California Solar Incentives
Guide to Solar Incentives in California (2023)
Last Updated: August 9, 2023
If you live in California, you may have noticed all that glorious sunshine. Why not make that sun work for you by using solar power for your home? And it’s not as expensive as you would think to go solar, especially because there are several California solar incentives available to homeowners that make the choice easier. Do acronyms like IRA, ITC, NEM 3.0 and CPUC make your eyes glaze over? Don’t worry, as one of the top solar installers in the nation ADT Solar has mapped the ins and outs of California’s regulations and offerings.
In this guide, we will go through every solar incentive in California and what it means for you, a homeowner interested in going solar.
Here’s what we’ll cover:
- Why California is the best state for solar
- California’s many solar incentives explained
- Federal solar tax credit
- Tax credit for battery storage
- Net metering explained
- What NEM 3.0 means for you
- What is the SGIP?
- DAC-SASH program
- California’s property tax exemption for solar panels
Ready to dive into all the incentives for going solar? Let’s get started.
Why go solar in California?
California is the nation’s leader when it comes to solar power. California has the largest number of solar installs in the nation (over 1 million), the highest percentage of electricity generated from solar (over 26%) and comes in second place in national growth projection. (1)
As of 2022, California currently ranks 1st in the nation in terms of total installed solar capacity at 40,977 mW. (2)
California is also a national leader in blackouts, crowned the ‘Blackout Queen’ in 2018 by Eaton’s Blackout Tracker research. (3) This was thanks to the over 4,297 blackouts within the previous decade.
If you live in California and have been wondering if switching to clean, renewable solar energy is right for you, you’ve come to the right place. We answer all of your questions and help you decide if solar panels are right for you.
California’s many solar incentives explained
California has always been a leader in renewable energy, and especially solar power. For more than a decade, it has led the country in solar energy adoption and provides a range of incentives to support homeowners in their transition to solar power. Here’s an overview of the various solar incentives available in the state:
California Solar Tax Incentives: California homeowners can take advantage of the federal solar tax credit (ITC), a significant tax incentive for installing solar panel systems. The ITC allows homeowners to claim a federal income tax credit worth 30% of the total cost of their solar system installation. This means that when you file your federal taxes, you reduce your payment by 30% of the expenses associated with purchasing and installing your solar panels. It’s important to note that California does not offer a specific state-level tax incentive for solar installations.
California Solar Rebates and Incentive Programs: To encourage homeowners to embrace solar energy, California offers a variety of rebate programs and incentive options. One prominent program is the DAC-SASH (Disadvantaged Communities Single-Family Solar Homes) initiative. DAC-SASH provides financial assistance and incentives specifically designed for low-income homeowners in disadvantaged communities, making solar installations more accessible and affordable for these households.
Net Energy Metering (NEM) Programs: California’s net energy metering programs allow homeowners with solar panels to earn credits for excess electricity they produce and send back to the grid. These credits can offset the electricity consumed from the grid during times when solar production is lower, ensuring additional savings on electricity bills.
California Solar Battery Incentives: With the increasing popularity of solar battery storage, California provides incentives to homeowners who install solar battery systems. The Self-Generation Incentive Program (SGIP) offers financial incentives to offset the costs of battery installations, making it more affordable for homeowners to store excess solar energy for use during peak hours or in case of power outages.
Additional Incentives and Financing Options: Apart from all these state and federal incentives, there are other local government programs, utility incentives and financing options available to California homeowners. These additional incentives and financing choices can further enhance the affordability and accessibility of solar installations.
Federal solar tax credit for California solar panels
To put it simply, if you qualify for the federal solar tax credit, you can claim up to 30% of your solar system’s cost as a credit. The federal Investment Tax Credit is set up to reward homeowners for going solar all the way into 2032.*
Here’s how it works: For a qualified solar energy system that costs $30,000, you would receive $9,000 as a tax credit. If that credit is larger than your federal tax obligation for the year, the remainder can be carried over as a credit for the next tax year.
Eligible costs associated with going solar include:
- Cost of solar panels
- Supporting equipment costs, such as microinverters, necessary wiring, mounting hardware, etc.
- Installation and labor costs, including inspection and permitting fees, as well as developer fees
- Solar battery backups or other energy storage systems with a capacity rating of at least 3 kilowatt-hours (kWh)
- Sales taxes that were paid for any eligible solar-related expenses
Tax incentive for solar batteries in California
Solar backup batteries make great sense for Californians and with the Clean Energy Tax Credit, they’re more affordable than ever.
California has more blackouts than almost any other state in the country, and a backup battery can help you manage your power needs even when the grid goes dark. And with California’s onerous peak-usage pricing, being able to store your clean abundant solar power for use when the rates are high means even more savings.
Peak usage pricing means that utilities charge different prices for energy at different times of the day. Usually, that means that electricity costs you the most just when you need it. With a solar backup battery, you can store your energy during the day when it’s inexpensive and use it at peak times, saving you real money. And you help the environment by drawing less power when the grid is struggling to meet demand.
Along with a tax incentive for solar panels, the Residential Clean Energy Tax Credit covers solar storage too. Thanks to the passing of the IRA, homeowners can now claim the 30% tax credit on stand-alone battery installations, even if they have already claimed credit for their existing solar system.
