California isn’t called the Sunshine State for nothing. On average, the region enjoys 159 full days of sunshine and 119 partly sunny days yearly. That’s a lot of sunshine!
It’s no wonder Californian residents are turning to solar power to lower their energy bills. Since sunlight is so abundant, why wouldn’t you go for it?
Solar panels significantly reduce the cost of electricity yet the upfront costs of purchasing and installing solar panels can be high. And, while costs have come down in recent years, you’re still looking at an investment of about $12 – $16,000.
However, it may interest you to know that there is help out there. Getting solar panels installed on your home may not be as out of reach as you previously considered. Let’s take a look at what incentives there are for solar energy in 2023.
Investment Tax Credit
The federal ITC allows homeowners to claim and deduct 26% of the cost of their solar installation from their federal tax liability for 2022.
Note that you must have your solar system installed by the close of 2022 to qualify.
Here’s an example. If your solar installation cost $10,000, 26% of that amount = $2,600.
Let’s say you owe $5,000 in taxes. You can therefore deduct $2,600 from $5,000, leaving only $2,400 to pay.
If your tax credit exceeds your tax liability amount in 2022, you can carry the additional amount over into 2023 and use it to offset next year’s taxes.
It’s worth noting that this tax credit is not exclusive to California. The rest of the US can benefit from it too.
Solar for Affordable Housing
California has a Single Family Affordable Solar Housing (SASH) program available. This applies to qualifying low-income family homeowners and allows them to offset the costs of installing solar on their homes. The program provides a single upfront incentive of $3/watt to those who qualify and live in the SCE, PG&E, and SDG&E territories.
Self-Generation Incentive Program (SGIP)
SGIP gives a rebate for qualifying solar energy systems that distribute energy to the grid. Unique to California, SGIP is overseen by the California Public Utilities Commission and is available to electric and gas customers of all major Californian utility companies.
Essentially, the power you distribute back to the grid will provide you with financial gain. These incentives vary depending on the type of system you have installed.
NET Energy Metering (NEM)
Customers can obtain credit for the extra energy their solar panels produce. NEM is the primary approach for compensating solar owners for their energy contributions and is now mandatory within California.
Depending on when you had your system installed, you will either be on NEM or NEM 2.0. NEM 2.0 has slightly lower compensation rates with a one-time connection fee of around $150.
There is a spanner in the works. NEM 3.0 is still being debated and, if implemented, will severely impact the savings you make on your energy bill. NEM 3.0 intends to introduce a monthly grid participation charge where you essentially pay for the privilege of accessing and selling your power back to the grid. Unsurprisingly, there is fierce opposition to this, and it is yet to be seen if it will come to pass.
Keep an eye on NEM 3.0 because if it comes into effect, solar energy will not be the worthwhile investment it once was.
Property Assessed Clean Energy (PACE)
PACE is a loan option that gives homeowners the opportunity to pay for their solar energy installation via their property taxes.
Local financiers have teamed up with local governments to fund the upfront investment of each project. Then, homeowners pay the money back on their property tax bill over a number of years.
The typical length of time for this loan is 20 years, and the homeowner’s property tax will increase to account for the repayments.
As well as California, this incentive is available in over 20 other states.
Property Tax Exclusion
This incentive is currently available until January 1, 2025. A property tax exclusion can be applied for qualifying new solar installations.
When you install solar panels on your home, the value of the property increases. Typically, new installations will see a rise in the amount of property tax you pay. However, installing a solar energy system will be exempt from this, so your property taxes won’t rise.
San Francisco GoSolarGF
The City of San Francisco is keen to help residents adopt clean energy. They do so by providing one-off payments to reduce the upfront costs of installing solar energy systems on homes, businesses, and non-profit organizations.
How to Find Out Which Incentives You Qualify For
With so many different incentives happening at once, it can be difficult to determine which ones you qualify for. Furthermore, while these incentives have been available in 2022, things may change in 2023. Indeed, many incentives expire while new ones crop up in their place, and it’s hard to keep track of it all.
Don’t worry. Any solar installation company worth its salt will already be clued up on the latest and greatest incentives available in California. When talking to solar professionals, be sure to ask them what the latest scheme is and whether or not you’re likely to qualify for anything.
They should also be able to help you with the paperwork that goes with applying for any of the above schemes, and if not, they’ll know exactly who you should approach and when.
Final Thoughts
It’s definitely still worth adding solar and storage in California in 2023. There are plenty of incentives out there to help you offset the investment plus; you can currently sell your excess energy back to the grid for a reasonable amount.
Keep an eye on NEM 3.0, as this will certainly change the landscape for owners of solar energy systems. With a bit of luck, the scheme could be scrapped. If not, it’ll become a major factor when considering solar for your home.