Switching smart: Solar incentives in Texas

Updated: Mar 20, 2025
12 min

Julia ZaraevaAuthor

Texas is second after California in the top solar-generating states. It might become number one in the next 5 years. Why did solar energy get so popular there? Electric prices go up like never before. Our advice: go solar ASAP but do it the smart way: read our article about Texas solar incentives and make use of them.

Key takeaways

Texas is second after California in the top solar-generating states. You’ll also find many federal, state, municipal, and cooperative financing options your solar system is eligible for to reduce the payback time.
Federal Tax Credit is a federal program, so it applies across the US. It allows you to deduct 30% of the total cost of your commercial or residential clean energy project from your federal income taxes, including not just the solar panels themselves, but also things like installing, shipping, and buying other equipment needed to make the system work. To claim this credit, you'll need to fill out IRS Form 5695 when you file your taxes.
In Texas, adding a solar PV system is an improvement to your property and typically increases its market value. However, thanks to the property tax exemption, the assessed value of your home for property tax purposes won't increase. This means you won't pay higher property taxes just because you've installed solar panels. To claim this exemption, you'll need to fill out Form 50-123.
Texas doesn't have a single, statewide net metering program. Instead, it's handled at the service utility company level. If your utility offers net metering (and many do), you can sell any excess electricity your solar panels generate back to the grid. In return, you'll receive credits on your electricity bill. The value of these credits and the specific rules of the program can vary depending on your utility. Contact your retail electric provider to find out the specifics of their net metering program.
Like net metering, solar rebate programs in Texas are usually offered by local authorities or individual utility companies, not at the state level. These rebates can help you reduce the upfront cost of your solar system. The amount of the rebate and the requirements you need to meet to qualify will vary depending on the specific program.

Why go solar in Texas: Power outages, storms and sun

Texas sun shines bright all year long

5.73

average number of peak sun hours in Texas

The first obvious reason for this is a lot of sunlight. Texas gets 135 clear days a year and about 5.73 peak sun hours a day. What is more, Texas is located in the south and gets enough peak sun hours both in summer with a maximum of 6.29 in August and in winter with a minimum of 4.11 in December. A 7-kilowatt solar system will generate over 30 kWh/day of AC for half a year, enough to fully power a medium-sized house.

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Texas has the most power outages in the US

More than 9,500 tornadoes were reported in Texas between 1950 and 2021. About 120-130 tornadoes hit Texas every year, according to data from the National Oceanic and Atmospheric Administration (NOAA). They often lead to destruction and power outages. Solar panels are a great choice for a tornado-heavy state: they withstand winds of at least 140 mph and add a layer of protection to your roof.

A solar system with batteries makes a lot of sense in Texas because of the high number of power outages. Texas experienced more power outages than any other state, according to Climate Central. Of the 1,542 weather-related outages documented in the U.S. over the study’s 20-year analysis, 180 were in Texas. The ice storm that hit the state in February 2021 left more than 4.5 million homes and businesses without power, some for several days. The crisis caused at least 246 casualties.

Watch our video about the best batteries on the market!

Texas electricity prices spike up

An average Texas household, consuming 1,094 kWh per month, pays $158.19 on electricity. This is close to an average bill across the US. The prices are rising rapidly though: the price per kWh jumped 11.34% from 12.82 ¢/kWh in 2022 to 14.46 ¢/kWh in 2023.

How to go solar in Texas: Solar incentives, credits, and rebates

There are many benefits for those who choose solar energy. We’ll guide you through the most important ones.

Incentive	Summary
Federal Solar Tax Credit (ITC)	Claim 30% of the solar system cost as an income tax deduction.
Property tax exemption	Install a solar system and keep the property tax the same.
Net metering	Sell solar energy to your utility company at a 1-for-1 rate.
Solar rebate programs	Benefit from rebates provided by your utility company.

Claim 30% of your solar system cost with Federal Solar Tax Credit

With the Solar Investment Tax Credit (ITC), homeowners can deduct 30% of not only the solar system’s cost but also its shipping and installation from their income taxes. If your system costs $10,000, you can get over $3,000 back through a tax deduction.

Learn how to claim Solar Tax Credit in 5 minutes with our Youtube video!

Freeze your property tax with Property Tax Exemption

that’s how much solar panels increase your home value on average

A solar system increases the value of your home by 4% on average. But with the property tax exemption, you don’t have to pay extra taxes on it. The value of your home increases, while the property tax remains the same. Win-win! To claim this exemption, fill out Form 50-123 and check the Solar and Wind-Powered Energy Device Exemption and Appraisal Guidelines for more information.

