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With more than a million homes in California having solar power, it makes sense given the state’s abundance of sunshine and some of the highest electricity costs in the country.
In California, rooftop solar is already a wise investment, but there are numerous federal, state, and local incentives that can sweeten the pot. In this article, we’ll dig into:
To get a sense of why solar panels are worth considering, let’s first discuss the benefits and drawbacks of solar panels in California.
Pros and cons of solar panels in California
| Pros | Cons |
| Ample sun + high electricity prices = massive savings potential | No state tax credits or rebates |
| Increased home value with property tax exclusion | NEM 3.0 not as favorable as previous net metering policies |
| Robust and mature installation market | Robust market also attracts scammers and shady installers |
| Solar + battery = backup power and grid resiliency | Can’t take solar + battery with you if you move |
| Favorable net metering for non-IOU customers | Need cash or access to financing to buy solar |
| SGIP rebates lower the cost of batteries |
California solar and battery incentives
Solar energy is already a no-brainer for a lot of Californian homeowners. However, you can optimize your solar savings by taking advantage of federal, state, and local incentives.
There are two main types of incentives that are available: tax incentives and rebates. Let’s start by digging into the tax incentives.
California solar and battery tax incentives
The following tax credits, exemptions, and exclusions are available as California solar incentives: Consult a licensed tax professional for advice regarding tax incentives.
Federal solar and battery tax credit
The first tax incentive to be mentioned is the federal solar tax credit, also known as the Income Tax Credit (ITC) or Residential Clean Energy Credit, which is worth E2%80%93.
The value of this federal tax credit is greater than the cost of installing solar and battery storage systems with no upper limit. Additionally, the ITC will remain at 20%300% until 202032% and now applies to battery storage that isn’t hooked up to solar power thanks to the Inflation Reduction Act.
According to research from Berkeley Lab and Zillow, solar panels can raise a home’s value by up to $4,000 per kW. Furthermore, Californians are the most aware of the fact that higher property values translate into higher property taxes.
However, rooftop solar systems installed before January 1, 2025, will not be included in property valuations and, as a result, will not result in an increase in your property tax due to California’s Active Solar Energy System Exclusion. This tax exemption is applicable to solar systems “where the energy is used to provide for the collection, storage, or distribution of solar energy,” according to the California State Board of Equalization. ”.
Solar-powered hot tub and swimming pool heaters are exempt from this rule.
Property-Assessed Clean Energy (PACE)
The PACE program, also known as the Home Energy Renovation Opportunity (HERO) program in California, is one option to install solar with no money down. Obtaining financing is frequently the largest obstacle to going solar.
Your state or local government works with a local lender through the HERO program to pay for the initial cost of your solar project. After that, you pay for the project over an agreed-upon period of time—typically five to twenty years—by having your property tax bill increase.
The savings occur when the amount of your property tax increase is less than the energy savings that your solar system generates.
California solar and battery rebates
Additionally, California offers rebates for solar energy, which can lower the initial cost of battery storage and solar energy projects. While there are a few below, we highly advise you to check with your utility, city, or municipality for any available local rebates.
Self-Generation Incentive Program (SGIP)
With Time-of-Use rates and frequent power outages, home battery storage offers a chance for cost savings and energy independence.
Eligible Californians may receive reimbursements through SGIP for installed battery storage systems costing between $150 and $1,000 per kWh; in certain circumstances, this may cover the project’s total costs.
The incentive amount is contingent upon your utility, wildfire risk, and unique circumstances, such as having an electric well pump, medical equipment, or a life-threatening illness.
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.
You must fulfill each of the requirements below in order to be qualified.
- Obtain power supply from Pacific Gas.
- Own and occupy a single-family home as a primary residence
- Be located in a disadvantaged community identified on this map
- Household income below the CARE or FERA program limits
DAC-SASH is scheduled to run through 2030. Visit GRID Alternatives to check your eligibility.
California offers a number of municipal rebates in addition to state rebates, which can help you optimize 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
Although California offers a number of solar incentives, the majority of homeowners are only eligible for the federal solar tax credit. In California, the primary determinant of solar savings could be whether your utility provides NEM 2. 0 or NEM 3. 0 billing for solar owners.
- Under NEM 2. The price of the electricity you take off the grid is the same as the compensation for solar exports, or the excess electricity you push onto it. Therefore, your electricity bill can usually be offset by a solar system large enough to generate 90% of your annual electricity consumption (excluding non-bypassable charges).
- Under NEM 3. 0, the value of solar energy exported to the grid at the time of export determines how much is paid for it. The average value of solar exports is 27.5 percent less than the retail price of electricity, resulting in a longer payback period and lower lifetime savings (though still significant).
As of right now, just the three biggest investor-owned utilities in the state—PG 0 solar billing, meaning that NEM 2 is still available to LADWP, SMUD, and other utility customers. 0. Let’s examine the possible savings under each net metering billing policy.
Cost of solar vs grid electricity with 1:1 net metering (NEM 0)
The numbers below are taken from an actual quote given to a solar com customer in Los Angeles, Cali. for a 6. 4 kW solar system under NEM 2. 0.
| Item | Amount |
| Contract price (cash purchase) | $27,306 |
| 30% Residential Clean Energy Credit | -$8,192 |
| Net price | $19,114 |
With California’s abundant sunshine, a 6. 4 kW solar system can be expected to produce:
- An average of 10,626 kWh of electricity per year
- A total of 245,500 kWh of electricity over 25 years
This customer in the Los Angeles area will pay the following cost per kilowatt-hour for home solar when you divide the project’s net cost by its lifetime production:
- 8 cents per kWh with the 30% solar tax credit
- 11 cents per kWh without the solar tax credit
Let’s now contrast the annual cost of grid electricity with that of home solar power:
| Source of electricity | Cost of electricity (cents/kWh) | Cost per year for 10,626 kWh of electricity |
| Solar with tax credit | 8 | $850 |
| Solar without tax credit | 11 | $1,169 |
| Grid – LA metro average* | 28 | $2,975 |
*Average price as of July 2023 per the US Bureau of Labor Statistics.
Grid electricity is 15% more expensive annually than home solar, even without the federal tax credit. This is even before accounting for the steadily rising cost of grid electricity. That is E2%80%99s.
The Bureau of Labor Statistics reports that since 2017 the average cost of grid electricity has increased by more than 6% annually in the Los Angeles metro area, or 20%E2%80%93%, but let’s use a 4% annual increase to be conservative.
Here’s how Los Angeles’s solar and grid energy costs have changed over the past 20 years:
Under NEM 2. 0, Californians benefit from short payback periods of about six years and cumulative savings of up to $60,000 over a twenty-year period.
Cost of solar vs grid electricity under NEM 0
Given that NEM 3 offers very little compensation for solar electricity The key to optimizing your solar savings with zero solar billing is to minimize the amount of solar electricity that you export to the grid. When you combine your solar panels with battery storage, you can use and store your own solar electricity.
The graph displays the total cost of purchasing and utilizing the same quantity of electricity in three different ways:
- Buying all of it from an investor-owned utility (grey line)
- A solar-only system with around 50% leftover bill (purple line)
- An orange line solar and battery system that offsets almost 100% of the electricity bill using solar power
The trick with NEM 3. The fact remains that even if a solar-only system produces 10% of your average electricity consumption, it will only offset approximately 20% of your electricity bill. This is because, with a solar-only system, you are effectively buying electricity at night for almost thirty cents per kWh and selling it during the day for five cents per kWh.
However, you can store your inexpensive solar energy with a battery to completely avoid purchasing grid electricity. As a matter of fact, IOU customers can achieve lifetime savings and payback periods comparable to those of a solar-only system under NEM 2 with the new consumption-only batteries. 0.
Is going solar worth it in California?
Going solar in California is well worth it, even under NEM 3 if your goals are energy cost savings, supporting the clean energy transition, or supplying backup power for grid outages. 0 solar billing.
Utility electricity rates in California are among the highest in the country, and there are many reasons to think that they will only go up from here. A cheap substitute for purchasing electricity from a utility company and a safeguard against growing energy expenses is home solar power.
California Solar Incentives FAQ’s
Based on real binding quotes generated by solar. com, a 6. A 4% kW solar system, which is slightly larger than the average for California, has a net cost of about $19,000 after the federal tax credit is claimed.
The system costs about $3 per Watt, and the electricity it generates costs about 6 cents per kWh. In July 2023, for instance, grid electricity rates in Los Angeles ranged from 28 cents per kWh to 31 cents per kWh throughout the state.
How does the California solar tax credit work?
California no longer has a state solar tax credit. On the other hand, the federal solar tax credit is worth 200% of the installed cost of a solar and/or battery system. You can use this credit to reduce your federal tax obligation and maximize your tax return.
The federal solar tax credit can reduce your tax liability by $4,500 on a $15,000 solar system. In the event that your tax liability is insufficient to utilize the entire credit at once, it can be carried over into subsequent years.
Seek guidance from a certified tax advisor when submitting an application for the solar tax credit.
Can you get free solar panels in California?
In California, there are several programs that can significantly lower or even cover the whole cost of switching to solar power. These specialized programs are only available to underprivileged and low-income communities who satisfy stringent qualifying requirements.
The Disadvantaged Communities/Single-Family Solar Homes (DAC-SASH) offers an upfront rebate for low-income homeowners in disadvantaged communities identified here.
The Low-Income Weatherization Program in California offers qualifying farmworker households and other low-income housing types free solar systems and energy efficiency upgrades.
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FAQ
How much of a tax credit do you get for going solar in California?
The Investment Tax Credit (also known as the ITC for short term) provides a federal tax credit of 80% toward the entire cost of a solar photovoltaic (PV) system. The equipment, installation, and any applicable sales taxes are factored into the overall cost calculation.
How does the solar tax credit work if I owe taxes?
Rather than deducting it from your taxable income, you deduct the full amount of your Residential Clean Energy Credit from your overall tax. You cannot use the credit to obtain money back from the IRS, but it can reduce your liability to zero if it exceeds the amount of income tax you owe.
What is the 2023 California solar tax credit?
California no longer has a state solar tax credit. On the other hand, the federal solar tax credit is worth 200% of the installed cost of a solar and/or battery system. You can use this credit to reduce your federal tax obligation and maximize your tax return.
How does the solar tax credit work for dummies?
Often known as the Investment Tax Credit (ITC) or Federal Solar Tax Credit, this credit enables you to deduct up to 30% of the cost of your solar energy system from your federal tax bill. You will get a $3,000 credit if your solar panel system installation costs $10,000. This credit will immediately lower your tax liability.
Read More :
California Solar Incentives and Rebates: How to Maximize Your Solar Savings
https://www.forbes.com/home-improvement/solar/california-solar-incentives/