California Solar Incentives, Tax Credits And Rebates Of 2024

In the U.S., California was one of the earliest pioneers and supporters of solar energy. In 1976, the state passed a law that favored investments in the solar energy sector. A few years later, an even more encouraging law hit the books and sought to stop various community associations from banning solar panel systems in their neighborhoods.

Today, California generates about 29% of the total solar supply in the U.S., making it the highest solar producer in the nation. Texas solar panel energy production trails as a distant second, with a production capacity roughly half that of the Golden State. Homeowners and businesses continue to choose to go solar here at a high rate, thanks in part to the high number of California solar incentives available.

California Solar Tax Credits, Incentives and Rebates Breakdown in 2024

Golden State residents can take advantage of several great solar incentives in California. The programs below can help you save a lot of money on the installation—and earn money back through rebates and net metering. We’ll even show you how to get free solar panels in California through a couple of local incentives.

Federal Solar Tax Credit

While there is no Californiasolar tax credit at the state level, CA residents can take advantage of the ongoing federal solar tax credit on their income taxes. This is officially called the Investment Tax Credit (ITC), and it’s worth 30% of the total installation cost. For instance, if you spent $10,000 on solar panels, you’d earn an ITC of $3,000.

It’s a nonrefundable tax credit, so depending on your tax liability, you may not get the full tax credit when you file. However, you can roll over the remaining funds from that credit into future tax filings. If you need help claiming the tax credit, we recommend working with a tax professional.

The federal solar tax credit will not last forever. Under current law, the 30% tax credit will last through 2032. For the 2033 tax year, it drops to a 26% credit, and for 2034, it decreases again to 22%. After that, the tax credit will go away, unless the federal government extends it.

Self-Generation Incentive Program (SGIP)

The California Public Utilities Commission’s Self-Generation Incentive Program (SGIP) offers rebates to residents for installing a solar battery along with the solar panel. The rebate amount varies depending on battery storage capacity and the local utility company.

Property Tax Exclusion

California currently excludes solar panel installations when assessing the value of your property. That means solar panels, though they do increase your home’s value, will not increase your property taxes. This exclusion will expire on Jan 1, 2025.

Property Assessed Clean Energy (PACE) Program

Qualifying homeowners can get financing through the Property Assessed Clean Energy (PACE) program. In this program, you can finance your solar panel installation and pay back the loan with your property taxes.

This program comes with some caveats: You’ll have increased assessments of your annual property tax bills, and a lien will be placed on your home until you’ve paid off the loan, which can make it harder to sell your house when the time comes until you’ve made your last payment. These contracts can last 10 to 30 years.

Local California Solar Incentives

Golden State residents may be able to take advantage of additional CA solar incentives based on where they live—and some residents could even get free solar panel installation. Here are a few of the most popular:

• Alameda Municipal Power Income Qualified Solar Rebate Program: Alameda customers with $106,000 or less of household income, whose house was built before 2020, are eligible for a $500 rebate when installing solar.
• Lancaster Energy Power Choice Program: Lancaster Energy customers can get a free Tesla solar panel and Powerwall installation with no upfront cost. Instead, you’ll pay for the energy the system produces, plus a monthly battery payment. You’ll still get a monthly electric bill from Lancaster Energy.
• LADWP Solar Rooftops Program: The Los Angeles Department of Water and Power offers another way to get solar panels installed for free. The company will install and maintain the solar panels — and pay you between $240 and $600 per year to lease your roof space. Your electric bill will be unaffected, but you’ll earn some extra cash each year and use your valuable roof space to contribute to California’s solar expansion.
• San Diego Building Permits: San Diego County is currently waiving the cost of building permits for residential solar panel installations.
• Silicon Valley Power Income-Qualified Solar Grant Program: Customers of Silicon Valley Power may be eligible for a grant for solar panel installation. The program has myriad stipulations; consult directly with the company to learn more.
• SoCalGas ENERGY STAR Solar Thermal Water Heating System: SoCalGas customers who install a solar thermal system can get a rebate of $2,500 to $4,500.

Net Metering In California

California is in its third iteration of its Net Energy Metering (NEM) program, called NEM 3.0. This net metering program allows residents who generate power via renewable energy sources (such as solar) to sell excess energy back to their utility company.

NEM 3.0 seriously reduced the buyback rate for solar energy, however — by 75%. Residents previously earned roughly 30 cents per kilowatt but now only receive 8 cents for the same amount of power. Solar advocates continue to fight this restructuring of the program, which has led to major job loss in the solar industry throughout the state.

How to Enroll In Net Metering

1. Purchase the correct system: The metrics vary depending on the size of your home, but a solar system has to be approved in order to qualify for net metering in California. Talk to your utility company or local pro for more information.
2. Install a renewable energy system: This one seems obvious, but you can’t apply for the program without a pre-existing solar energy system. In other words, it’s not worth it to try to start this process before the panels have been placed. As an aside, net metering is also available for consumers who get energy via wind, tidal currents and many other alternative methods.
3. Complete the necessary documentation: Unlike many states, you don’t actually have to apply for net metering in the traditional sense, as it’s a requirement for state utility companies to offer this service. You do, however, have to fill out the correct documentation to get the ball rolling. Contact your local energy company or hit up their website and look for the net-metering program. There will be an application page, of a sort, but as long as you meet the above requirements, the request will be approved.
4. Receive Permission to Operate: Once approved, you’ll receive something called a Permission to Operate (PTO.) This is the green light for participation in the state’s net metering program.

