Solar Power Rebates, Tax Credits and Solar Panel Incentives in California; 2012 Update
There have been several changes recently to solar power rebates, tax credits and other incentives that effect residents of California.
California's RPS or Renewable Portfolio Standard
Under California's Renewable Portfolio Standard Act ("RPS"); targets have been set at 33% of electricity production to come from renewable energy by 2020. Interim targets set goals of 20% renewable energy by Dec 31, 2013 and 25% by Dec 31, 2016. This is the reason why rebates and incentives are being offered by utilities companies, and why the government has funded the rebates available under the California Solar Initiative, to ensure that these targets are met. To help your understanding we distinguish the rebates and incentives available for solar electricity panels into incentives that reduce the up-front cost and incentives that increase the income and savings from the system over time.
Federal Tax Credit
The single most significant financial incentive for your solar power system in California is the same Federal Tax Credit that applies right across the USA. This gives you a credit on your Federal Tax bill equivalent to 30% of the cost of your solar system For more information on this visit out page "The 30% federal tax credit for residential solar power systems" Because this is a tax credit you get the benefit of this when you do your next federal tax return, rather than getting a cheque on the day of installation. Still, it has a real value if you are in a position where you are paying annual federal income tax equivalent to 30% or more of the value of your solar system.
California State Rebates
California has an extensive state rebate program - the California Solar Initiative ("CSI") to encourage the development of solar power. The amount you get varies on the size of the system you install (it is expressed as a $ amount per kilowatt of peak capacity of your solar panels ), the Utility company you are with, and how close that utility company is to achieving their goals for solar power system installations in their area. The closer they get to their goals the lower the incentive becomes. It is further complicated by the fact that incentives can be taken up front or over time,( but most people will choose to take their incentive up front). For the big three utilities, PGE, SCE and SDGE rebate levels now (April 2012) , for residential systems are around the $200-$250 per kilowatt level. The best way to get the most up to date information on the rebate levels is to use the facility here to get 3, free quotesfrom installers who service your area and know the state of play with your local utility. In most cases installers give you a discount up front for the value of this rebate and then they claim the rebate back through the utility. Many of California's small utilities offer rebates as well. Some of these still offer per kilowatt rates that are higher than those offered by PGE, SCE and SDGE. Here is a table of rebates for specific municipal utilities but some of these may now be out of date:
|Alameda Municipal Power||$2,090/kw||50 kw|
|Azusa Light and Power||$1,850/kw||50% of costs|
|City of Healdsburg Utilities||$820/kw||$3,280|
|City of Lompoc Utilities||$3,000/kw||50% of costs|
|City of Palo Alto Utilities||$1,200/kw||None|
|Corona Department of Power and Water||$1,530/kw||$4,590|
|Hercules Municipal Utility||$2,250/kw||$10,000|
|Lassen Municipal Utility District||$3,220/kw||Lesser of 50% of costs or $6,000|
|Lodi Electric Utility||$2,090/kw||$8,400|
|Merced Irrigation District||$2,800/kw||$7,000|
|Modesto Irrigation District||$1,500/kw||50% of costs|
|Pacific Power||$1,130/kw||5 MW|
|Pasadena Water and Power||$2,000/kw||1 MW|
|Roseville Electric||$1,360/kw||10 kw|
|Silicon Valley Power||$2,500/kw||$25,000|
|Turlock Irrigation District||$1,870/kw||50% of costs|
Ongoing Incentives for Solar Power in California: Payment for your electricity you feed into the grid
In California you have a choice about how you are paid for electricity that your system feeds back into the grid. You can either choose to take a Feed in Tariff, where you are paid a fixed rate for power that you feed back into the grid for a fixed period, or you can choose Net Metering, in which case you are given a kwh credit for solar electricity that you feed back into the grid. In practical terms it is generally better for folks with smaller systems to choose net metering and for folks with larger systems to choose the FIT. However, this is not always true and you should discuss your options with the solar installers that you choose to get quotes from.
