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.
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:
|Average cost to install
|Generac PWRcell M5
|LG Chem RESU 16H Prime
|sonnen eco 15
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:
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.
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.
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.
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.
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 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.
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 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.
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).
Residents of Fort Collins, Colorado can receive up to $1,500 for installing a new battery storage system in their home. The incentive is $100 per kWh of usable capacity. For example, a 13.5 kWh Tesla Powerwall would qualify for a $1,350 rebate.
Customers of Holy Cross Energy can receive an incentive of $250 per kW of battery output rating installed alongside a solar energy system. The incentive is only available to those solar customers who participate in Holy Cross’s Time of Day Optional rate schedule.
Customers with rooftop solar installations who live in and around Jacksonville, Florida can receive a $2,000 rebate when they install a battery.
Most residents of Nevada are served by NV Energy, which means they’re eligible to get a rebate when they install battery storage alongside a solar panel installation. Both new and existing solar installations qualify.
If the customer signs up for NV Energy’s Time of Use (TOU) rate, they can qualify for $190 per kWh of installed storage, capped at $3,000 or 50% of costs. If they stay on the flat rate plan, the incentive is $95 per kWh with a $1,500/50% cap.
For example, a 13.5 kWh Tesla Powerwall would qualify for a rebate of $2,565 for a customer on the TOU rate, or $1,282.50 for someone on the standard rate.
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.
Eversource and National Grid serve customers across New England, and offer this battery storage incentive program in Connecticut, Massachusetts, New Hampshire, and Rhode Island.
Home solar battery owners can earn annual incentive payments for offering some battery capacity to their utility company for up to 60 days a year during peak summer hours.
The utilities will pay customers in exchange for the ability to draw energy from their batteries on certain very high energy usage days during summer peak hours (2-7 pm, June-September). These are days when buying emergency power from fossil fuel plants would be prohibitively expensive, so the utilities would rather pay you a little bit for access to your battery during the course of the summer.
Each time the utility uses a battery during these days, it is called an “event.” During these events, the utility will draw power from the battery for 2 to 3 hours at a rate of a certain number of kilowatts (kW). Throughout the summer, there will be 30 to 60 of these events.
At the end of the year, the utility will average the power draw it used during all of the events, and pay the battery owner a flat fee for the average number of kW drawn. The fees differ by state and utility company, but they range from about $250 to $400 per kW.
So let’s say your average draw is 3 kW and the per-kW payment is $400. In that case, you’ll receive a check for $1,200 at the end of the summer. The payments are typically made in October or November.
Green Mountain Power serves over 260,000 customers all across Vermont, and is one of the leaders in smart renewable energy policy in the country. The company’s Bring Your Own Device (BYOD) Program was one of the nation’s first battery incentive programs, and is still available to new subscribers. Customers who want to participate can sign up through the link above.
Under the program, you agree to let Green Mountain activate your battery during “peak events”, which they say occur between 5-8 times per month on average. Customers enroll a certain number of kW of storage in the program and agree to participate for 10 years.
The utility currently offers upfront payments per kW enrolled, with:
For example, if a customer with an existing solar system adds a Tesla Powerwall and enrolls 3 kW in the BYOD program at the 4-hour-per-event tier, they would receive an upfront payment of $3,150 ($950 for the 4-hour tier plus $100 for installing a retrofit battery). Each time there is an event, Green Mountain would use the battery for 4 hours, reducing the energy stored by 12 kWh (3 kW times 4 hours).
In this scenario, the battery would only have 1.5 kWh left in reserve, but would charge again as the sun rose the next morning. Luckily, customers can choose to enroll any number of kW in the program, and balance their incentive amount with the amount of the battery they want to keep in reserve for power outages.
If you live on Long Island and are considering home solar with a battery, you can join the PSEG Battery Storage Rewards program.
Under the program, you agree to let PSEG access your battery during a certain number of events each summer when grid usage is at critical highs. The utility will activate participants’ batteries to provide power to reduce strain on the grid.
You must work with an approved contractor on the installation, who will connect you with a battery storage aggregator (currently Swell Energy). There is currently an upfront incentive available from Swell for all participants.
Utah residents served by Rocky Mountain Power (RMP) can earn both cash rebates and annual participation payments for installing a battery in their home. The program requires homeowners to sign up for a 4-year commitment to provide energy to the grid during evening peak times.
In exchange for a customer’s participation, RMP will pay $400 per kilowatt enrolled at the start of the agreement, and an additional $15 per kW each year after enrollment for four years. As of this writing, only sonnenCore, sonnen eco, and sonnen ecoLinx batteries qualify for the program, but RMP says it plans to work with other manufacturers in the future.
For example, a sonnen eco 15 can output 7 kW at any time. If a customer enrolled the 7 kW in the WattSmart program, they would receive a check for $2,100 upon approval, and $105 in each of the next 4 years.
The program requires homeowners to agree to allow RMP to control their batteries and gather operational data. RMP says it will not discharge the batteries below 50% capacity in the first year, but they may reevaluate that amount in future years. The program rules allow RMP to use up to 90% of the battery, should they decide to do that.
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.
To see what incentives you qualify for, use our solar calculator and click the button below the calculator to get quotes from installers.