California Solar Tax Credits, Incentives and Rebates (2024)

Based on our research into state solar incentives, California offers the following programs to help homeowners save on solar installations.

Disadvantaged Communities—Single-family Solar Homes (DAC-SASH)

Incentive value: $3 per watt of solar capacity ($3,000 per kilowatt)

Frequency: Single-use

The DAC-SASH program offers solar incentives for low-income households that meet certain eligibility requirements. The average cost of installing solar in California is $2.51 per watt, while this program offers an incentive of $3 per watt. In other words, the DAC-SASH incentive can cover the full cost of most solar panel systems.

Eligibility

The DAC-SASH incentive is available for households that meet the following requirements:

• The home is located in one of the state’s top 25% most disadvantaged communities, as identified by the California Communities Environmental Health Screening Tool.
• The homeowner is a customer of Pacific Gas & Electric (PG&E), San Diego Gas & Electric (SDG&E) or Southern California Edison (SCE).
• The applicant has a household income below the CARE Income Guidelines. For June 2023 through May 2024, the limit is $39,440 for a one- or two-person household and increases for larger households.

How To Apply

The DAC-SASH program is managed by GRID Alternatives in California as part of its broader Energy for All program. You can apply directly online. This program will remain available through 2030.

Self-Generation Incentive Program (SGIP): Small Residential Storage

Incentive value: $0.15 per watt-hour (Wh) of battery storage capacity

Frequency: Single-use

The Self-Generation Incentive Program (SGIP) provides rebates for energy storage systems in California. Homeowners can install battery banks along with solar panels to create a 24/7 power supply, which you can use at night, on cloudy days or during blackouts. Combining your battery with solar panels is not required to qualify for the SGIP, but state officials recommend it. California has some of the highest electric rates in the country so recharging batteries without solar panels can become expensive.

SGIP has a program budget with a series of steps, where the incentive rate decreases as SGIP allocates more funds. As of January 2024 the SGIP dashboard specified an incentive rate of $0.15 per watt-hour for small-scale residential batteries. For example, a Tesla Powerwall with an energy storage capacity of 13.5 kWh (or 13,500 Wh) could result in an incentive of $2,025.

Eligibility

To qualify for the SGIP energy storage incentive, you must be a customer of one of the following utility companies:

• PG&E
• SDG&E
• SCE
• Southern California Gas (SoCalGas)

The SGIP incentive is available for both homeowners and renters (with landlord approval).

How To Apply

SGIP offers energy storage incentives through approved installers. The program has an online tool you can use to find and contact qualified battery installers in your area.

SGIP: Residential Storage Equity

Incentive value: $0.85 per watt-hour of battery storage capacity

Frequency: Single-use

The SGIP has a “Residential Storage Equity” category for low-income households, medically vulnerable users and communities at risk of fire. This category has a higher incentive rate of $0.85 per watt-hour. This means a 13,500-Wh battery, the Tesla Powerwall for instance, could qualify for an incentive worth $11,475.

Eligibility

The Residential Storage Equity incentive has the same requirements as the SGIP incentive described above. However, it is only available for electricity consumers in need, including:

• Low-income households
• Medically vulnerable households
• Communities at risk of power outages because of wildfires

SGIP’s residential brochure has a detailed description of all household types that qualify for the increased incentive of $0.85 per watt-hour. You can also check the disadvantaged communities map, developed by the California Office of Environmental Health Hazard Assessment (OEHHA), to see if you may qualify based on location.

How To Apply

Just like the standard SGIP incentive, the Residential Storage Equity program is offered through approved battery installers. You can contact the program online for more information.

Solar Energy System Property Tax Exclusion

Incentive value: $0 property tax on the value of a solar energy systems

Frequency: Ongoing

California has a property tax exclusion for solar energy systems installed before 2025. The exclusion not only applies to solar panels but also to lithium-ion batteries and many types of solar heating systems.

