Sunny California has a history of solar incentives that have made it the national leader in residential solar, but its recent decision to lower its net metering rates has some critics questioning its commitment to residential solar systems. Still, installing solar panels can be a money saving move there.
California dominates the American solar energy market, having produced 28% of the nation’s nearly 26,000 megawatt hours in August 2023. However, its current incentives for solar panels lag behind several other states — California doesn’t make CNET’s list of states with the best incentives for solar panels.
Read more: Best Solar Companies in California
Can solar panels save you money?
Interested in understanding the impact solar can have on your home? Enter some basic information below, and we’ll instantly provide a free estimate of your energy savings.
All Americans who purchase solar panels are eligible for the federal tax credit for renewable energy, but state and local incentives for solar vary across the country. Here are the incentives for solar projects in California.
Note: These California incentives are for residential electric customers only. California has additional incentives for organizations, businesses and farms. The solar panel incentives listed below are accurate as of May 26, 2023. Local government and utility programs change regularly, so check program websites to make sure they are still active.
Watch this: New Solar Shingles You May Not Even Notice
California state solar tax credits and incentives
Several incentives, credits and rebates are available to all Californians who invest in solar energy systems. Other incentives in this list apply to multiple California counties or to lower-income energy customers.
Property tax exclusion for solar energy systems
California is among 32 states that provide protection against property tax increases for homeowners who install solar panels. Under California law, all qualifying active solar energy systems will be excluded from the assessment of your property, meaning that installing solar panels will not impact your property taxes one way or another.
This property tax exclusion is currently set to expire Jan. 1, 2025.
California Self-Generation Incentive Program
Utility customers of the four major investor-owned utilities — San Diego Gas & Electric, SoCalGas, Southern California Edison and Pacific Gas & Electric — are eligible to receive rebates for installing solar batteries using California’s Self-Generation Incentive Program. The California Public Utilities Commission offers a $200 rebate for each kilowatt-hour of your solar storage system.
A midsize battery like the LGES 16H Prime, one of the top picks in CNET’s list of best solar batteries, provides 16kWh storage, which would result in a $3,200 rebate under current rules in California. The battery itself will cost about $8,000 to $11,000 before installation.
Disadvantaged Communities – Single-Family Solar Homes program
California’s DAC-SASH program provides solar incentives for low-income customers in disadvantaged communities. Administered by GRID Alternatives, the program offers Californians $8.5 million in incentives annually.
The California Public Utilities Commission says that eligible customers can receive up to $3 per watt in incentives for solar installations. The current cost per watt of solar panels in California is $3.93, so DAC-SASH participants could save about 75% on solar installations.
Watch this: How See-Through Solar Panels Could Bring Renewable Energy to Your Windows
California net metering incentives
Net metering allows homes with solar installations to receive money back for contributing surplus solar energy to the broader electricity grid. New rules for net metering cut that amount by 75%. While earlier net metering participants earned about 30 cents per kilowatt, new participants will get about 8 cents per kilowatt.
The new net metering plan comes with higher electricity rates for times when demand is high and access to renewable energy is low, making solar batteries more valuable.
Read more: Best Solar Batteries for 2023
PACE financing for solar panels
Property Assessed Clean Energy programs provide financing for solar installations that allows residents to pay back loans for solar panels with their property taxes. While commercial PACE loans are common throughout the US, only three states — California, Florida and Missouri — offer residential PACE programs.
Unlike mortgage loans, PACE loans usually require no down payment or monthly payments. Instead, borrowed money is repaid through homeowners’ property tax bills over a term of 10 to 30 years. However, a lien is placed on your home until the loan is fully paid off, which makes selling your home more complicated. Some lenders may not want to provide a mortgage for a home with an attached PACE lien.
California currently has four state-licensed PACE program administrators:
Local communities may provide PACE-style financing of their own. The Sonoma County Energy Independence Program functions similarly to state-licensed PACE programs, letting participants pay back solar installations via their property tax bills over 10- or 20-year terms at 7.49% interest.
Local solar tax credits and incentives in California
Beyond the solar incentives at the state level, many cities, towns and municipalities offer additional incentives for residents who invest in solar energy projects.
Alameda Municipal Power income-qualified solar rebate
Residential customers of Alameda Municipal Power can get a small rebate for installing solar panels. You’ll get $500 back for any qualifying solar installation if you earn less than $106,000 and your home was built before Jan. 1, 2020. This incentive is designed to offset fees incurred from installing solar panels.
