Guide to solar battery tax credits, rebates, and other incentives

All across the United States, regulators and utility companies are beginning to recognize the value of energy storage. As a result, there are now several incentives available for home solar batteries, including federal and state tax credits, rebates, and utility programs. 

Some of them come with certain requirements, like reserving battery capacity for the utilities to use, and then there are others that offer an incentive for simply purchasing a battery.

Home solar batteries aren’t cheap, but these incentives can reduce the cost by a lot. And the peace of mind that comes with knowing you’ll be protected in the event of a power outage is priceless. 

If you’re interested in solar power and batteries for your home, check out the below guide to see if your state or utility is supporting home energy storage with incentives.

How batteries qualify for the federal clean energy tax credit

Homeowners have long been able to enjoy a significant tax break when they install solar panels. The current federal clean energy tax credit gives homeowners back 30% of the upfront cost to install solar panels at tax time, the year after they’re installed. Luckily, batteries also qualify for the tax credit, whether or not they’re installed with solar panels.

Before 2022, a battery storage system had to charge exclusively from solar energy to qualify for the tax credit. Then Congress passed the Inflation Reduction Act, which updated the tax credit to include batteries not charged from solar power.

Here are some example cost calculations for the solar battery tax credit:

Battery	Average cost to install	Tax credit
Tesla Powerwall	$11,500	$3,450
Generac PWRcell M5	$15,000	$4,500
LG Chem RESU 16H Prime	$13,000	$3,900
sonnen eco 15	$25,000	$7,500

Qualification criteria

Batteries of all brands, chemistries, and costs are eligible for the tax credit. The main criteria you need to meet for a battery to get the federal tax credit are:

• The taxpayer must be the owner of the battery system

• The taxpayer must have a taxable income

• The battery must be installed at the taxpayer's residence

• The credit can only be claimed on the original installation of the system

• The battery must be at least three kilowatt-hours (kWh) in size

To claim the federal tax credit, you need to fill out IRS form 5695 while filing your taxes for the year that the installation was completed. It's best to consult a tax expert for details.

The last important thing to know is that taxpayers must have tax liability in order to claim the ITC. If you don’t owe taxes equal to the credit amount, you can claim it over more than one year, but the credit can only offset taxes you would have owed.

Disclaimer: SolarReviews is not qualified to give tax advice. Contact a tax professional to learn more about how the federal clean energy tax credit could work for you.

State solar battery rebates and incentives

In addition to the federal tax credit, several states have taken steps to help homeowners get battery storage systems with their solar installations. These incentives can be combined with the federal tax credit to reduce the total cost to own a battery down to a very manageable number.

Here are the current state-level solar battery incentives:

• California Self-Generation Incentive (SGIP)

• Hawaii (Oahu) Battery Bonus Program

• Maryland energy storage tax credit

• Massachusetts SMART program

• Oregon battery rebates battery incentive

California Self-Generation Incentive Program (SGIP)

The SGIP battery rebate program provides homeowners in the Golden State with rebates when they install solar batteries. The program was started in 2018, as a response to the need for energy storage systems in fire-prone areas where utility companies frequently shut off power. 

The program currently offers rebates of between $150 and $1,000 per kilowatt-hour of storage. The differing amounts depend on qualifying factors, with higher rebates going to low-income customers who live in highly fire-prone areas. These homeowners qualify for an “equity resiliency” rebate bonus.

Together with the federal solar tax credit, the SGIP program greatly reduces the cost to add a battery to a home. Customers of the state’s 3 major utility companies (PG&E, SDG&E, and SCE) who don’t live in fire-prone areas can reduce their cost by up to 45%, while people who qualify for the equity resiliency bonus can get batteries for next to nothing.

Learn more: What’s new with California’s SGIP battery rebate in 2023?

Hawaii (Oahu) Battery Bonus Program

In Hawaii, customers of Hawaii Electric Company (HECO) on Oahu can sign up for the Battery Bonus Program and commit some of their batteries’ capacity for daily use during peak times in exchange for some pretty nice rebates. 

Under the program, HECO customers are paid $850 per kW of power (up to a maximum of 5 kW) they commit to serve to the grid for two hours every day during the period between 6 and 8:30 pm. There is an additional ongoing monthly incentive of $5 per kW, paid as a bill credit. Finally, customers not on HECO’s net metering plan will be paid for any electricity their battery sends to the grid at the applicable retail rate.

For example, a customer who installs a Tesla Powerwall and commits 5 kW will receive an incentive payment of $4,250, and $25 monthly bill credits for up to 10 years. The battery will be discharged by HECO every day for two hours between 6 and 8:30 pm, reducing its stored energy by 10 kWh (5 kW for 2 hours). Provided the battery was fully charged at 6 pm, this would leave it with 3.5 kWh left over, in case of an outage. 

Participating customers must agree to allow HECO to access their battery daily for 10 years. The batteries will discharge first to serve the needs of the home in which they’re installed, and any further capacity will be exported to the grid. 

Maryland energy storage tax credit

In 2021 and 2022, the state of Maryland offered an excellent tax credit that could be combined with the federal tax credit to seriously supercharge your savings on a home battery. This program awarded a maximum of 30% of the cost of installation - up to $5,000 for homeowners and $150,000 for businesses. 

Maryland also did not require the batteries to be charged with solar energy, meaning this tax credit could be applied in addition to the federal credit. And there’s even more good news - Maryland also allowed homeowners to claim the credit on all costs associated with the battery, including labor, sales tax, and other equipment needed to connect it to the home.

Following the example above with the Tesla Powerwall (which would cost $11,500), the Maryland incentive would be $3,450. In addition to the federal tax credit of $3,450, the final net cost of the Powerwall after one year would be just $4,600.

