Solar Guide

California’s Active Solar Energy System Property Tax Exclusion prevents your property taxes from increasing when you install a qualifying solar energy system on your home. This is technically called a “new construction exclusion” rather than an exemption, which means that adding solar panels won’t cause your property’s assessed value to go up. Normally, when you add something valuable to your property, the county assessor would increase your property tax assessment to reflect that added value – but with this incentive, solar installations are specifically excluded from triggering any assessment increase.

The financial benefit varies by property but can save homeowners hundreds to thousands of dollars annually in property taxes. Since California property tax rates average around 0.75% of assessed value, and solar systems can add $15,000-$40,000+ in property value, this exclusion can save homeowners $100-$300+ per year in property taxes. The exclusion applies to active solar energy systems used for electricity production, water heating, space conditioning, or process heat – but excludes solar pool heaters and hot tub heaters.

To qualify, you must install an active solar energy system that uses solar devices to collect, store, or distribute solar energy. The system must be “thermally isolated” from living spaces. Most residential solar panel systems automatically qualify. No application is required for existing homeowners adding solar – the exclusion is automatically applied when the assessor receives your building permit. However, if you’re the first buyer of a newly constructed home with solar installed by the builder, you may need to file form BOE-64-SES to claim the exclusion.

The current program is scheduled to sunset on January 1, 2027, so solar installations must be completed before this date to qualify. There are no residency requirements – the exclusion applies regardless of where you live. If you lease your solar system rather than own it, the exclusion still applies. The key deadline to remember is that this valuable tax benefit will no longer be available for new solar installations after the 2026 tax year.

The Disadvantaged Communities Single-Family Affordable Solar Homes (DAC-SASH) Program is a California state initiative designed to make solar energy more accessible to homeowners in disadvantaged communities. This program provides upfront cash incentives to help offset the cost of installing a solar energy system, making clean energy more affordable for qualifying households.

The program offers up to $3 per watt in fixed, capacity-based incentives. For example, if you install a 6-kilowatt solar system, you could receive up to $18,000 in upfront incentives. To qualify, you must own and live in your home, receive electricity service from PG&E, SCE, or SDG&E, be enrolled in or eligible for the CARE or FERA income-qualified utility programs, and live in a designated disadvantaged community area.

If you think you might qualify for this program, you can visit the GRID Alternatives website to learn more about eligibility requirements and how to apply. This incentive works alongside other solar benefits like the federal tax credit to help make solar energy systems more affordable for California homeowners in qualifying communities.

The Equity Fund is a California state program that provides battery storage rebates specifically for low-income households and disadvantaged communities. Created in 2022 with $630 million in funding under Assembly Bill 209, this program addresses the criticism that previous solar incentives primarily benefited higher-income families by focusing support on those who need it most.

Eligible homeowners can receive rebates of $150, $850, or $1,000 per kilowatt-hour of battery capacity installed. The higher rebate amounts ($850-$1,000/kWh) are available for customers enrolled in CARE or FERA utility assistance programs, those living in disadvantaged communities (DAC-SASH areas), California tribal communities, fire-prone areas, or regions with frequent power outages. To qualify, you must be enrolled in California’s CARE/FERA programs, live in a designated disadvantaged community, or reside in a California tribal area. Additionally, customers in these qualifying groups receive enhanced net billing credits under California’s NEM 3.0 program and can save approximately 18-35% on their electric bills through CARE/FERA discounts.

Net Billing in California is the current system that determines how much credit you receive for excess solar energy your system sends back to the electric grid. Unlike the previous net metering system, Net Billing provides export credits based on the actual value of your solar energy to the grid at the time it’s produced, rather than a simple 1:1 credit against your electric bill.

The financial benefit varies significantly depending on your utility company and when your solar energy is exported. For the three major investor-owned utilities (PG&E, SCE, and SDGE), the new ‘NEM 3’ system that began April 15, 2023, provides hourly export credits that change based on grid demand and time of day. These credits are typically much lower than retail electricity rates, ranging from roughly 3-5 cents per kWh during annual true-ups. Other utilities like SMUD offer a fixed export rate of 7.4 cents per kWh, while Imperial Irrigation District provides $0.0698 per kWh with monthly settlement.

If you submitted a complete interconnection application before April 15, 2023, you may be grandfathered under the more favorable NEM 2.0 system. However, you cannot increase your system size at all or decrease it by more than 20% without losing this grandfathering status and being moved to the less favorable NEM 3 system. Municipal utilities like LADWP still operate under traditional 1:1 net metering and are not subject to the NEM 3 changes.