Solar Incentives in California

Solar panels on  house

Solar Rebates and Tax Credits
California is far and away the most mature residential solar market in the country, which can be both a blessing and a curse in some ways. Overall, it is definitely a net positive for homeowners who live here because they are usually more informed about the intricacies of solar and the state’s solar lobby is powerful enough to fight for important savings tool such as net metering.

But the downside of the mature market is that, unlike other states like Massachusetts and South Carolina, where rebates and energy credits are used to incentivize homeowners to consider solar, California has discontinued almost all of its state-specific solar incentives because the industry is strong enough to sustain itself.

Residential Renewable Energy Tax Credit
The most prominent and recognizable incentive for residential solar customers is the Residential Renewable Energy Tax Credit. According to the official language from the Department of Energy, “a taxpayer may claim a credit of 30% of qualified expenditures for a system that serves a dwelling unit that is owned and used as a residence by the taxpayer.” In layman’s terms, this means that as long as the homeowner is putting solar on his/her primary residence, they are entitled to a tax credit that is equal to 30 percent of the total cost of the system.

For example, if someone purchases a solar system for $20,000, they are entitled to a $6,000 federal tax credit, thus reducing the net cost of the system to $14,000. The tax credit is an incredible cost-savings tool for homeowners interested in investing in solar and it usually can turn what was a 12-year return on investment into a 7 or 8 year ROI depending on the system size and the homeowner’s electricity usage.
In order to qualify for the tax credit, homeowners must purchase the solar system, either with cash or through a loan option. If the homeowner chooses to lease the solar system, the tax credit will go to the person or company that is leasing you the equipment. This is one of the main reasons why lease and PPA options have grown less popular as homeowners begin to realize the savings they can collect by owning the system themselves. It is important to research how solar financing affects the tax credit benefits.

Also, not everyone has the tax liability to take advantage of the tax credit. The credit can be carried forward for up to five years, which means that the homeowner has five years to recoup the entire amount, but every individual has a unique tax situation and so it is important to do your homework before making any assumptions. In most cases, the tax credit can be a straightforward process.

Net Metering in California
Net Metering is not as widely understood as the federal tax credit is but it is arguably the most important incentives with which California homeowners save money by going solar. Put simply, net metering is the concept that the homeowner is able to sell excess electricity produced by the solar system back to his/her utility and then is able to draw down on said credit when their solar system does not produce as much electricity as they use. In essence, the homeowner’s meter spins backwards and forwards as the utility is essentially agreeing to be the homeowner’s battery.

The impact on savings is immense, especially for homeowners that are able to build a solar system capable of offsetting 100 percent of their electricity usage. In practice, homeowners build up a credit during the summer, when their solar system is producing the most electricity. And then they are able to draw down on that credit in the winter rather than pay their utility for the extra electricity usage.
There are no circumstances where a homeowner will not qualify for net metering. In fact, net Metering is relatively standardized throughout California, but it is still important for homeowners to check with their utility to make sure they understand the intricacies of the policy.

Property Tax Exemption for Residential Solar Systems
Living in California is not particularly cheap and while many homeowners may have read that a solar system will increase the value of the home (which is true!) there next question usually concerns whether or not their property taxes will increase as well. The question is understandable and luckily for homeowners in California, thanks to an incentive passed as law by the state, there is a property tax exemption for homeowners in California who go solar. According to the Database of State Incentives for Renewables & Efficiency (DSIRE), a section of the California Revenue and Taxation code allows a property tax exclusion for specific types of solar systems installed before 2025. It includes everything from solar systems installed on homes being newly built to solar water heating systems and plenty in between. It also includes batteries used for solar storage, solar space conditioning systems and even solar mechanical energy.

However, homeowners interested in installing pipes and ducts used for solar energy only qualify for 75% of their “full cash value”. It is also worth noting again that Barnes Solar does not employ any tax professionals or home appraisers, so it is important for homeowners to do their own research and homework as well.

Self-Generation Incentive Program (SGIP)
If you are a homeowner who is interested in solar, you have probably begun to hear about batteries or “battery backup” systems. Although batteries are still considered something of a luxury item in solar in that they are expensive and only helpful in very specific situations, the California Public Utilities Commission that set aside some money to incentivize “existing, new, and emerging distributed energy resources”.

This incentive program is called SGIP and it offers rebates to customers who purchase energy storage systems. The amount of the rebate depends on the utility and how many customers serviced by that utility have already participated in the program. For example, for Southern California Edison customers, the program is already in Step 3, meaning that if the homeowner is also planning to take advantage of the federal tax credit, they are entitled to a rebate worth .25/Wh. Please note, the rebate is not based on the size of the solar system, it is based on the size of the battery system.

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