California solar rebates and incentives: 2024 guide

Solar panel systems in California are expensive, but incentives from the state and federal governments can help you reduce the upfront cost. Between the federal tax credit and other state-specific incentives, you can save thousands on solar panels, making them well worth the investment. Here's how you can lower the cost of solar if you live in California.

As a California homeowner, you have access to some great incentives that can substantially improve your return on investing in solar panels. The four incentives below are some of the most impactful ways to bring down your solar costs. 

Residential Clean Energy Credit

The Residential Clean Energy Credit, formerly known as the federal investment tax credit (ITC), can reduce your solar panel system's cost by 30%. Your entire system qualifies for this incentive, including equipment, labor, permitting, and sales tax. 

When you file your federal income taxes, you can claim this incentive as a credit towards your federal tax bill. Just keep in mind that to qualify for the ITC, you need to purchase your system either with cash or a solar loan–if you lease your system, you won't be eligible. 

You also need a high enough tax bill, though you can roll over any remaining credit year-to-year until the end of 2034 when the ITC expires. The only time you might be eligible for a direct payment for the ITC is if you're a tax-exempt entity, like a nonprofit organization.

DAC-SASH

If you live in a top 25% disadvantaged community and you're a Pacific Gas & Electric (PG&E), Southern California Edison (SCE), or San Diego Gas & Electric (SDG&E) customer, you may be able to install solar for free or at a very low cost. The DAC-SASH program offers an incentive worth $3/W for solar panel systems between 1 and 5 kW. To qualify, you must also meet income requirements and own a single-family home. Through May 2024, the income limit is $39,440 for a household with one or two people. 

PACE financing

California is one of only three states that offers property assessed clean energy (PACE) financing to homeowners. This financing arrangement allows you to install a solar panel system with typically no money upfront and pay it back over a set period of time–usually between 10 and 20 years. 

Most PACE programs include low interest because the debt is tied to your property instead of you, making it a secure loan. With PACE financing, you make payments as an addition to your property tax bill. If you sell your home before paying off your loan, it will automatically transfer to the new homeowners. 

Local rebates

Two local electric companies offer rebates for some homeowners installing solar panels:

• Rancho Mirage Energy Authority has a Residential Solar Rebate Program, which provides a one-time $500 rebate to any homeowner who installs a new solar panel system or expands an existing system. 

• Alameda Municipal Power has an Income Qualified Solar Rebate Program that offers  a one-time $500 rebate to homeowners with household incomes below $106,000 who are installing a new solar panel system on a home built before 2020.

California doesn't offer a sales or property tax exemption, but it does provide an Active Solar Energy System Exclusion, which means your solar panel systems aren't assessed and don't result in higher property taxes. This exclusion is set to expire starting in 2025.

California no longer offers net metering, but if you're a customer of one of the three Investor Owned Utilities (IOUs)–Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E)–and you connect your solar panel system to the grid, you can benefit from net billing. Net billing is similar to net metering in that you earn credits when you send excess electricity from your solar panels to the grid. When the sun isn't shining and you need to pull electricity from the grid, your utility will apply the credits to your bill.

How much are bill credits worth with net billing?

The IOUs transitioned to net billing, also called NEM 3, in April 2023. To determine export rates, the California Public Utilities Commission (CPUC) created the Avoided Cost Calculator (ACC) based on wholesale electricity cost predictions. Under net billing, the value of excess solar energy is now based on what your utility pays for electricity (wholesale rate) instead of what you pay for electricity (retail rate). This means you won't save as much on your electric bills. 

Because the wholesale value of electricity depends on supply and demand in the market, your exact compensation rate varies by the hour of the day, day of the week (i.e., weekday vs. weekend), and month you export the energy. There are 576 possible export rates in total for each utility company. On average, wholesale credits are worth about 25% of retail electricity rates in California.

The CPUC updates the calculator every two years with predictions spanning nine years. If you go solar during those two years, you lock in export rates for the full nine years. Your export rates will still change annually depending on the wholesale electricity cost predictions, but from the time you connect your system to the grid, you'll know exactly how they'll change for each of those nine years. After nine years, your export rates will still depend on avoided costs, but they'll vary based on the version of the ACC available at that time.

You can lock in current export rates by getting your solar panel system interconnected before January 1, 2025. 

How long do bill credits roll over?  

On each monthly bill, you'll have a fixed charge that you can't offset with solar export credits and either a balance for the electricity you consumed and didn't offset with solar or a rollover of extra export credits. 

Because the value of export credits is low under NEM 3, it's likely you won't have any credits remaining by your "true-up" date, or the date of your interconnection. If you do happen to have leftover credits by this date, your utility company will compensate you based on the Net Surplus Compensation Rate they've set for that month and year. This rate will always be significantly lower than the value of your export credits, so it's important to minimize your leftover credits. 

Ideally, you'll want to interconnect your system in late winter/early spring (likely sometime in March) so you can build up your credits throughout the summer and use them throughout the winter. To disincentivize all Californians from going solar at the same time, the California Public Utilities Commission (CPUC) allows you to change your true-up date once so you can make it align with that March timeline. 

What to know about export rate adders

If PG&E or SCE is your utility company, you can earn a bit more for the electricity you export to the grid with "adders." Similar to the ACC export rates, you'll lock in these adders for nine years. Your adder rate depends on the year you interconnect your system and stays the same throughout the nine years. If you're a customer of SDG&E, a non-residential customer, or your system is part of new construction, you won't be eligible for adders. 

Each year you wait to go solar, the adder rate drops, lowering your savings; starting in 2028, adders will no longer be available. If you're a low-income customer or live in a disadvantaged community (DAC), your adders will be considerably higher. Here are the adder rates, depending on your utility company, your income status, and the year you connect your system to the grid:

Learn more about the net billing programs in California:

Pacific Gas & Electric (PG&E)

Southern California Edison (SCE)

San Diego Gas & Electric (SDG&E)

In addition to solar incentives, California also offers some great battery incentive programs to bring down the price of energy storage.

The Self-Generation Incentive Program (SGIP) provides a rebate when you install a battery wired to function during a power outage. The value of your rebate varies depending on your utility company, the size of your battery (in kilowatt-hours, kWh), and whether you're a low-income customer or live in a high-fire-risk area. 

To calculate your rebate amount, simply multiply your battery size by the number that applies to you in the table below:

To understand if you qualify for the Residential Storage Equity or Equity Resiliency rebates, check out this brochure from the CPUC. 

The rebate values will decrease in the future as more homeowners get batteries because SGIP has a tiered rate structure. This means if you're thinking about adding a solar-plus-battery system, you should do so sooner rather than later. All batteries above 3 kWh are also eligible for the 30% federal tax credit.

If you're looking for solar installers in California, here are some popular suggestions: