Solar panels are one investment that does not fail in California. For years the state has been developing programs and ideas to make the switch to solar energy easier. All these programs formed a long log and it can be hard to figure which ones are still active. That’s why in this article we made a list of the best California solar incentives that save you money.
California is one of the Top 10 American sunniest states. It shares the name Sunshine State with Florida. Solar systems get around 5.6 peak sun hours throughout the year on average. A 7-kilowatt system would be enough to keep a medium-sized house powered in the daytime.
High electricity prices are what ensures a good payback on solar panels in California. The average monthly bill for Los Angeles floats around $220. It’s about 30% higher than the average value of $150 per month across America. When a solar system fully covers your energy consumption, it makes you around $2,500 per year and pays for itself in 5-10 years. With a lifespan of over 25 years, your solar panels will bring your money back 2-3 times.
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Heaps of sunshine, high electricity prices and lots of solar incentives made PV panels a great investment in California. This is why Los Angeles ranks first in installed solar capacity in the U.S. with over 650 megawatts of power. However, recent changes in net meteкing policy and the expiration of some programs cooled down the ardor of Californian solar enthusiasts. Let’s go over the most important Californian solar energy programs.
Investment Tax Credit (ITC) is the one incentive that every American that goes solar should use. Under this program, you can deduct 30% of the cost of your PV system from income taxes. For example, if your system overall made you spend $10,000, you can apply to claim $3,000 back. The cost includes expenses like shipping and labor. To claim the ITC, complete IRS Form 5695 and add your credit information to Schedule 3, Form 1040. Submit them when filing your taxes.
How does the solar tax credit work if you don't owe taxes? The credit carries over indefinitely for homeowners. If your income taxes are smaller than the size of the incentive, you deduct what you can and the rest rolls over to the next year.
California Revenue and Taxation Code excluded solar PV systems from a property tax assessment. This incentive applies to systems installed before December 31, 2024.
Components that fall under the exclusion include batteries, power conditioning equipment, transfer equipment, and parts. Pipes and ducts that are used to carry solar energy qualify for the 75% exemption of their full cash value.
Likewise, dual-use solar equipment qualifies for the 75% exclusion. Dual-use photovoltaics are a type of system where the panels do more than just generate electricity. This applies to building-integrated photovoltaics (BIPV), agrivoltaics, floating panels (FPV), and vehicle-integrated photovoltaics (VIPV).
To learn more, contact the assessor's office in your county.
California provides a partial exemption from the state's sales and use tax for farm equipment and machinery. PV systems that provide electricity to farm equipment may qualify for this exemption as well. At least 50% or more of solar energy must be used to power equipment and machinery. The program nullifies 100% of the state taxes, but local and district sales taxes will still apply.
The Self-Generation Incentive Program (SGIP) in California is a program that offers rebates to people and businesses who install energy storage systems. The amount of money you receive depends on factors like the type of system you install and its capacity.
The SGIP is overseen by the California Public Utilities Commission (CPUC). Retail electric and gas customers of San Diego Gas & Electric (SDG&E), Pacific Gas & Electric (PG&E), Southern California Edison (SCE) or Southern California Gas (SoCal Gas) are eligible.
Initiated in 2001, the program was extended through January 1, 2026. The state extended eligibility for this program to home solar systems paired with energy storage systems in 2022. The CPUC will need to develop rules before these new incentives are available.
Learn more about the SGIP program and apply through the Self-Generation Incentive Program website.
Single-family Affordable Solar Homes program (SASH) aimed to help low-income families to go solar in California. You could get as much as $15,000 for a new system. Unfortunately, the program expired at the end of 2021 and so far the state shows no plans to revive it.
Net metering at full retail rate was one of the reasons behind California becoming the leader in solar energy in the US. Net Energy Metering 3.0 (NEM) approved on December 15, 2022 reduced net metering compensation rates by around 75%. Essentially, California moves from net metering to net billing.
New customers will now be compensated at avoided cost rate instead of a full retail rate. NEM 3.0 increases the payback time of a solar system in California from 4-5 years to 5-10 years.
Los Angeles Department of Water and Power (LADWP) offers a Feed-in Tariff (FiT) for solar owners. LADWP is purchasing energy for up to 20 years through a power purchase agreement. As of 2023, the price can reach up to $0.145 per kWh.
Californian law prohibits homeowners associations (HOAs) to ban the installation of solar system. HOAs can impose reasonable restrictions but they should not increase the cost of the system by more than $1,000. They also shouldn’t decrease its performance by more than 10%.
HOA should express in writing their approval or denial of the installation of a system within 60 days. If the application is not denied within 60 days, it will be deemed approved unless the owner of a PV system failed to provide the information necessary for approval.
The law also prohibits the association from requiring a vote of homeowners for the installation of a solar energy system. Any HOA that is not a public entity that violates the Solar Rights Act must pay a civil penalty of up to $1,000.
Shade Control Act protects your panels from the neighbor’s trees shading your panels. The law provides that a tree or shrub cannot cast a shadow that covers more than 10% of a solar array at any time between the hours of 10 a.m. and 2 p.m. if the tree or shrub is planted after the installation of the solar collector. Neighbors may voluntarily sign solar easements to ensure that proper sunlight is available to solar energy systems.
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Andrey had been a news editor and freelance writer for a number of medias before joining A1SolarStore team. Climate change and its impact on people's lives has always been among his interests and it partially explains his degree in Philosophy and Ethics.
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