California Solar Incentives You Need to Know

August 7, 2022  |  Solar Energy

If you live in California, you probably enjoy plenty of sunshine all year round. The high amount of sunshine makes the Golden State an ideal location to adopt solar energy. Going solar in California is not only a step toward renewable energy but also an affordable one.

The Golden State is a leader in renewable energy. It provides some of the best solar incentives in the country. The California state government continues its commitment to supporting green, renewable energy. As a solar user in California, you are eligible for various financial incentives and credits. 

This article discusses some of the best California solar incentives. Read on!

Net Energy Metering

Your solar energy system can feed the excess energy generated into the local power grid. The utility company takes the metered energy and provides credits equivalent to the amount of electricity generated. Net Energy Metering, therefore, is an agreement between you and the utility company. You save on electricity bills by providing excess energy into the local grid. 

Net Energy Metering is a statewide CA solar incentive. It’s especially useful if you use a lot of electricity at night, i.e heating systems or EV charging. You can generate solar energy during the day, feed it directly to the grid, and use cheap electricity during off-peak hours. This results in significantly fewer electricity bills.

The Net Energy Metering program is provided by the three largest utility companies:

  • San Diego Gas & Electric (SDG&E)
  • Pacific Gas & Electric (PG&E)
  • Southern California Edison (SCE)

All these utility companies are governed by the California Public Utility Commission.

Federal Solar Tax Credit

Also known as the Residential Clean Energy Credit, this is a tax credit for solar users. It allows you to deduct up to 30% of the cost of installing a solar energy system from your federal tax. 

Solar systems installed before the end of December 2019 were eligible for a 30% tax credit. Solar systems installed in 2020-2022 are eligible for a 26% tax credit, while those installed in 2023 are eligible for a 22% tax credit.

Here are some qualifications for the Federal Solar Tax Credit:

  • You installed a solar PV system between January 1, 2006
  • You purchased the solar PV on your own, either through cash or financing
  • You did not lease the Solar PV system
  • You installed the Solar PV system at your primary or secondary residence
  • The Solar PV system is an original installation

This solar credit covers the following:

  • Installation labor costs, including developer, inspection, and permit costs
  • Costs of solar energy storage devices

Always remember that this incentive is a tax credit, not a refund. It does not pay you the difference but reduces the taxes you owe. If your credits exceed your owed taxes, the difference rolls over to the next year. 

Solar for Affordable Housing

This program is designed for low-income or disadvantaged communities. It’s suitable for homeowners who get their electricity from San Diego Gas & Electric (SDG&E), Southern California Edison (SCE), or Pacific Gas & Electric (PG&E). Also known as DAC-SASH, this program provides cash incentives to homeowners so they can offset the cost of a solar energy system. Homeowners get upto $3 per watt as per the California Public Utilities Commission guidelines.

To qualify for this program, you must:

  • Live in or own your home
  • Receive electrical service from SDG&E, PG&E, or CSE
  • Property is within a disadvantaged community (DAC) qualified area
  • Be eligible or enrolled or FERA or CARE income-qualified utility bill programs

Through this program, homeowners receive capacity-based, upfront, or fixed incentives to offset the cost of a solar PV system.

Property-Assessed Clean Energy (PACE)

Legislative bodies in California designate areas where property owners can enter into contractual assessments to finance 100% of the costs of renewable energy. Property-Assessed Clean Energy (PACE) is a loan option that allows California property owners to finance solar energy projects through their property taxes. It is a unique approach to financing that allows homeowners to make renewable energy improvements on their property. This incentive allows you to finance solar installation on your home using property taxes.

PACE loans are added on top of the property’s regular taxes and are spread over time, usually 10-20 years. With a PACE loan, you can finance the installation of a solar PV system and pay later on top of a property tax loan. As a result, these loans are tied to the property rather than the owner. In case you want to sell or transfer the property to a new owner, the PACE loan remains attached to the property.

PACE is voluntary and not a free program. Before participating in it, you should do sufficient due diligence and read all contractual documentation. Also, ensure the salesperson or contractor does not misrepresent the project’s cost.

Property Tax Exclusion for Solar Energy Systems

This incentive is also known as Active Solar Energy System Exclusion. As a property owner in California, you are entitled to exemption of the extra property tax for the amount of value of the solar system contributed by the solar system. Basically, this means that once you install solar panels on your property, your property increases in value. Normally, you’d pay more taxes due to increased property value. However, with this incentive, your solar energy system is not assessed. Therefore, they are exempt from paying property taxes arising from the increase in property value.

This incentive lasts until January 1, 2025. By installing solar, your property increases in value without having to pay tax on it. This incentive is especially ideal for property owners who want to install large solar energy systems to offset electricity usage.

Choose Day One Solar for Solar Installation

The above are just some of the best solar incentives available for California residents. They offer different financial benefits to new and existing solar users. If you are ready to go solar in California, these financial incentives can help reduce your financial burden. Always seek professional tax advice when applying for the above California tax credits, especially the Federal Solar Tax Credit.

Looking for solar installation? Day One Solar provides solar installation services in Santa Cruz county. Day One Solar provides solar installation services for residential properties, business properties, farms, and communities. It helps with solar system design, installation, system checks, energy storage, and more. 
Contact us today, and we’ll help you kickstart your solar journey!