California Solar Incentives (2023) | ConsumerAffairs (2023)

Faced with environmental concerns and the rising cost of electricity, more people are turning to solar energy as an alternative power source. The federal and California state governments offer incentives to switch to solar, and residents can access numerous benefits that make it easier. While some incentives are limited to homeowners in vulnerable communities, others are available statewide.

We’ll explore the incentives available to California residents and discuss how they can help you go green so you can decide where your solar savings go the furthest.

Key insights

• Solar energy is an excellent alternative for those looking for an environmentally friendly power source.
• Incentives can offset the upfront costs of switching to solar and provide long-term savings on electricity bills.
• California offers a variety of incentives to residents looking to switch to solar energy, such as rebates and other financial benefits.
• California’s solar incentives are generous, but some end soon and require homeowners to act fast.

California solar rebates

Solar rebates encourage people to install solar power systems at their homes or businesses by giving them cash back or discounts on their purchases. In California, you can take advantage of several solar rebates to help you pay for the installation and maintenance costs associated with purchasing a solar power system.

Self-generation Incentive Program (SGIP)

California’s Self-Generation Incentive Program — or SGIP — offers qualifying residents incentives for new, existing and emerging distributed energy resources, including solar battery storage systems that can supply energy in a power outage.

The Self-Generation Incentive Program provides rebates for multiple power generation sources installed by customers.

The program is administered through the California Public Utilities Commission (CPUC) and aims to assist California communities during fire season. It boasts more than $1 billion in authorized funding through 2024. The CPUC’s website has a tool that assists you through the application process.

In addition to the basic SGIP rebates, California offers two categories of higher rebates aimed at providing battery storage incentives for lower-income, medically vulnerable and at-risk-for-fire communities.

The Equity SGIP rebates are available to eligible customers at a rate of $850 per kilowatt-hour (kWh), while Equity Resiliency rebates go up to $1,000 per kWh. Notably, many Equity budgets are exhausted and require consumers to join a waitlist.

Disadvantaged Communities – Single-Family Solar Homes (DAC-SASH)

Created in June 2018 and scheduled to run through 2023, the DAC-SASH program provides financial assistance for income-qualified homeowners in disadvantaged communities.

Eligible homeowners can save money on their electricity bills and increase the value of their homes by receiving no-cost rooftop solar installations through the program run by GRID Alternatives.

Applicants must receive their electrical service from Pacific Gas and Electric Company (PG&E), Southern California Edison (SCE) or San Diego Gas & Electric (SDG&E) to qualify, among other requirements.

Local utility company rebates

There are several local utility rebates available through individual California municipalities. Depending on your location, these rebates may be available through GoSolarSF, the Los Angeles Department of Water and Power, PG&E, the Rancho Mirage Energy Authority or the Sacramento Municipal Utility District, among others. Research local programs and contact your utility provider to determine which rebates are available in your area.

California solar tax credits and benefits

Solar tax credits are incentives the government offers to encourage people to invest in clean energy. These credits let taxpayers subtract a specific amount of money from the amount of tax they owe when they purchase or install certain solar systems. While California no longer offers its California Solar Initiative (CSI) General Market program, you can still take advantage of the federal credit and programs that work with your property taxes.

Janice, of Paso Robles, California, worked with Sunrun and shared her satisfaction with the company and the incentives she qualified for.

“We got 25 panels to start and then, we ended up getting a Tesla and installing another 25 panels,” they said. “The first time, we ended up getting a $10,000 tax credit. The second time was not as much but it was 26% tax credit.”

Federal solar investment tax credit

U.S. residents can take advantage of the federal solar investment tax credit — or ITC — to reduce the out-of-pocket costs of installing solar.

Solar photovoltaic systems installed between 2022 and 2032 are eligible for a 30% tax credit with no cap on savings; those installed in 2033 and 2034 qualify homeowners for a 26% or 22% credit, respectively. So, if you spend $50,000 installing a solar system for your home, you can reduce your federal income taxes by $15,000 — a dollar-for-dollar savings.

Keep in mind, though, that “[t]he federal residential solar energy credit is only available to taxpayers who purchase and install solar panels on their home,” according to Mark Steber, chief tax information officer at Jackson Hewitt. “The tax credit is not available to those who are leasing the equipment, as the lease is not a purchase cost.”

Active Solar Energy System Exclusion

California’s Active Solar Energy System Exclusion lets homeowners construct active solar energy systems without increasing or decreasing the assessed value of their existing property. This means that if a new solar system increases the value of your home, your property taxes will not reflect that increase and you won’t have to pay more.

That said, active solar energy systems covered by the program do not include solar swimming pool heaters, hot tub heaters, passive energy systems or wind energy systems. This program is scheduled to sunset on Jan. 1, 2025, so consider switching to solar while the incentive is still available.

Other California solar incentives

In addition to rebates and tax benefits, California offers several other incentives that make it easier to afford solar panels. Consider these programs if you’re thinking aboutswitch to solar.

Net metering

Net metering is a program that lets people get credit for generating their own electricity from solar power. When your solar energy system generates more energy than you need, the excess goes back to the utility grid.

This overproduction can be used to offset electricity costs, and you get credit for the energy your system produces. Under California’s current net energy metering (NEM) tariff — NEM 2.0 — customers receive per-kWh credits for solar electricity equal to the value of electricity from their utility.

Note, however, that NEM 2.0 is only available to new solar applicants until April 14, 2023. NEM 3.0 will replace NEM 2.0, reducing the compensation rates for new solar customers in California by about 75%.

This change will increase solar payback periods and cause homeowners to experience reduced savings over the life of the system. If you’re considering a switch to solar, act quickly so you can lock in California’s higher net metering rates for the next 20 years.

Property-Assessed Clean Energy (PACE) program

The PACE model is a type of state and local program that lets homeowners finance the purchase and installation of solar systems through their property tax bills.

The costs of solar are assessed against the property (in the form of a lien) rather than the homeowner individually. For that reason, this type of financing may make it difficult to refinance or sell your home in the future, and there’s a chance that you may lose your home if you can’t keep up with payments on your loan.

If you’re considering financing solar through PACE, consider how long you plan to stay in your home and whether you intend to tap any of your home equity during the financing period.

Also, make sure you work with a vendor that understands the program and what expenses are eligible. California’s Department of Financial Protection and Innovation (DFPI) maintains lists of PACE program administrators and other vendors to consider when investing in solar.