electricity than you need, PGE will give you bill credits. These credits can be used in future months when your panels produce less energy. You will be credited for the extra energy at the Net Surplus Compensation Rate (NSCR) in a year. The NSCR is based on electricity market and is calculated every month. After one year, you’ll get a credit for extra electricity at the average rate for that month.
What will happen to my SCE NEM credits?
If you have a solar panel system that produces more electricity than you need, you will receive bill credits on your SCE bill. These credits can be used to pay for electricity in future months. Again, when your panels produce more electricity than you use over 12 months, you’ll be credited at the Net Surplus Compensation Rate (NSCR). The NSCR is calculated based on the market price of electricity each month. After 12 months, any extra electricity you produce will be credited at the average rate for that month.
What will happen to my San Diego Gas Electric (SDGE) NEM credits?
If you have a solar panel system and produce more energy than you need for a month, you’ll receive bill credits on your SDGE bill that can be used in future months. If you produce more electricity than you use over the course of a year, you’ll receive credits for the extra electricity at the wholesale compensation price. The wholesale compensation price is based on electricity market and is calculated by SDGE on a per-kilowatt-hour basis for each month. At the end of 12 months, any extra electricity will be credited to your account at the average rate for that month.
California NEM 3.0 Implications
For solar and battery storage installers in California, it has been estimated that under NEM 2.0, a monthly electric bill went from 250 down to 18 with solar. New NEM 3.0 rates, effective April 13, will go from 250 down to 95, which is still a considerable saving but less attractive than NEM 2.0 rates.
Pairing battery storage with solar installation will be more beneficial under NEM 3.0. Homeowners that are grandfathered in NEM 2.0 will still be able to add battery storage later on and remain under NEM 2.0.
Important date to remember. The current NEM tariff, NEM 2.0, is available for new customers until April 14, 2023. Even if the installation is set within 3 years, you can be grandfathered into NEM 2.0 if you submit all applications for construction before the April 14 deadline.
What is included in a complete interconnection application?
- Signed contract
- Single Line Diagram (SLD)
- Contractors State License Board disclosure (CSLB)
- Consumer protection guide
- Oversizing attestation (if applicable)
NEM 2.0 grandfathered program is good for 20 years; at that point, systems will transfer over to the NEM 3.0 program rates.
California residents aiming to go solar who want the best experience possible are recommended to go through one of Solar Insure’s Certified Installers. We thoroughly vet the contractors in our network so you can have peace of mind that you will receive a quality install, your installation is immaculate, and any covered parts or labor you may need to keep your system running are protected with Solar Insure products. Call or text our team at (714) 625-8204 to get the support you need.
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San Diego Gas Electric (SDGE) has a net energy metering (NEM) program that lets you earn credits on your bill for the excess electricity your solar array produces and sends to the electric grid. 7 Net metering in San Diego helps you save money on your future energy bills.
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