The average homeowner will wait an average of 8 years to earn back their initial investment in residential solar panels through energy savings. The long-term benefits of energy efficiency are significant but the upfront costs for hardware and labor can be high. There are a number of rebates, tax credits, and additional options to offset the cost of installing solar panels on your home.

Understanding the Federal Solar Tax Credit in 2021

In December 2020, the Federal Solar Tax Credit was extended for two additional years. If you install a residential solar energy system in your home, you will be eligible to claim 26% of its cost on your federal income taxes. The main condition of this tax credit is that the system is both installed and operational. Homeowners who installed a residential solar panel system last year are also eligible to claim 26% on this year’s taxes.

The tax credit covers the hardware (solar photovoltaic panels and cells), installation costs, inspection and permit fees, and additional equipment. Energy storage devices such as stationary batteries are also covered by the credit if they are explicitly used with solar panels.

The solar energy system you install has to be functional and generate electricity for your home during the tax year in question. This is one of the main criteria for eligibility, fulfilling the federal government’s definition of a completed installation. One compelling aspect of this tax credit is that there is no maximum amount that can be claimed.

Solar Battery Rebates: the Self-Generation Incentive Program

In an effort to prepare citizens for future outages and wildfire seasons, the California Public Utilities Commission (CPUC) offers rebates for the purchase and installation of energy storage systems. The Self-Generation Incentive Program (SGIP) includes backup power systems that can be used with solar panels.

The general SGIP rebate is based on the energy storage capacity of the system that is installed. At the time of this writing, the general rate of the rebate is $250/kilowatt-hour. For example, if you install a typical solar battery with 10 kWh of capacity it would qualify for a $2500 rebate.

Since the rebate program has a set budget and a tiered structure, the rate of the rebates will decrease as more customers take advantage of the program. The SGIP prioritizes communities in high fire-threat areas and those that have experienced frequent outages, as well as low income and medically vulnerable customers. The rebate is available to electric and gas customers of PG&E, SCE, SoCalGas, and SDG&E.

Net Metering: Cooperation Between You and the Power Grid

Installing solar panels on a residential property in California makes your home eligible for the state’s net metering program. The program allows customers who generate electricity (“customer-generators”) to sell surplus energy back to their local power utility. In exchange, they receive financial credit on electric bills.

Based on your energy generation system and utility provider, there may be a one-time fee in order to qualify for the program. However, there is a significant long-term advantage to offsetting the costs of electricity derived from the power-grid with the surplus energy of your solar panel system. According to the CPUC, 90% of energy derived from customer-generators is incentivized by the Net Metering program.

Regional Rebate Options

Many regional utilities and energy providers in California offer rebates or additional incentives for customers who want to invest in residential solar panels. At the time of this writing, East Bay Community Energy offers a $1250 incentive to property owners who agree to share their stored energy with the utility. Sonoma Clean Power incentivizes the aforementioned net metering option by increasing the amount of money paid for the excess energy produced by residential solar technology. Additional examples include MCE’s Solar Rebate Program, which has allocated $535,000 in rebates to qualified customers.

California residents may be eligible for additional rebates after installing solar panels and backup energy systems. Additional options may be available to supplement the federal and state-wide incentives, including local utility and municipal programs. Residential solar energy can reduce the cost of cooling, heating, and electricity well into the future while rebate programs can offset the initial cost of the investment.


Photo by Mike Fox on Unsplash