FIT (Feed in Tariff)
This means that you can choose to get paid for every Kw/hour of electricity you produce. This is an opt in or out program and if you opt in you can't get net metering. If you do want to get a check for all those kilowatt-hours ("kwh') of electricity your producing, entering into a contract in 2012 will get you between 7.68 cents (10-year contract) and 9.27 cents (25-year contract) for every kwh. Given that power in California now averages around 16 cents per kilowatt hour, and higher usage often over 20 cents per kwh, net metering will give most customers are better return on the power they feed into the grid In fact it probably only makes sense to opt into the FIT if you are looking at installing a large scale solar farm.
Net Metering means that your electricity provider will monitor how much power you consume from the grid and how much power you generate and send back to the grid. This is achieved by the installation of a bio-directional meter that separately records what you buy from the grid and what you push back into the grid. The amount of kilowatt hours you feed back into the grid is subtracted from the amount of kilowatt hours you have purchased from the grid in each billing period. So if you used 1000 kwh in a period and sent 300 kilowatt hours into the gird during the day when you weren't using much power at home, then your utility will only bill you for 700 kilowatt hours. Not all utilities give a 1:1 credit of kwh's. Some only give a fractional credit i.e 90%. In this case, on the example above, only 270 kwh would be credited to the customer bill even though they fed 300 kwh into the grid. You can look on the SCE, PGE and SDGE websites for their net metering policies. Alternatively you can use our quote form "here" to get quotes from solar panel installers that know the policies of your utility. At the end of 12 months any net surplus you've accumulated can either can held as a credit towards bills indefinitely, or the utility will write you a cheque at the 12-month average price for electricity between 7am and 5pm. Just make sure you tell the utility which option you want! If you forget to make an affirmative choice your credit reverts back to the utility without compensation. The real value of net metering is that the value you get for the power that you feed back into the grid will increase in time as the retail price of power increases.
California State Tax Exemptions and State Tax Credits
Although you don't get a state based tax credit anymore the good news is that your solar power system is totally exempt for property tax. This means although the value of your property has been raised by the solar power install you won't be penalised for it by having to pay higher property taxes. Unfortunately, you do not get any sales tax exemption in California when you purchase solar panels.
5kW Example Return on Investment
|Size of System (kw)||
|Space required (square feet)||
|Price of system per watt||
|Price of power (marginal cost high usage kwh's) $ per kwh||
|Average daily kwh produced per 1 kw of solar||
|Total average daily production||
|Total Price (before incentives)||
|Federal Tax Credit||
|State Tax Credit||
|State Rebate (assuming PGE or SCE level 9, other utilities may be more)||
|Actual out of pocket cost after incentives claimed||
|Annual Power production||
|Total Annual Energy savings based on net metering at 1:1||
|Cumulative Energy Savings||
|Annual Return on Investment||
|Payback Time assuming no increase in power prices||6.66 years|
|Payback time assuming 7% annual increase in power prices||Under 6 years|
These figures are estimates of course. Your home is unique, and how much you can expect to save depends on lots of little details. Please note the reason we have used $US .20 per kwh when the average retail price in California is currently only 16 cents per kilowatt hour is that power prices in California are tiered so that the price per kwh goes up as you use more kwh per billing period. A solar power system reduces your consumption of power in the most expensive band first and so this is why it has a higher value to you than the average cost of power. Thankfully, we know some experts in your area. Just fill out the form and one of then will be more than happy to go over all those details and help you craft a plan to get the absolute most out of a solar power system for your home. Your quotes from local solar installers through this site are 100% free and without obligation.
Californian Solar Incentives and investment case: Summary April 2012
California has a very good overall package of incentives to help meet its solar targets. It is not the best but it is not the worst. One of the biggest factors in deciding if you should go solar in California is the price of power, its expensive and its going to get more expensive. It's our opinion that a solar power system for your home in California is a financial no brainer. Remember, Warren Buffet's compound annual return on investment over 50 years is only around 20% and with a solar power system you are likely to exceed this within only 5-6 years. From then on the percentage return you get each year just goes up and up as power prices go up and up over the next 30 years.