Net metering in California
Net energy metering has been an important part of solar’s growth in California and across the country.
Once you have a solar energy system installed, it’s common for your solar panels to generate more electricity than your home is using. For example, when you’re at work during a sunny, cool day, your home won’t use much energy at all, but your solar panels will be very productive.
Under an NEM program, you can send that energy into the grid and your electric company will give you credits that will offset the cost of electricity you use when the sun is down.**
Different states and utilities give credits at different rates. One of ways that California promoted solar energy over the years was to base that rate on the retail price of electricity, so it was close to the price a homeowner would pay for electricity at night. That was known as NEM 2.0, and if a homeowner had a solar energy system in place before April 14, 2023, they will still be paid at that rate in the future. They can even add a solar backup battery to their system, qualify for the federal Residential Clean Energy Tax Credit and keep their NEM 2.0 rate.
What NEM 3.0 means for you
On April 15, 2023, California rolled out a new net metering program, NEM 3.0, to reflect a net billing system. Under the new policy, solar panel owners can still sell back any unused energy to their utility company, but with a few major changes. The biggest difference is that credit for unused energy is now determined with an avoided cost calculator. That means that the utility will pay the same price for the energy you send into the grid as they would pay for energy from other sources, including big generating plants.
Those rates are usually low during the day when the sun is shining and your solar panels are generating energy, but higher when the sun is low.
With a solar battery added onto a solar panel system, homeowners are able to store excess energy for later use. This allows them to bypass high time-of-use rates because they’d be using the stored energy that their system generated.
For more information and updates on the policy, see the California Public Utilities Commission website.
California’s Self-Generation Incentive Program (SGIP)
California’s Self Generation Incentive Program, or SGIP, provides perhaps the best state-based incentive for California homeowners to install a solar energy storage system. One of the first incentives of its kind in the U.S., the program has been extremely successful in helping California lead the nation in the adoption of home battery technology. The program is available to the ratepayers of SDG&E, SoCal Gas, SCE and PG&E.
There’s more than $1 billion in rebates available for SGIP through 2024, with nearly 60% of that dedicated to “equity resiliency” projects.
If you’re a homeowner that meets certain qualifications, such as living in a high fire risk area, the Equity Resiliency projects portion of the SGIP could work for you. All of this can be a bit overwhelming, so we’d be happy to have one of our experts help you navigate the SGIP process – it’s part of what we do!
Disadvantaged Communities – Single-Family Solar Homes (DAC-SASH) program
California Public Utility Commission doesn’t think the benefits of solar energy should only go to the wealthy—that’s why the state implemented the DAC-SASH program in 2018 and has committed to funding it through 2030 with $10 million annually. DAC-SASH subsidizes installation of solar energy systems of 1-5 kilowatts for homeowners who might not be able to afford solar otherwise.
The program is tailored for residents of qualifying disadvantaged communities who meet specific income guidelines. The program is limited to customers of the largest investor-owned utilities: Pacific Gas & Electric (PG&E), Southern California Edison (SCE), or San Diego Gas & Electric (SDG&E).
California solar panel property tax exemption
Investing in a solar energy system can be a great way to increase your home’s value while also saving on your utility bills. It’s natural to assume that an increase in property value would lead to higher property taxes. However, here’s where California stands out. In addition to other solar incentives, California excludes solar energy systems from property tax evaluations. This means that homeowners who install solar panels can enjoy the full benefit of their system’s value without any increase in property taxes. In simpler terms, you get the added value without any additional tax burden. It’s just one of the many ways California supports and encourages homeowners to embrace solar energy.
All that being said, it’s pretty easy to see why going solar in California is worth it. Not only do you get to power your home with all that sunshine, but you also get more control over your home’s energy and rising electricity costs. Not just now, but forever!
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ADT Solar: Empowering California homeowners with solar energy
Now you know why California has long been the leader in solar. With the state’s plentiful incentives, California homeowners have every reason to use the sun’s energy to generate energy. From saving money on your electricity bills to making a positive impact on the environment, going solar is a smart choice. At ADTS olar, we’re here to be your trusted partner throughout the entire process, helping you unlock the full potential of solar energy.
Don’t miss out on the financial rewards and environmental benefits that solar incentives offer. Take the first step towards a brighter future today! Simply click the button below to get a free quote from ADT Solar. Let us show you how solar power can transform your home and your life.
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Frequently asked questions about solar incentives in California
There is no state solar tax credit in California, however, homeowners in California can take advantage of the federal investment tax credit (ITC) for solar panels. The federal ITC allows homeowners to claim a credit on their federal taxes based on a percentage of the total cost of their solar system installation. As of 2023, the ITC is set at 30% of the expenses associated with purchasing and installing solar panels.
To claim the solar tax credit, follow these steps. First, check with your accountant to ensure your eligibility. Second, document the expenses related to your solar panel system installation, including equipment and labor costs. Third, complete IRS Form 5695 and submit it with your federal tax return to calculate the credit amount based on the specified percentage for the tax year.
Solar panels do not increase property tax in California. In fact, California offers a property tax exclusion for solar energy systems. This means that the assessed value of a homeowner’s property will not increase due to the installation of solar panels, and they will not be subject to higher property tax as a result. Homeowners can enjoy the financial benefits of solar energy without worrying about an additional tax burden on their property.
Read more about going solar in California