CleanPowerSF Solar Inverter Replacement Program
The San Francisco Public Utilities Commission and CleanPowerSF are running this program to help customers replace old, damaged solar inverters. The program is available only to existing GoSolarSF customers with a solar installation that’s at least 10 years old and no longer covered by warranty.
If your solar inverter needs replacing and you use a participating installer*, you can receive up to $3,000 to cover the cost of the replacement.
* While the solar inverter replacement program appears to be active, the CleanPowerSF fact sheet notes that participating installers are current “as of May 2022.”
Lancaster Energy Power Choice
Residential customers of Lancaster Energy who can’t afford solar panels or don’t want to pay for them can get them installed for free by Tesla with the electric company’s Power Choice program. Tesla will install rooftop solar panels and a Tesla Powerwall Battery for no money at all, and customers will pay for energy usage and storage via their usual electric bill.
Read more: Free Solar Panels: Here’s What the Fine Print Means
However, customers don’t get tax incentives from the solar panels and can leave the program only by “buying out” the solar equipment and battery. Also, if a home in the Power Choice program is sold, the contract transfers to the new owner, which could make selling more complicated.
Los Angeles Department of Water and Power Solar Rooftops Program
LADWP’s Solar Rooftops Program gives its customers another way to contribute to solar power generation without spending anything for solar panels. LADWP installs, connects and maintains the solar panels on a homeowner’s property at no cost, and gives the homeowner an annual payment of $240 to $600 each year for 20 years. Customers’ electric bills are otherwise unaffected.
Sacramento Municipal Utility District battery storage incentive
Though a $150 stipend for solar panel installations has lapsed, SMUD is offering up to $2,500 for battery installations in its service area. The incentive ranges from $50/kWh of installed battery storage (capped at $500) to $250/kWh (capped at $2,500). Your incentive is determined by which pricing plan you opt into and how much control over your battery you give the utility.
San Diego Green Building Incentive Program
The city of San Diego will waive building permit fees and plan check fees for the installation of residential solar panels.
Silicon Valley Power Low Income Solar Grant Program
Publicly owned Silicon Valley Power, which mostly serves the city of Santa Clara, provides grant money for solar panels to residential customers enrolled in its Financial Rate Assistance Program. Eligible customers who own their solar installations can get $3.50 per watt for solar systems up to 3 kilowatts of power. Solar systems must produce at least 3,800 kWh annually.
SoCalGas Solar Thermal Water Heating System Rebate
SoCalGas customers in central and Southern California can get a rebate of $2,500 to $4,000 on qualifying solar water heaters. Your system must have a Solar Uniform Energy Factor of 1.8 or higher, and you’ll need to install a new Energy Star-certified water heater along with your solar installation.
Local solar attic fan rebates in California
Many local energy providers offer rebates for energy-efficient appliances, including solar attic fans. These fans usually connect directly to dedicated solar panels to power themselves and cool down attics. Here are the publicly owned electric utilities that are currently offering rebates for solar attic fans.
Azusa solar fan rebate: Customers of Azusa Light and Water can get up to $150 as a credit on their electric bill with the purchase of a qualified solar fan for their attic or home using this application (PDF).
Glendale Water & Power solar attic fan rebate: GWP customers who install solar attic fans can get $100 for each, or $125 if the fans were purchased in Glendale. Customers are limited to two rebates every 10 years at the same residence, and can apply for the rebate online.
Gridley solar attic fan rebate: The City of Gridley Electric Utility gives customers a rebate of $0.45 per cubic feet per minute for solar attic fans. Fill out the application (PDF) and mail or email it to the electric department.
Imperial Irrigation District solar attic fan rebate: Residential electric customers can get a $125 rebate for solar attic fans using this application (PDF).
Lodi solar attic fan rebate: The Lodi Electric Utility offers a rebate for solar attic fans based on the capacity of your fan — $0.15 per cubic feet per minute. You’ll need to complete this form (PDF) to apply for the rebate.
Modesto Irrigation District solar attic fan rebate: Residential customers of MID can get some money back (PDF) after purchasing a solar attic fan — $100 for appliances with 20 watts of power or greater; $50 for fans with 10 to 19 watts. The application form (PDF) must be snail-mailed back to the electric company.
