California’s known for more than just its sunny beaches, giant redwoods, and Hollywood. The Golden State ranks first in the nation for its solar power generation, thanks in large part to the robust incentives, tax credits, and rebates available to California residents.
As a solar energy company operating in California, we are experts in helping people understand how solar incentives can make it more affordable to go solar. Although this post doesn’t go over every single rebate available, it will explain the most popular ones that you may be eligible to receive.
If you’re interested in solar energy for your home, keep reading to learn how to get the most out of your investment in clean energy.
Available Solar Rebates, Tax Credits and Incentives in California
From federal tax credits to local rebates from your utility company, here are the most popular solar incentives available to California residents in 2022. (Note: Your eligibility can depend on your location, electric utility provider, income level, interest in battery storage, and more. This is not tax advice, and you should always consult a tax professional.)
1. Federal Solar Investment Tax Credit
Most California residents are eligible to receive the Federal Solar Investment Tax Credit—also known as the ITC. Enacted in 2005 by the Energy Policy Act, the ITC originally covered up to 30% of the cost of installing a solar panel system.
That 30% tax credit remained the same from 2006 through 2019. In 2015, however, Congress voted to phase out the solar tax credit, beginning in 2020, when the tax credit would be reduced from 30% down to 26% for residential solar power systems.
Though, in late 2020, the COVID relief bill provided a two-year extension to the 26% rate. That means as of 2022, the rate is still stable at 26%. That said, by 2023, the rate is expected to drop to 22% then ultimately go away entirely in 2024—at least for residential solar panel systems like the ones we install at Palmetto.
What Exactly Does the 26% Solar Tax Credit Mean?
The ITC currently allows you to deduct up to 26% of the cost of your solar power system from your federal taxes. Think of the ITC as a coupon from the federal government offering 26% off your home solar installation. For example:
- Your solar installation costs $20,000.
- You could be eligible to receive up to $5,200 back in federal tax credits.
- This money can then be used to reduce your federal income tax owed for the tax year you installed your solar photovoltaic (PV) system.
2. Disadvantaged Communities Single-Family Affordable Solar Homes (DAC-SASH) Program
To increase the adoption of renewable energy in disadvantaged communities, California created the Disadvantaged Communities Single-family Affordable Solar Homes. Also known as DAC-SASH, this state program provides qualified homeowners with fixed, upfront, capacity-based incentives that can help offset the cost of a solar energy system.
The DAC-SASH program offers up to $3 per watt to eligible homeowners. Per the California Public Utilities Commission, homeowners must meet the following terms to be eligible for incentive:
- Own and live in their home
- Receive electrical service from Pacific Gas & Electric (PG&E), Southern California Edison (SCE), or San Diego Gas & Electric (SDG&E)
- Enrolled or eligible for CARE or FERA income-qualified utility bill programs
- Property is in a disadvantaged community (DAC) qualified area
If you think you could qualify for the DAC-SASH program, visit the GRID Alternatives website.
3. Solar Energy System Property Tax Exclusion
In California, people who install a solar- or wind-powered device to produce energy for their residence or place of business are entitled to an exemption for the amount of value the device contributes to their property. This essentially means anyone who installs solar panels or other solar-powered devices on their property is exempt from paying property taxes equivalent to the property value increase as a result of adding said system until 2025.
It’s a win-win: your solar system could increase the value of your home and you don’t have to pay property taxes on it. This incentive is a great benefit, especially for people who require a larger system to offset their electricity usage.
4. Net Metering Programs
Customers who install solar panels on their homes are eligible for the state of California’s net metering program. Net energy metering (NEM) is a billing mechanism where utility companies provide credits to homeowners for the extra electricity their solar panels generate and add to the electricity grid.
With net metering, you’re only billed your net usage: The difference between the total energy your solar system produces and the total energy your home consumes. Net metering is available in the three large investor-owned utility companies in California:
- Pacific Gas & Electric (PG&E)
- Southern California Edison (SCE)
- San Diego Gas & Electric (SDG&E)
The California Public Utility Commission governs PG&E, SCE, and SDG&E. Their NEM program provides customers with the full retail rate for their energy exported to the grid, but there are a few stipulations you should consider:
- You must pay a one-time interconnection fee - It’s $75-$145, depending on the utility.
- You must pay the non-bypassable charges - These charges fund low-income, energy efficiency, and other similar programs.
- You must transfer to time-of-use (TOU) energy rates - This step is required if you want to participate in net metering. You can learn more about TOU rates here.
At the end of your 12-month billing period, you will be compensated for it at “fair market value” if you have any surplus credits on your account. Known as net surplus compensation (NSC), this rate changes based on the 12-month rolling average of the market rate for electricity, and that historical data can be found on your utility’s website.
Municipalities and other electric cooperatives, such as Los Angeles Department of Water and Power (LADWP), also provide net metering credits to residential solar owners in their territories. However, the value of the credit depends on the policies set by the municipal utility company or electric cooperative’s governing board.
Consider Palmetto as Your California Solar Energy Company
As a company on a mission to halt climate change and expand access to clean energy for everyone, Palmetto is eager to help as many people as we can go solar and reduce their carbon footprint. And we invite you to join us on our journey by installing solar panels on your home.
If you’re interested in learning more about going solar in California, check out our Guide to Solar Panels in California.
Ready to go solar? Get started today with a savings estimate from Palmetto to learn more about how California solar tax credits and incentives in 2022 can help reduce your out-of-pocket expenses. Now is the time for you to take advantage of the California solar incentives that your state and local governments and utility company may have to offer!