California Solar Incentives and Rebates

California has been a historical leader in rooftop solar panels, thanks in large part to high electricity prices, and it's one of the states where residential solar panels are most common.

California's solar incentives, while they've changed over the last few years, can still help improve the financial math of going solar. Here's what you need to know.

(Note: Your eligibility can depend on your location, electric utility provider, income level, interest in battery storage, and more. This article is not tax advice; you should always consult a tax professional.)

Residential Clean Energy Credit

Most California residents who buy their solar panels can receive the Residential Clean Energy Credit — formerly known as the Investment Tax Credit, or ITC. It is now slated to sunset at the end of 2025, seven years before its previous deadline.

The Residential Clean Energy Credit allows eligible homeowners to deduct up to 30% of the cost of their solar power system (including equipment, installation, and battery storage, if included) from their federal income taxes. For example:

• Your solar installation costs $20,000.
• You could be eligible to receive up to $6,000 back in federal tax credits.
• You can reduce your federal income tax owed for the tax year you installed your solar photovoltaic (PV) system.

Remember, the credit value is based on the total cost of the system. Tax credits are also just that: credits. The Residential Clean Energy Credit is not a rebate or a discount and cannot be applied directly toward a solar loan.

Disadvantaged Communities Single-Family Affordable Solar Homes (DAC-SASH) Program

California created the Disadvantaged Communities Single-family Affordable Solar Homes Program to increase the adoption of renewable energy in disadvantaged communities. DAC-SASH provides qualified homeowners with fixed, upfront, capacity-based incentives meant to offset the cost of a solar energy system.

The DAC-SASH program offers up to $3 per watt to eligible homeowners. Homeowners must meet the following terms to be eligible for the 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.

Solar Energy System Property Tax Exclusion

In California, people who install a solar- or wind-powered device to produce energy for their residence or business are entitled to an exemption for the value the device adds to the property. This means anyone who installs solar panels is exempt from paying property taxes equivalent to the property value increase from adding said system until 2026.

The program has been extended and is in effect until Jan. 1, 2027.

Net Metering and Net Billing Programs

In California, solar owners are invited to participate in unique bill credit programs called net billing or, in some cases, net energy metering. These setups allow solar owners to earn credits on their electricity bill in exchange for the excess solar energy their panels generate and add to the grid.

As of today, new customers in PG&E, SCE, and SDG&E can only sign up for NEM 3.0, the state’s current bill credit program.

• NEM 1.0 began in 1996 and was California’s first net metering program.
• NEM 2.0 replaced 1.0 in 2017, offering slightly less than the retail rate for excess solar energy.
• NEM 3.0 credits homeowners’ excess solar exported to the utility grid at the avoided cost rate.

How net billing (NEM 3.0) in California works

As a solar owner with net billing, the electricity your panels produce will first power your home. What your home doesn’t immediately use will either be stored in a solar battery or be added to the grid. Your utility company will track how much energy you consume and how much you share with the grid—the latter credited at the hourly avoided cost rate. This rate changes every hour but averages around 4 to 8 cents/kWh.

Net billing 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)

Under NEM 3.0, you must transfer to differentiated time-of-use (TOU) energy rates. At the end of your billing period, you will be compensated at “fair market value” for surplus credits on your account.

Equity Fund

In 2022, new equity incentive funding of $630 million was passed under Assembly Bill 209 to support clean energy storage incentives for low-income Californians under the Self-Generation Incentive Program (SGIP).

Under the new net billing program, NEM 3.0, individuals within these communities are eligible for greater net billing credits. Customers enrolled in CARE or FERA programs can receive a discount of approximately 35% off their electric bill for CARE and approximately 18% for FERA.

Finding Local Solar Incentives

California has local solar incentives which include rebates or waived or reduced fees or taxes. Here are some examples:

• Alameda Municipal Power customers can receive a $500 rebate when installing a solar system.
• SoCalGas customers can qualify for a rebate of $2,500-$4,500 for a solar thermal water system.
• Burbank Water & Power may offer rebates for green energy installations.

To see if there are additional local solar incentives in your city or county, check local utility and government websites, or Database of State Incentives for Renewables & Efficiency.

California Solar Incentives FAQs

Can I get free solar in California? There's no such thing as free solar panels. There are plans which may include no money down.

Does California have net metering? California has had net metering programs for solar owners since 1996.

How can I find and claim local incentives? Check local utility and government websites, or NC State’s database of state incentives.

Does California have a state tax credit for solar panels? No, California does not give a state tax credit for solar panels.

Disclaimer: This content is for informational purposes only. All content mentioned does not constitute professional advice and is not guaranteed to be accurate, complete, reliable, current, or error-free. Palmetto does not provide tax, legal, or accounting advice. Please consult your own tax, legal, and accounting advisors.