$11,500 - $3,450 - $3,450 = $4,600

The reason we’ve used so much past tense language in this section is the full $750,000 of funding for the Maryland Energy Storage Income Tax Credit was used as of September 2022, and the status of the 2023 program is not yet clear. 

We’ll update this article when we know more, but you can also check out Maryland’s page for more information about the credit.

Massachusetts SMART program battery incentive

Massachusetts has been solar-friendly for a long time. The state offers a small tax credit with a cap of $1,000 and also supports solar with ongoing payments under the Solar Massachusetts Renewable Target (SMART) Program. This program pays incentives directly to solar system owners for each kilowatt-hour of energy their solar panels generate.

The best part of this program is that it pays additional incentives to people who get a battery installed as part of a solar energy system. The calculation is complex and depends on many factors. 

First, the incentives are assigned to “blocks,” which represent a certain number of megawatts of solar generation capacity. As the blocks fill up, subsequent applicants are paid a slightly smaller incentive. Next, energy storage is also assigned in blocks, and the amounts for the main incentive and energy storage adder are paid together.

For example, as of this writing, customers served by Eversource East are on Block 6, and energy storage is on Block 10. Under the current incentive blocks, a homeowner applying for the SMART program when purchasing a 6.5 kW solar panel system with a single Tesla Powerwall would earn an incentive of $.13013 per kWh for 10 years. $.09203 of that incentive would be for the solar, and $.0381 for the battery.

The incentives are paid every month through a homeowner’s electricity bills. Using the example above, the solar system would produce an average of about 695 kWh per month, earning the homeowner a $90 payment from the utility company. Over 10 years, the homeowner could expect a total SMART incentive of over $10,800. 

Combined with the federal and state tax credits, the SMART program more than pays for the cost added by the battery, and customers of Eversource and National Grid also can pair the SMART incentives with the ConnectedSolutions programs (described in the below section) to get even more rewards for using a home battery. 

Massachusetts is truly a state that cares about supporting home solar. You can check the current SMART program block availability by going to this page.

Oregon battery rebates

In 2020, the Oregon state government made $10 million available for its Solar + Storage Rebate Program, which provides rebates of $300 per kWh for residential battery systems. It also provides rebates to service providers who install batteries that benefit multiple low-income customers, such as multifamily housing providers and tribal and governmental entities that serve low-income communities.

The program does not require that the battery be used to feed into the grid, but instead provides incentives simply for purchasing the battery. The current incentive is $300 per kWh of battery storage, up to $2,500 or 40% of costs, whichever is lower. For low and moderate-income homeowners, the incentive can cover as much as 60% of the battery cost, but retains the $2,500 limit.

Essentially, the limit means that all batteries with capacities of 8.3 kWh and greater will qualify for a $2,500 rebate. This covers most of the home solar batteries on the market. 

To claim the incentive, homeowners must work with an approved contractor. Only new installations of solar and storage qualify for the incentive. Definitions of low and moderate-income for the state can be found here.

Utility battery incentives

Utility companies have a tough job. They have to provide power to customers through rain, sleet, snow, and hail, and when they make a mistake, it tends to make headlines. They’re realizing that having batteries located in homes and business around their service area can be a very good thing, and they’re willing to pay incentives to people who buy batteries.

Some battery incentive programs pay you a lump sum rebate based on the size of your battery. Others require battery owners to sign contracts that allow the utility to have ongoing access to their battery, but often pay larger incentives.

We’ve separated these programs into three types:

• Cash rebate programs, which require neither a contract nor a requirement to share the battery’s capacity with the grid

• Bring your own battery programs, which are full-fledged programs available at a few utilities, and require participants to allow the utilities to control their battery during times of high electricity demand

• Battery pilot programs, which are usually like “bring your own” programs, but available only to a limited number of customers as a test before a utility offers a full-fledged battery incentive. Green Mountain Power's battery lease program is an example of one.

Cash rebate programs

As mentioned earlier, these programs pay rebates directly to people who get a home battery, without requiring the battery owner to use the battery to provide services to the grid. 

These incentives are direct reductions in the cost of the battery, so they reduce the amount you use to calculate the 26% federal tax credit. For example, if a battery that costs $13,000 gets a $2,000 rebate, the amount of the tax credit is 26% of $11,000 (the cost of the battery after the rebate).

Here are current battery rebate programs:

Bring your own battery programs

This kind of incentive is very new, so only a few utility companies offer widespread programs to large numbers of their customers. In general, these programs require a homeowner to sign a contract that allows the utility to use their battery during a limited number of annual events over a certain number of years. 

Under these programs, the utilities offer either an upfront incentive, ongoing payments, or both. In exchange for these incentives, they need access to use your battery during grid emergencies. When power draw increases dramatically, such as during a heatwave, the utility can use the batteries of thousands of customers to address demand. This reduces the need for obtaining emergency power from fossil fuel plants that costs a lot and pollutes the environment.

This kind of response to grid emergencies is called “demand response,” and battery storage is just one way to tackle the problem. Many utilities also offer rebates for purchasing smart thermostats, provided you give them permission to allow them to increase your AC by a degree or two during these periods of high power demand. 

Here are the battery incentive programs currently available from utility companies:

Battery pilot programs

Battery pilot programs are happening all around the country. These small-scale programs are designed by utilities to test the feasibility of incorporating more distributed energy storage into the grid. 

Oftentimes the number of customers who can sign up for these programs are in the double or triple digits, but the programs can sometimes be larger.  

Because of the limited nature of these programs, we can’t guarantee that you’ll be able to sign up for one of those listed below. We’ll do our best to keep this list updated.

• Arizona Public Service (APS) Residential Battery Pilot

• Xcel Energy’s Battery Connect Program

To see what incentives you qualify for, use our solar calculator and click the button below the calculator to get quotes from installers.