“Eureka,” California’s state motto since 1963, meaning “I have found it,” resonates with state residents looking for financial savings and a reduced carbon footprint as they discover the Golden State’s robust solar programs and incentives. California is a leader in renewable energy, especially solar power. The state generates approximately 33% of the total solar supply in the United States, making it the highest solar producer in the nation. It has led the country in solar energy adoption over the past decade and provides a range of incentives to support homeowners in their transition to solar power. 

California's solar programs go beyond promoting the adoption of solar panels and add-on battery storage - they also contribute to lowering the overall cost for homeowners. The appeal of solar in California is heightened by the state's efforts to increase accessibility, through thoughtfully designed programs catering to low-income households. California residents can rest assured that their solar investments are protected as the state has a set of laws in place, ensuring that homeowners' rights to own solar panels are secure. This promotes widespread solar access while preventing unnecessary restrictions. These measures make the sun-soaked state of California an ideal place to invest in solar energy.

 

What Incentives Are Available for California Residents?

California Tax-Based Solar Incentives

Property-Assessed Clean Energy (PACE)

The PACE program – known as the Home Energy Renovation Opportunity (HERO) program in California – provides an avenue to go solar with zero money down. It offers accessible solar financing, providing owners with affordable payment options. This agreement involves collaboration between local or state governments and traditional financiers, who fund the initial project costs. Homeowners then repay their local authority through an increased property tax bill, usually spread over 20 years.
Making it even more attractive, the obligation to settle the debt upon sale or refinance is removed. The high security of loan payments tied to the property tax bill contributes to low-interest rates, making the program a win.

 

The Investment Tax Credit (ITC)

The ITC, is a significant benefit, reducing the income tax burden by 30% of the total system installation costs. It’s important to note that California does not offer a specific state-level tax incentive for solar installations.
The federal solar tax credit covers a substantial portion of installation costs for a solar PV system. Currently set at 30%, this rate will remain until 2032, decreasing to 26% in 2033 and 22% in 2034. The credit is set to end by 2035 unless renewed by the federal government.

 

California Net Metering (NEM 3.0)

This program is a perk for homeowners with solar panels, enabling them to earn credits for any excess electricity they produce and send back to the grid. The credits can offset the electricity consumed from the grid during times when solar production is lower, resulting in additional savings on electricity bills.
California changed its net metering policy to Net Energy Metering 3.0 (NEM 3.0) last year. Under this revised policy participants have the opportunity to sell excess solar energy to local electric companies in exchange for power bill credits. By leveraging the new NEM 3.0 billing tariff alongside a solar plus battery system, participants can offset their power bill by as much as 70-90%.

 

California Solar Property Tax Exclusion

In California, the property tax incentive for the installation of an active solar energy system takes the form of an exclusion, rather than an exemption. The Active Solar Energy Exclusion is categorized as a “new construction exclusion,” meaning that the installation of a qualifying solar energy system will not result in either an increase or a decrease in the assessment of the existing property. This exclusion applies to any active solar energy system constructed or completed before January 1, 2027. Even after the exclusion period ends, any solar energy system previously excluded as new construction will remain exempt from property tax until the property changes ownership.

 

California Solar Programs for Affordable Housing

Self-Generation Incentive Program (SGIP)

The SGIP is an initiative that provides rebates for solar installations combined with battery storage. Those eligible for the SGIP rebate include residential customers of Pacific Gas and Electric Company, Southern California Edison, Southern California Gas Company, and San Diego Gas and Electric. Beyond the general program, two additional categories provide higher rebates: Equity and Equity Resilience. Participating in this program can result in substantial savings, approximately around $200 per kilowatt-hour (kWh) for solar battery systems.
Under the Equity category, eligible participants can benefit from a rebate that covers approximately 85% of the cost of an average energy storage system. For those who qualify for the Equity Resiliency category, the rebate goes even further, covering close to 100% of the cost of an average energy storage system.

 

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

This program offers subsidies for the installation of solar energy systems ranging from 1 to 5 kilowatts. This initiative is specifically designed to assist homeowners who may face financial constraints that would otherwise make solar installation unaffordable. For eligible homeowners, DAC-SASH provides nearly cost-free installation, presenting an opportunity to save up to $3 per watt through upfront solar rebates.

 

Local Incentives

The federal and state solar tax incentives in California emerge as the best options for saving money and maximizing returns with a solar array. Additionally, there are some local incentives available, depending on location and the utility company that services the property, which can further enhance the benefits. Most of these local incentives are easy and quick to apply for and can save participants hundreds or even thousands of dollars, so they’re well worth the time and effort it takes to enroll. More details can be found at https://www.consumeraffairs.com/solar-energy/california-solar-incentives.html

 

Who Can Apply?

