Living in California isn’t always as glamorous as it may sound. The cost of living in California is one of the highest in the country, next to only New York and Hawaii. Everything is expensive in California, from real estate, to a cup of coffee, to essential utilities like electric.
This is why many Californians are making the switch from traditional electric utilities to their own individual solar power systems. While the cost of solar power was once expensive, the price has come down significantly over the past few years. Now, it’s affordable for the average homeowner to consider solar power, and in California there are additional tax benefits.
California Solar Rebates
California was one of the first states to institute a solar rebate program in 2005 under Gov. Arnold Schwarzenegger. Today, on a per household basis, California solar rebates are among the highest in the country.
The main solar rebate program in California is known as the California Solar Initiative. Rebates vary according to utility territory, system size, customer class, and performance and installation factors. Rebates are said to decline in “steps” based on the volume of solar megawatts.
There are two ways to receive an incentive based rebate on system performance. There’s either an upfront payment based on expected performance paid as a lump sum, or a monthly payment based on actual performance over a period of five years.
Expected Performance Based Buy Down (EPBB)
The EPBB incentive is a one-time lump sump incentive paid up front for customers with smaller systems. Residents are paid their rebate using an EPBB calculator that considers major design characteristics of the system, such as panel type, shading, orientation, and solar insolation available by location.
Once the EPBB calculates expected performance, it will determine the total expected performance of the setup. It will then put residents in one of the incentive step levels and pay the rebate based on the total watts produced times the payout per watt.
Performance Based Incentive (PBI)
PBI is given on larger setups and is required for all setups greater than 30kW as of January 2010. Residents with smaller systems can opt-in to PBI but it generally pays out slightly better to take the EPBB rebate and not have to worry about it.
PBI works by calculating actual performance over the course of a five-year monthly period (60 months in total). The incentive is paid on a fixed dollar per kilowatt-hour of generation basis and is paid out monthly for five years total.
California offers other solar rebates for solar water heaters as well. Purchasing a solar water heater that displaces an electric water heater can receive a rebate up to $1,250, and this number increases to $1,875 if a solar power water heater displaces a natural gas water heater.
How to Apply for California Solar Rebates
Receiving a rebate for a photovoltaic system does require homeowners to jump through a few hoops. First, residents need to have an energy efficiency audit of their home in order to maximize the efficiency of what’s already there. After the audit is completed, a solar installer registered with the California Energy Commission must apply for the incentive on behalf of the homeowner.
Once these two steps are completed, the state will sent notice of approval to the homeowner. The homeowner then has a year to install or have the system installed. When the system is installed, paperwork must be sent to the state and the rebate will be sent immediately for the EPBB rebate and monthly payments are sent for the PBI rebate.
Solar Energy Tax Credit
In addition to California solar rebates, residents living in California are eligible for the federally available solar energy tax credit. Extended in 2015 under the Consolidated Appropriations Act, residents can receive a 30% rebate on qualified expenditures for installing solar power on their home.
Taken directly from the Department of Energy page for the tax credit, residents can earn up to a 30% tax credit based on when they install a system on their home. Here’s how it breaks down:
- Residents earn a 30% tax credit on expenditures if the system is installed by 12/31/2019.
- Residents earn a 26% tax credit on expenditures if the system is installed after 12/31/2019 and before 01/01/2021.
- Residents earn a 22% tax credit on expenditures if the system is installed after 12/31/2020 and before 01/01/2022.
The IRS also notes that there is no maximum credit for systems placed in service after 2008, and that even homes that are not the taxpayer’s principal residence are eligible for the credit. In other words, a summer or vacation home is still eligible for the credit even if the credit is used on the primary residence as well.
California residents who use solar water heating for their property are also for a tax break. The same rates for solar power also apply for solar water heating. However, the solar water heating for swimming pools or hot tubs is not eligible for the credit.
Advantages to Solar Power in California
California is one of the best states to purchase a solar power system in the United States. This is for a number of reasons, like these:
- California has the perfect climate for solar power: California, Hawaii, and Florida have the sunniest days out of all 50 states. This maximizes how much solar power can actually be generated by the setup.
- Electric costs in California are otherwise high: Purchasing solar power in California can save homeowners well over $100-200 in utility bills a month. Compared to other states, homeowners who switch to solar power in CA tend to save the most.
- Some residents can earn money from selling back electric: In some instances, California residents have been able to actually get paid for their solar power system. Some utility companies purchase excess electricity generated from solar power homes.
These reasons, along with the generous California solar rebates are why purchasing solar power in California so much sense. California leads the United States in solar power consumption, and the state is arguably the most committed towards clean, renewable energy. We can only hope more states will catch on in the coming years so our reliance on fossil fuels ends for good.