As a quick example, assume you own a $700,000 home in California. Considering a 0.7% rate, you would pay $4,900 in property taxes per year. If you install a solar panel and battery system for $30,000, the assessed value of your home and its property taxes would stay the same. Without the tax exclusion, a $30,000 home value increase would represent a $210 property tax increase.

Eligibility

• The property tax exclusion is available for solar energy systems installed before January 2025. Energy storage systems are also eligible if paired with solar panels.
• The tax exclusion is not available for solar swimming pool heaters, hot tub heaters, passive energy systems and wind energy systems.
• The tax exclusion is available for homeowners who live on their property and home builders or owners who intend to sell the property.

How To Apply

The solar energy property tax exclusion is automatically applied when you get a building permit.

There are several local solar incentives in California that residents can take advantage of, which we’ve outlined in the chart below.

How To Claim Local Incentives

Your solar installer will help you apply for federal, statewide and local renewable energy incentives you are eligible for. To see if there are additional solar incentives in your city or county, check your local utility and government websites.

California changed its net metering policy to Net Energy Metering 3.0 (NEM 3.0) last year, which means you can sell excess solar energy to local electric companies in exchange for power bill credits. However, with NEM 3.0 the export tariffs you receive for surplus solar energy are much lower than the electricity prices you would normally pay.

We recommend storing surplus solar energy in a battery, instead of selling it at low prices:

• If you store electricity in a battery and use it later, you save the full value of each kilowatt-hour of energy.
• If you sell excess energy under NEM 3.0 tariffs, you only earn a few pennies per kilowatt-hour of electricity.

The previous NEM 2.0 policy offered better solar export tariffs that were only slightly lower than retail electricity prices. On the other hand, the NEM 3.0 policy pays around 75% less for surplus solar energy. NEM 2.0 was phased out in April 2023, leaving NEM 3.0 as the only option for new solar installations.

MarketWatch Guides Tip

We recommend California’s net metering programs only for solar owners who can still qualify for the older NEM 2.0 rates. If your only option is NEM 3.0, you can achieve higher savings by storing excess solar energy in a battery bank.

Net Metering vs. Solar Batteries

As a quick example, consider a home solar system generates 10,000 kWh of energy per year. However, most homeowners cannot use all that solar electricity directly. For instance, you do not need to use as much electricity to power lights during the day, when you are asleep or away from home.

We estimated how much you would save by using 5,000 kWh of energy directly while exporting the remaining 5,000 kWh to the local grid.

• We estimated annual power bill savings using the average residential rate in California of 29.99 cents per kWh.
• Since NEM 3.0 tariffs are around 75% lower than retail prices, we can assume a solar export price of 7.50 cents per kWh for this example.

In this case, you would save $1,500 in power bills a year by using 5,000 kWh of solar energy. However, you would only get $375 for exporting the other 5,000 kWh, creating a total savings of $1,875.

With a battery bank, you can store excess solar energy to offset and save the full value of grid power costs. If your solar panels produce 10,000 kWh per year and you bank half that production in your battery, you would save $1,500.

How To Enroll in Net Metering

To enroll in net metering, your solar installer will submit an interconnection application to your utility company. Once approved for interconnection, your installer will connect your solar system to the grid, and you can start earning from the net billing tariff (NEM 3.0).

To learn more about the new net billing structure, visit the California Public Utilities Commission website.

The federal solar investment tax credit (ITC) can help maximize your solar savings by allowing you to claim 30% of your total solar installation costs on your federal taxes. It’s not a tax refund. Instead, it reduces the amount of money you owe in taxes as a credit.

There is no maximum to the amount you can claim and it can be applied to most installation costs for a solar PV system. The 30% rate will remain until 2032. It will decrease to 26% in 2033 and 22% in 2034. Unless renewed by the federal government, the credit will end by 2035.

