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Solar Rebates and Tax Incentives
There are Federal, State, and local rebates available that make purchasing a solar power system for your residence or business very affordable, and in turn make this a great "green" investment opportunity. The solar contractor you hire will typically take care of applying for the state and local rebates, and you would work with your tax professional to apply for the federal tax credit at the end of the year. Each of these rebates is broken down below.
Federal Tax Credits
The United States Federal Solar Tax Credit is for 30% of the cost, up to $500 per 0.5kW of power capacity. This tax credit expires December 31, 2016. Both existing homes and new construction qualify for this tax credit. It must be your principle residence, as rentals and second homes do not qualify. Installations must meet applicable fire and electrical code requirements. Something important to note is that unlike other federal energy incentive tax credits, the solar tax credit is not capped at $1,500. You receive the credit on the tax return corresponding to the year your system was "placed in service."
You can't get back more than you have paid in taxes for that year's e-file, but you can carry over the tax credit to the following year, as long as the rebate is still in effect. So as an example, if your credit is worth $10,000, but you only paid $8,000 in taxes that year, then you can carry over the remaining $2,000 credit into the next year, and receive that credit on the following years tax return.
State Solar Incentives
The incentives you would receive from state to state will vary. California is a leader in the push for the use of clean, renewable, solar energy, through the California Solar Initiative (CSI) program, which has a goal of 1,750 MW of "general market" installed solar by 2016. The amount you receive from the CSI is determined which one of the 10 "steps" the program is currently on when you apply. As the money in each step is used up, each subsequent step offers a smaller rebate. This means that the sooner you have your system installed, the larger the rebate you receive. This rebate applies to nearly all residential, commercial, government, and non-profit customers of the state's three investor owned electric utilities, namely Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E). Those who fall under a municipal utilities jurisdiction and not one of the state's, may also qualify for similar incentives through their particular municipal service provider. The following is a table of the steps and rebate amounts of the Expected Performance Based Buy down (EPBB) of the California Solar Initiative.
| Step | Statewide MW in Step | Residential | Commercial | Gov't/Nonprofit |
|---|---|---|---|---|
| 1 | 50 | n/a | n/a | n/a |
| 2 | 70 | $2.50/watt | $2.50/watt | $3.25/watt |
| 3 | 100 | $2.20/watt | $2.20/watt | $2.95/watt |
| 4 | 130 | $1.90/watt | $1.90/watt | $2.65/watt |
| 5 | 160 | $1.55/watt | $1.55/watt | $2.30/watt |
| 6 | 190 | $1.10/watt | $1.10/watt | $1.85/watt |
| 7 | 215 | $0.65/watt | $0.65/watt | $1.40/watt |
| 8 | 250 | $0.35/watt | $0.35/watt | $1.10/watt |
| 9 | 285 | $0.25/watt | $0.25/watt | $0.90/watt |
| 10 | 350 | $0.20/watt | $0.20/watt | $0.70/watt |
Local Municipality Rebates
Local municipalities not covered under the CSI may have their own solar incentive program. The rebates from these programs can differ significantly, but thus far, the Los Angeles Department of Water and Power (LADWP) has one of the best solar incentive programs out there. LADWP's solar rebate is based upon the amount of power your system is predicted to produce over the course of 20 years, and a degradation factor of 0.9. This prediction takes real world factors into account, such as panel azimuth, tilt, and overall system efficiency. LADWP requires the use of the PV Watts tool to calculate your yearly system performance based on the previously mentioned factors. Once you calculate the kWh output of your system over the course of a year using PV Watts, and then multiply that number by 20 years, and once again by the degradation factor of 0.9, the following table displays the incentive amount per kWh you will receive on your rebate.
| Steps 1-10 | MW Target | Incentive $/kWh |
|---|---|---|
| 1 | 6.7 | 0.14 |
| 2 | 3.3 | 0.13 |
| 3 | 3.3 | 0.12 |
| 4 | 5.0 | 0.11 |
| 5 | 8.3 | 0.10 |
| 6 | 10.0 | 0.09 |
| 7 | 11.7 | 0.08 |
| 8 | 13.3 | 0.07 |
| 9 | 15.0 | 0.06 |
| 10 | 16.7 | 0.05 |
So as an example, if your system is predicted to produce 7,000kWh per year according to the PV Watts tool, and you multiply that by 20 years and then once again by a degradation factor of 0.9, you get, 126,000kWh. You multiply that number by the incentive amount for the current step of the program, we will use step 3 as an example, you would get 126,000kWh x $0.12/kWh = $15,120 as your rebate. This amount does NOT include the 30% you would get back from the federal tax credit!