Past California Solar Panel Incentives

Because California was a pioneer in the solar panel movement, it also has some of the oldest solar panel incentive programs — many of which have now expired. Among some of those programs that the Golden State has now ended are:

• California Solar Incentive (CSI): This program closed at the end of 2016. Because solar panel costs dropped significantly, the California government no longer saw the need for this major rebate program.
• CSI-Thermal Program: Previously, California residents could get rebates for replacing electric- or gas-powered water heaters with a solar thermal system. This California solar rebate ended in mid-2020, however.
• Single-Family Affordable Solar Homes (SASH) Program: This program provided additional incentives for solar installations on single-family homes, but California closed the program in 2022.
• Multi-Family Affordable Solar Housing (MASH) Program: Similarly, this program is closed to new applicants but provided incentives for solar panel installations on multi-family homes.

How to Apply for Solar Incentives in California

There are all kinds of solar incentives available to California residents, but applying for these programs can be daunting. That’s where we come in. Here’s how to get started reaping those financial rewards. Contact your utility company or solar service provider for detailed and local information.

• Federal tax credit: Applying for the federal tax credit is easy—just fill out form 5695 from the IRS and include it with your tax return. Be sure to attach the required documentation, like installation information from your local solar company. Before you know it, you’ll be staring down a 30% tax credit.
• Net metering: See above for specifics as to how to get started with this program in California. It’s actually pretty easy. Just install a solar panel system and contact a local utility company to apply.
• Property tax exclusion: As previously mentioned, solar installations tend to increase the overall property value. California residents, however, don’t have to worry about an associated increase in property taxes. In some cases, this exemption automatically applies. For others, you have to file a claim with the county assessor via the claim form BOE-64-SES. Make sure to have certain information handy, like the value of the system itself and your property value.
• DAC-SASH program: This program offers free or low-cost solar installations for customers in communities who meet certain requirements. There’s an information and application page to help people get started.
• PACE program: This program offers financing for solar panel systems. There’s a website with a bunch of useful information, including an application. Remember, PACE offers financing. You’ll have to pay it off via an increase in property taxes.

California Solar Panels Cost and Savings

The cost of solar panels in California varies depending on the size of the system, the brand you choose and the installation complexity for your solar company based on your roof’s shape and slant. The average California homeowner needs a 5 kW system, which costs an average of $12,700 before any incentives or rebates.

Now let’s talk about incentives and savings. After the federal tax credit, the aforementioned average cost drops down to $8,890. In other words, the average rebate amounts to $3,810. As for energy use, a solar system helps Californians save an average of $1,400 in utility bills. This plus the rebate means that it takes an average of six years for the system to pay for itself, assuming a 5 kW system. Solar systems last an average of 25 years, so the rest of that time you’ll be racking up savings.

Installing solar panels to a home in California raises the property’s value by an average of $20,000. The state’s annual property tax amounts to around 1% of a home’s total value, so the property tax exemption saves homeowners around $200 per year or $5,000 throughout the life of the system. Property tax rates, however, fluctuate, and some go down to 0.7%.

Which Solar System Is Right for Your Home?

Several factors impact the choice of solar systems for your home, including how much sunlight hits your home, whatkind of roof you have, brand preference and budget. The best way to determine the right solar panels in California is to consult with an experiencedsolar installer near you.

Benefits of Going Solar

Going solar in California — or anywhere you live — has numerous benefits, both for the environment and your bank account:

• Reduced reliance on fossil fuels: Fossil fuels are finite, and burning them is terrible for the environment. By switching to solar, you reduce your carbon footprint and instead rely on a green and unlimited (for at least the next five billion years) source of energy.
• Savings on utility bills: Though you’ll have a large upfront cost to install the solar panels, you’ll enjoy ongoing savings through the reduced cost of energy. If you stay in your home long enough, you’ll more than recoup the money you spent. Here’show much money solar panels save the average homeowner.
• Energy independence: Solar panels create an independent power grid, right on top of your own home. If the power goes out in your neighborhood after a storm or some other event, you’ll still have access to electricity through your solar panels.

Is It Worth Going Solar in California?

Going solar in the Golden State is still worth the investment, despite the fact that many California incentives for solar have been phased out and the net metering program is merely a shell of its former self. You’ll still be able to take advantage of the federal income tax credit, can get a rebate for installing a solar battery, earn some money for net metering, and may even qualify for local incentives.

Going solar also allows you to become energy-independent and help reduce our reliance on fossil fuels.

How to Choose the Best California Solar Panel Company

Choosing the best solar panel company in California can be tricky because the Golden State is full of great licensed solar providers. Start by reading reviews online and asking friends, family, and neighbors with solar panels for their input.
As you compare your top choices, consider factors such as price, availability, and customer reviews.

Bottom Line

Installing solar panels in California can be expensive, but a number of solar incentives, rebates, and ongoing earning options can make the investment well worth the cost. Many of these incentives are going away in the coming years, however, so if you’ve had your eye on solar, now is the time to act.

Source: https://www.forbes.com/home-improvement/solar/california-solar-incentives/