You will claim the tax credit on your federal tax return for the year you install a solar system. To apply, download and fill out IRS Form 5695 for residential energy credits. If you owe less in federal taxes than the value of your tax credit, you can roll over the remaining balance to cover your tax burden for up to five years.

According to our research , Californians can expect to save around $60,400 throughout the lifetime of their solar system and recover the upfront cost of installation in the first 4 years of use. To estimate these savings, we used average annual electricity rates from the U.S. Energy Information Administration (EIA), the specific photovoltaic power output (PVOUT) from the Global Solar Atlas and the average cost of installing a 6kW system in California of $15,060.

The savings you can actually achieve by installing solar panels in California depends on your total system cost, payment method and what solar incentives you claim. The percentage of electricity your home directly uses can also impact your long-term savings. California has low net metering rates — if you send excess solar energy to the grid, you only get a small fraction of its retail value back. But if you install a solar battery, you can lessen your grid usage at night and on cloudy days, resulting in higher power bill savings.

The use of solar incentives is extremely popular in the state of California with 91% of residents making use of at least one incentive to reduce the cost of installing a solar system. In October 2023, the MarketWatch Guides team surveyed 1,000 homeowners with solar panels, including 120 California residents. We used the survey to analyze solar panel costs within the state and asked respondents about which solar incentives they claimed. Here is a breakdown of the results, with percentages representing California’s 120 of the 1,000 total respondents.

*The availability of local rebates will vary by area. You can check with your local government or utility company to see if you qualify for any additional incentives. 

We also asked survey respondents how they paid for their solar system, whether with cash, a solar loan, a solar lease or a power purchase agreement (PPA). In the case of California, 44% of respondents purchased their solar panel system with an upfront payment. Solar loans were the second most popular buying option, chosen by 23% of respondents.

To benefit from all of the incentives mentioned above, you’ll need to start the process of installing solar. We recommend using one of our trusted installers from the list below.

Check out our picks for the top solar companies in the California cities listed below:

• Bakersfield
• Los Angeles
• Sacramento
• San Diego
• San Francisco

Solar panels are worth it in California due to its year-round sunshine allowing optimal efficiency, solar-friendly policies that encourage clean energy adoption, and wide array of experienced installers to choose from. The Solar Energy Industries Association (SEIA) lists California as the no. 1 state in the country for solar power adoption. The state has enough solar installed to power over 11 million homes. There are numerous factors that make solar power worth it in California.

The Golden State receives impressive levels of sunshine throughout the year, which means homeowners can generate large amounts of solar energy with relatively smaller solar panel systems. California also has a plethora of solar-friendly policies and incentives to make it easier for homeowners to switch to clean energy. A remarkably high number of solar installers also serve California residents, offering multiple choices when comparing providers.

Pros of Going Solar in California

• High power bill savings: California has some of the highest electric tariffs in the U.S., but this also means that solar panels achieve greater savings than in many other states. The Energy Information Administration (EIA) reports an average residential tariff of 29.99 cents per kWh in California, while the U.S. average tariff is 16.29 cents per kWh. In other words, the savings per kilowatt-hour you can achieve with solar energy are 84% higher than the national average.
• Local incentives for energy storage: You can pair solar panels with home batteries to create a 24/7 power supply not limited by sunshine conditions. California is one of the few states that offer rebates for battery systems with the Self-Generation Incentive Program (SGIP).
• Security from power outages: California is among the states with the largest number of blackouts. Wildfires are relatively common, knocking down power lines and causing electric service interruptions. A solar panel and battery system can keep your home powered during these emergencies.

Cons of California Solar

• Low net metering tariffs: California’s electricity is expensive, but you get paid a much lower rate when you send excess solar energy to the grid with NEM 3.0. You can solve this issue by storing excess production in a battery, but it can increase your project budget by over $10,000.
• Lack of state solar incentives: California does not offer homeowners major incentives for investing in solar panels. While the DAC-SASH program offers an incentive of $3 per watt, it is only available for disadvantaged communities.

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