Sell excess electricity with Net Metering Program

On sunny summer days, your solar panels generate more electricity than your home needs. You can sell this extra energy to the grid for credits and receive an electricity bill reduction. In the best case, one kilowatt-hour given to the grid is one kilowatt-hour off of your next utility bill.

Net metering — a billing mechanism that credits homeowners for the electricity they give to the grid

Although Texas doesn’t have a statewide net metering program, there are many utility companies offering this opportunity. Here are some of them:

Save up to $3,000 with solar rebate programs

Texas doesn’t have an initiative encompassing the whole state, but some local authorities and utility companies provide homeowners with nice rebates:

• Austin Energy offers a $2,500 rebate after completion of their free educational course. With this course, the company wants to help its customers make an informed choice about solar power.
• City of San Marcos offers a $2,500 rebate for the installation of grid-tied renewable energy systems. To qualify for the rebate, your system should be pre-approved by the utility and meet certain energy efficiency criteria. For more information, visit the program website.
• AEP Texas North Company and AEP Texas Central Company offer up to $3,000 rebates for installation of solar systems. The system should be new and meet the minimum estimated performance requirements (80% of optimum). Please refer to the Program Guidebook for additional details.
• Oncor Electric Delivery also offers rebates for the installation of solar systems. The systems should be new and equipped with batteries. For more information, visit the program website.

Ask your utility company about the rebates they provide. A couple of thousand dollars saved will make the purchase of your solar system even better.

Incentive/ Program	Description	Benefits	Eligibility/ Requirements	Notes
Federal ITC (30%)	30% tax credit on the total cost of solar system installation.	Reduces overall system cost, accelerates payback period.	Must own the system, meet IRS guidelines.	Applies to installation, equipment, and other associated costs.
Property Tax Exemption	Exemption on added property value from solar.	No increase in property taxes due to solar.	Form 50-123.	Property value increases, but taxes don't.
Net Metering	Allows homeowners to sell excess solar energy back to the grid for credits.	Reduces or eliminates electricity bills.	Varies by utility.	No statewide program, utility-specific programs.
Solar Rebate Programs	Rebates for solar installations.	Reduces upfront costs.	Varies by local authority and utility.	Rebate amounts and requirements vary widely.

What are solar incentives, and why do they exist?

Governments are strongly encouraging the shift to solar energy by providing a range of financial incentives, solar buyback programs, and energy credits designed to make it more accessible and affordable. They recognize that the initial investment in a solar system can be a significant hurdle, and they're offering various programs to help homeowners and businesses overcome this barrier. Essentially, they're providing a financial boost to make the switch to solar more appealing.

One common approach is offering tax credits. These credits allow you to deduct a portion of the solar system's cost directly from the taxes you owe, reducing your overall tax burden. In some areas, they also provide cash rebates, which are direct payments made after the system's installation, effectively lowering the initial out-of-pocket expenses.

Beyond tax credits, rebates are another key incentive. These function like refunds, where you receive a portion of your investment back after your solar system is installed and operational. This helps to offset the initial costs and makes solar energy more financially attainable.

Furthermore, many jurisdictions have implemented net metering programs. This allows you to sell any excess electricity generated by your solar panels back to the local utility company. If your system produces more energy than you consume, the surplus is fed back into the grid, and you receive credit or payment for it. This not only helps recover the initial investment but also provides a potential source of ongoing income, effectively turning your solar system into a revenue generator.

The reasons behind these generous incentives are multifaceted. First, by promoting its adoption, governments aim to reduce reliance on fossil fuels, decrease greenhouse gas emissions, and combat climate change. Second, the solar industry creates jobs in various sectors, including manufacturing, installation, maintenance, and research and development, contributing to economic growth and providing new employment opportunities. Finally, solar energy enhances energy independence, reducing reliance on foreign energy sources and strengthening national security.

For homeowners and businesses, these incentives translate into tangible financial advantages. You receive assistance with the initial installation costs, enjoy reduced monthly electricity bills, and potentially generate income through net metering. These programs make solar energy a more financially viable option, allowing you to save money while contributing to a cleaner, more sustainable energy future. Moreover, the widespread adoption of solar energy can contribute to grid stability and resilience. By providing distributed generation, solar reduces the strain on centralized power plants, especially during peak demand, leading to a more reliable and robust energy infrastructure for everyone.

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Julia Zaraeva

Author

Years of experience in translation and a love of nature help Julia find the right words to encourage going solar. She joined the team in 2023 and is happy to make her contribution to a greener future.

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