How to Save Money on Solar Panels In California

As of 2023, California is leading the nation in solar energy adoption, with over 32,000MW of capacity installed across the state – enough to power nearly 6.5 million homes with renewable energy. With abundant sunshine and a wealth of incentives, it‘s an opportune time for Golden State residents to go solar. This guide will walk you through all the ways you can maximize savings on solar panels in CA.

Overview of Solar Savings Programs in California

There are numerous rebates, tax credits, and other solar incentives available at the federal, state, and local levels that can add up to major savings for CA homeowners. Here are some of the main ways Californians can reduce the cost of installing solar panels:

  • Federal Solar Tax Credit – This 30% tax credit on the total cost of a solar system lasts through 2032 and can save homeowners thousands. However, leased solar systems do not qualify.

  • Net Metering/Billing – CA policies allow solar households to get credit or payment for excess power sent back to the grid. This can offset your monthly bills.

  • Property Tax Exemption – Solar panels in CA are 100% exempt from increased property tax assessments. This provides lasting savings over the system lifetime.

  • Renewable Portfolio Standards – CA mandates utilities hit clean energy targets, driving them to offer solar rebates and benefits to attract customer installations.

  • Leasing – With high electricity rates, solar leases often still provide net savings compared to utility bills in CA, despite losing access to some incentives.

In total, the combination of available credits, rebates, exemptions, and more creates substantial savings opportunities.

Federal Solar Tax Credit

The federal solar tax credit offers eligible homeowners a 30% credit on their federal income taxes based on the total cost to purchase and install their solar panel system. This does not apply to leased systems. With the average pre-incentive cost of a 6 kW solar array in CA being around $16,080, the tax credit could save you nearly $5,000!

This 30% credit remains in place for systems installed by the end of 2032. It then steps down incrementally through 2034. So now is the optimal time to go solar and maximize savings under the full credit.

When claiming the federal tax credit, just be sure your solar company provides you with the necessary documentation detailing your system cost.

California Solar Incentives

While CA does not have a statewide solar tax credit, many municipal utilities and solar programs offer rebates and benefits driven by the state‘s ambitious clean energy goals.

Net Metering & Net Billing

The vast majority of areas in California allow net energy metering (NEM), through which a homeowner receives energy credits on their utility bill for any excess solar electricity fed back to the electric grid from their system. This enables solar customers to offset the power they draw from the grid at night with what they export during sunny daytime hours. Newer homes are transitioning to net billing which functions similarly.

California‘s strong NEM and net billing policies provide the added savings benefit of selling your excess solar power back to the grid. With intense renewable energy targets in a sunny state like CA, there is high demand for that solar power.

Some municipalities like Los Angeles DWP even offer performance-based incentives where you can earn money through producing solar power on top of net metering bill credits.

Property Tax Exemption

One of the best ways CA supports solar panels is through exempting them from increased property tax assessments. So if you add a $15,000 solar array to your home‘s value, it will not raise your property taxes. This saves you money for the entire lifespan of your solar panels.

Sales Tax Exemptions

While CA no longer exempts residential solar purchases from state sales tax, commercial and industrial solar projects remain exempt. Any businesses looking to go solar in CA can thus avoid paying sales tax on equipment, installation services, and more.

More Local Programs

Cities across CA have additional solar incentives like feed-in tariff programs that pay you set rates for excess solar electricity fed into the grid. Contact your local utility/municipality to learn about any solar rebates, tax breaks, or other savings available in your area.

Should You Buy or Lease Solar Panels in California?

For homeowners trying to decide whether to purchase a solar array or lease one through a solar provider, both options can make financial sense in CA.

The benefit of an outright purchase is that you can take advantage of incentives like the federal tax credit which are unavailable with a leased system. This upfront investment also means you own the array so will reap higher long-term savings.

However, since you pay $0 upfront with a solar lease or PPA agreement, this route still provides instant savings given CA‘s high electricity rates. While you do lose access to some incentives, a good solar lease payment is still far less than an average CA utility bill.

Run the numbers for both buying vs. leasing solar panels so see which delivers you greater overall savings based on federal tax incentives weighed against long-term power bill reductions.

Solar Incentives in California: Summary

Federal Tax Credit30% return through 2032
State Tax CreditsNone currently
Equipment RebatesOffered locally by some utilities
Net MeteringYes
Property Tax Breaks100% exemption
Sales Tax BreaksCommercial/industrial only as of 2023
Performance PaySome local programs

Further Reading on California Solar

To go even more in depth on solar policy and incentives in California, check out the following additional resources:

A Guide to All of Tesla‘s Gigafactories and Where They Are Located – EV leader Tesla is pouring investment into CA-based solar initiatives

Can You Recharge an EV With Solar Power? – Combining residential solar panels with electric vehicle charging delivers maximum savings

Solar Panels in Arizona: Cost, Savings, and Rebates – How does California compare to its sunny neighbor Arizona in solar policy?

With its market-leading renewable energy targets and access to a wide range of incentives, California makes it easier than ever for homeowners to break into solar. Follow the recommendations outlined here maximize your savings!

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