California residents are in luck as they have the opportunity to benefit from various tax incentives by opting to install solar systems. These incentives enable both home and business owners to deduct a portion of the installation expenses from their tax obligations. Once the solar system is installed, the owner assesses the overall eligible cost, multiplying it by the tax credit rate. This determines the exact credit amount available for deduction from the individual or business's total tax liability for the given year. It's a straightforward way for Californians to reap the benefits of solar energy while enjoying some tax relief.

Combining California Solar Incentives with the ITC/Residential Clean Energy Tax Credit

There is no state tax credit for solar equipment in California, but all California residents are eligible for the federal investment tax credit. This federal incentive grants an income tax credit equal to 30% of the entire installation cost. On average, this tax credit alone can save participants just under $5,000, provided they owe enough in taxes to utilize the entire credit. The state offers other solar incentives — like net metering and solar financing programs — which can be combined with the ITC to maximize returns on solar installation.

An October 2023 survey by the MarketWatch Guides team indicates that around 91% of 120 California residents surveyed have used at least one incentive to reduce the cost of solar panel installations. Despite the state's reduction in net-metering credits, there are still opportunities to save money, especially when opting for high-performing solar panels paired with solar storage.

 

What Steps Are Needed to Take Advantage of the California Solar Incentives?

It is recommended that applicants review each program’s requirements, prepare all necessary documentation in advance, and seek guidance from a tax professional or the solar power installer.

 

Property-Assessed Clean Energy (PACE)

1. Applicants must contact their PACE program administrator. The Department of Financial Protection & Innovations (DFPI) provides a list of program administrators.

2. Provide the required information, which may include contact information, an income verification letter from the applicant’s employer, tax returns from previous years, and other documents.

3. Connect with a PACE-approved solar panel installation company through the program administrator.

4. Move through the solar installation process with the installer and then provide the final details to the program administrator.

 

Investment Tax Credit (ITC)

1. Applicants must fill out IRS form 5695 from the IRS’s website.

2. Prepare documents: these may require information about the solar installer, the capacity of the solar system, and the address where the system is installed.

3. Applicants should file the completed form alongside their taxes.

 

California Net Metering

1. Applicants must request an interconnection application from their electric company.

2. Fill out the application. Applicants will need to supply information about the system capacity, the expected generation, and the installer’s contact information.

3. Pay the interconnection application fee. This might be included in the solar installer’s estimate, so check before paying it separately.

4. Submit the application and proceed with the rooftop solar installation.

5. Once the system is installed and connected, the utility provider will likely need to inspect the connection before approving the applicant for net metering.

 

California Solar Property Tax Exclusion

If a developer installs an active solar energy system while constructing a new building, the initial purchaser of that building may receive the exclusion if:

1. The building was completed on or after January 1, 2008.
2. The developer/builder did not receive the exclusion.
3. The purchaser files a form with the assessor.
4. Claim the form BOE-64-SES (Initial Purchaser Claim for Solar Energy System New Construction Exclusion) from your local county assessor’s office.
5. Fill out and submit the form.

 

Self-Generation Incentive Program (SGIP)

1. Applicants must go to their energy company’s SGIP page:

• • Pacific Gas & Electric (PGE)
  • San Diego Gas & Electric (SDG&E)
  • Southern California Edison
  • Southern California Gas Company (SoCalGas)

2. Check for eligibility and fill out the form provided.
3. Submit the form along with any other required documents.

 

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

1. Applicants begin by checking eligibility on the GRID Alternative website. They must own a home in California to qualify for this program.

2. A program administrator will reach out to obtain any documentation required, including an income verification.

3. A program administrator will walk applicants through the next steps, which include finding a certified installer and getting the system installed and running.

 

Sunny Savings 

California, famous for its breathtaking beaches, iconic surf, abundant sunshine, and majestic mountains, has a rich history of embracing its natural wonders. With a strong commitment to environmental consciousness, it’s no surprise that the Golden State is at the forefront of the renewable energy movement. The state’s solar incentives make going solar an easy and appealing choice for residents, saving them money while moving towards a greener future and brighter future, all while preserving the natural beauty that defines California. For more information on California’s solar incentives please seek guidance from a tax professional or your solar power installer.

References

https://todayshomeowner.com/solar/guides/california-solar-incentives/

https://www.consumeraffairs.com/solar-energy/california-solar-incentives.html

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

 

Find Policies and Incentives by State:

https://www.dsireusa.org/