Pasadena solar attic fan rebate: If you’re a Pasadena Water & Power customer, you can get $80 back on a rebate for solar attic fans, plus another $20 if you purchased the fan in Pasadena. You’ll need to sign into your online account to apply for the rebate.
Riverside solar attic fan rebate: The electric company of Riverside provides a number of rebates for energy-efficient appliances, including solar attic fans. To claim the $100 rebate for a solar attic fan, complete and mail or email this form (PDF).
Ukiah solar attic fan rebate: Ukiah also provides a rebate for solar attic fans based on their capacity. The city utility pays $0.20 per cubic feet per minute. Residential customers can apply for the solar attic fan rebate with this form (PDF).
Federal solar tax credits and incentives for Californians
The federal solar tax credit might be more valuable than any of the state and local incentives currently offered in California. It gives you 30% back in the form of a tax credit for expenses related to installing solar panels and batteries.
The official name of the federal solar tax credit is the Residential Clean Energy Credit, and though it was expected to expire in 2022, the Inflation Reduction Act extended the tax credit until 2035.
Applying for the federal solar tax credit is simple. Fill out IRS Form 5695 and include it with your tax return for the year in which you installed your solar system, or let the best tax software handle it for you.
The Inflation Reduction Act of 2022 keeps the federal solar tax credit at 30% until 2033, when it will drop to 26%. The credit will further decrease to 22% in 2034 and expire in 2035.
The solar tax credit is nonrefundable, meaning the credit you receive cannot be more than the amount you pay in taxes. You can, however, carry over any additional credit beyond your tax burden into future tax years.
Comparing California solar incentives
| California incentive | Description | Eligibility | Estimated value** |
|---|---|---|---|
| Solar property tax exclusion | Solar investment will be excluded from home assessments for property taxes | All Californians, until 2025 | $240 per year, though will vary considerably based on home price, solar installation, and local taxes |
| DAC-SASH | $3 per watt incentives for solar installations | Lower-income Californians in disadvantaged communities | $24,000 |
| Net metering | Money back for excess electricity put back into the grid | Residential California customers of investor-owned utilities | 8 cents per kWh |
| California Self-Generation Incentive Program | State rebate for installing solar batteries | All Californians | $200 per kWh of solar storage |
| Alameda Municipal Power income qualified solar rebate | Solar panel rebate for lower-income customers | AMP customers earning less than $106,000 | $500 |
| CleanPowerSF Solar Inverter Replacement Program | Incentive to replace broken inverters at no cost | GoSolarSF customers | Up to $3,000 |
| Los Angeles Department of Water and Power Solar Rooftops Program | Free solar panel installation with an annual payment instead of energy savings | LADWP customers | $4,800 to $12,000 over 20 years |
| Sacramento Municipal Utility District battery storage incentives | Incentive based on storage size and utility rate plan | SMUD customers | $500 to $2,500 |
| San Diego Green Building Incentive Program | No permit or plan check fees for solar installations | San Diego residents | Varies based on home size |
| Silicon Valley Power Low Income Solar Grant Program | Money back per kWH of solar system power for eligible customers | SVP customers enrolled in its Financial Rate Assistance Program | $10,500 |
| SoCalGas Solar Thermal Water Heating System Rebate | Money back for eligible solar water heaters | SoCalGas customers | $2,500 to $4,000 |
| Local solar attic fan rebates | Money back for purchasing energy-efficient appliances | Residential customers of publicly owned electric companies in Azusa, Glendale, Gridley, Imperial, Lodi, Modesto, Pasadena, Riverside and Ukiah | $80-$150 |
| Federal solar tax credit | 30% tax credit for qualified solar installation costs | All Americans, until 2035 | $7,200 |
** Values of incentives are based on a national $24,000 solar installation average ($2.99 per watt for a 8kWh system). State property tax is estimated at 1% of home value.
California power purchasing agreements
If you don’t want to install solar panels yourself, a solar power purchasing agreement lets another company install solar on your property, then charge you a predetermined amount for that solar energy.
Solar power purchasing agreements are an easy way to get solar power at no cost upfront, but you won’t get any of the tax incentives related to solar panels, and you’ll need to watch out for potential rate hikes over time.
Here are a few of the local public solar power purchasing programs available in California.
PoweredUp Network
The PowerdUp Network installs solar with zero upfront costs to residents of Goleta, Santa Barbara, San Luis Obispo and Ventura. Customers currently pay 24 cents per kWh for the first year of service, with rates increasing 2.9% annually over the agreement’s 25-year lifetime.
The program is open only to homeowners who don’t already have solar. Renters or people who live in townhouses that share a roof with another dwelling are excluded.
Santa Clara Solar Water Heating Program
For homeowners who don’t want to install their own solar water heaters, the city of Santa Clara leases and maintains solar water heating equipment for its residents. Homeowners pay an installation fee and a monthly utility fee for the equipment, and the city takes care of the rest.
Community solar programs in California
California has allowed community solar programs by law since 2013. Community solar projects let people use solar energy without installing solar panels on their property. The electricity comes from a large shared solar installation.
California recently passed the Community Renewable Energy Act, a law that aims to make community solar projects more accessible for renters and homeowners who cannot afford solar panels.
The Community Solar Green Tariff program provides a 20% discount on community solar energy for people living in disadvantaged communities. Also, some municipal power companies in California, such as the city of Anaheim, provide community solar discount programs for residential customers.
California solar FAQs
Is it worth going solar in California?
California doesn’t measure up to some other states as far as the best incentives for solar, but it still offers incentives for solar storage, net metering and installations for low-income families in disadvantaged communities.
However, the new California net metering plan slashes the value of surplus solar energy put back into the grid by 75%. Some experts suggest the new rates will extend the time needed for your solar system to pay you back in energy savings from five or six years to about 15.
Whether solar panels are worth it depends on your personal situation, particularly how much you care about generating your own clean electricity. If you’re looking to save money immediately, check your local electricity providers for community solar discount programs.
How do solar tax credits work?
Solar tax credits encourage investments in solar energy by giving you money back at tax time. The amount of tax benefit will usually be a percentage of the amount invested in solar energy. The credits need to be claimed for the same tax year in which you paid for your solar project.
How does the federal solar tax credit work?
The federal tax credit for solar investment, officially called the Residential Clean Energy Credit, provides a tax incentive for Americans who invest in solar, wind, geothermal, fuel cells or battery storage.
For energy-saving improvements to your home, including solar panels, the federal tax credit gives you 30% back on your investment, with no cap or limit, except for fuel cells. To claim the credit at tax time, you’ll need to submit IRS Form 5695 with your return. All of the top tax software can handle that for you.
How many times can you claim solar tax credits?
You can only claim solar tax credits once, in the year that you purchase your solar equipment. If you make additional investments in solar or renewable energy in future years, you can take tax credits for that money as well. There are no limits on how many times you can claim the credit, as long as you are making repeated investments in renewable energy over multiple years.
One exception to the one-time rule is if your federal solar tax credit exceeds the amount you owe in taxes for a year. You don’t get the extra money back right away, but you can carry over the excess amount to future tax years, meaning that it’s possible to claim the federal solar tax credit for the same investment over successive years.
What are the new rules for net metering in California?
In April 2023, California changed its rules for net metering, reducing the value of solar installations that return electricity to the broader grid and increasing the value of solar batteries.
The new rules — called Net Metering 3.0 — reduce the credit value for excess energy sent to the grid by 75%, from an average of 30 cents per kWh to about 8 cents per kWh.
New time-of-use rules will make electricity more expensive at certain times of day, so solar batteries that can store and provide electricity at high-priced times are now more valuable.
Under Net Metering 2.0, solar customers in California could expect to pay off their solar panels with electricity savings in about five or six years. Some experts now predict it could take up to 15 years under the new rules.
Customers who installed solar panels under earlier net metering rules will continue to receive the earlier net metering rates for 20 years from their initial installation.
It’s important to note that these new net metering rules only apply to California’s six investor-owned utilities — San Diego Gas & Electric, SoCalGas, Southern California Edison, Pacific Gas & Electric, Bear Valley Electric Service and Liberty.
Local publicly owned utilities may still provide their own rates for surplus solar energy. For example, Los Angeles Department of Water and Power is currently paying 19 to 34 cents per kWh, well more than the new rates for net metering 3.0. Other providers may pay less — Turlock Irrigation District currently pays less than 3 cents per kWh — or not at all.
CNET’s Andrew Blok contributed to this story.
