2023 Solar Incentives Guide for Palo Alto, CA - Tax Credits & Rebates
In this guide, we'll cover the latest solar incentives and rebates available in Palo Alto.
You'll learn about:
- Local & State Solar Incentives
- Federal Tax Credits (Updated for 2023 and beyond)
- Ways to optimize your solar investment
Solar installers are experts in maximizing your solar tax credits and rebates.
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Updated September 15, 2023
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What Solar Tax Credits, Incentives, and Rebates are Available in Palo Alto?
Property Tax Exclusion for Solar Energy Systems and Solar Plus Storage System
Western Riverside Council of Governments - Home Energy Renovation Opportunity (HERO) Financing Program
Minimum financing: $5,000
The financing may not exceed fifteen percent (15%) of the market value of the property, up to the first seven hundred thousand dollars ($700,000) of the property’s market value, and ten percent (10%) of the remaining value of the Property above seven hundred thousand dollars ($700,000) minus any PACE assessment on the property The total amount of any annual property taxes and assessments shall not exceed five percent (5%) of the property's fair market value, determined at the time program financing is approved.
Local Option - Municipal Energy Districts
Self-Generation Incentive Program
Incentives will step down over time. See below for incentive amounts.
Renewable Market Adjusting Tariff (ReMAT)
LADWP - Feed-in Tariff (FiT) Program
Base price will step down over time as certain MW goals are met
California Solar Initiative - Solar Thermal Program
Single Family Residential Incentives:
Systems that displace natural gas: $29.85 per estimated therm displaced
Systems that displace electricity or propane: Funding has been exhausted
Commercial/Multifamily Incentives:
Systems that displace natural gas: $20.19 per estimated therm displaced
Systems that displace electricity or propane: $0.42 per estimated kWh displaced *** Note, funding has been exhausted in this category for SCE and PG&E
Solar Pool heating: $5.00 per estimated therm displaced
Santa Clara Water & Sewer - Solar Water Heating Program
City of Palo Alto Utilities - Solar Water Heating Program
Single-family residential electricity or propane-displacing systems: $0.54 per kWh displaced
Multifamily and Commercial gas-displacing systems: $14.53 per therm displaced
Multifamily and Commercial electricity or propane-displacing systems: $0.42 per kWh displaced
Low-Income Multifamily gas-displacing systems: $19.23/therm displaced
Low-Income Multifamily Electric or Propane Displacing systems: $0.56/kWh displaced
Federal Residential Renewable Energy Tax Credit
Source: https://www.dsireusa.org/
Solar incentives encourage homeowners to switch to renewable energy by providing financial incentives meant to lower the burden of solar panel installation and use. Solar incentives can include upfront discounts, cash back or credit towards your monthly utility bill. Some incentives are offered by the federal government, some by the California government and some by your utility company, county or municipality. Some broad categories of solar incentives include:
- Rebates: A rebate is a partial refund credited to your account after you've paid for your solar panels. These may be offered by your local utility company, your county or your state. The rebates are usually applied before tax credits are calculated.
- Solar Renewable Energy Certificate (SREC): SRECs and similar other performance-based incentives might be available to you if the solar system on your home produces over a specified (generally small) amount of electricity. Performance-based incentives are generally handled by the state government. You can sell SRECs to your utility company or other buyers, and the money you receive in return is generally considered part of your taxable income.
- Tax Credits: Tax credits reduce, dollar-for-dollar, the amount of income tax you owe the government. These differ from tax deductions.
- Tax Exemptions: Tax exemptions may come in one of two forms. The first is sales tax exemption, applied when you purchase solar panels. The second is property tax exemption. This allows you to exclude the added value of your solar system when paying property tax on your house.
- Net Metering: Be sure to talk with your Palo Alto utility company about signing a net metering contract. This allows you to receive credit towards your utility bill every month for the value of excess energy your solar panels generate. You could receive either a dollar-for-dollar credit or a percentage of the value.
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Federal Solar Incentives
Federal solar incentives are probably the first thing that comes to mind when thinking about solar incentives. The Federal Solar Investment Tax Credit, or ITC, is likely the most commonly known federal solar incentive. The ITC allows you to claim a tax credit for a set percentage of the cost of your solar system.
The ITC can be applied to solar systems installed after January 1, 2006 and lets you deduct from your taxes a percentage of the total cost of solar panels, accessories, equipment and labor. This credit can be claimed on solar panels installed on a primary or secondary residence that you own in the United States. The original claim amount was 30% of the total cost, although certain projects may qualify for only 26%, depending on the details. There is no maximum claim amount.
To know exactly how much money the ITC could save you, contact your local Palo Alto solar panel installer.
The Inflation Reduction Act, passed in August 2022, expanded and extended the ITC (as well as renaming it to the Clean Energy Credit). For solar system installations that begin after January 1, 2022 and are completed by the end of 2032, homeowners may be eligible for a credit equal to 30% of the total cost. This percentage will decrease annually after 2032 until the Clean Energy Credit expires in 2035. The program expansion also makes it easier to get credit for energy storage systems, beginning in 2023.
Click here to learn more about the new Inflation Reduction Act. Your local Palo Alto solar panel installation expert is the best person to answer your questions regarding the new Clean Energy Credit and how it applies to you.
State & Local Solar Incentives
Some solar incentives are often also provided by state and local governments. Similar to federal incentives, these can include tax credits, rebates and more. Some incentives are ongoing, while others are offered for only a limited time. Your local solar incentives could come from your county or municipality, or from the California government.
Next Steps for Installing Solar in Palo Alto
The variety of available solar incentives has enormously increased the adoption of solar energy nationwide over the past 15 years. You may receive solar incentives from the California government, the federal government or your local utility company. Your local Palo Alto solar panel installer can help you learn more about which incentives you can apply for, and get you started on the path to switching to renewable energy today.
EcoWatch's Palo Alto, CA Solar Incentives FAQs
I already have solar panels. Does my system qualify for any incentives?
If your solar panels were installed after January 1, 2022, you may qualify for the recently increased 30% tax credit under the Inflation Reduction Act. If you installed your system between 2006 and 2021, you might qualify for a tax credit between 26% and 30%, depending on the date of installation. Speaking with a representative from the company that installed your system, or any local Palo Alto solar installer, can help you learn what incentives you can apply for.
How much will a solar system save me annually on my electric bill in Palo Alto?
Once you add solar panels to your house in Palo Alto, you can anticipate savings of approximately $1,623.19 per year, or approximately $30,840.65 over the next 20 years.
What are some environmental benefits of installing solar panels on my home?
You can reduce your carbon footprint by 250 pounds of CO2 annually by installing solar panels. This adds up to approximately 5,000 pounds over 20 years. Solar is also a renewable energy source, which means that switching your home over lessens the drain on our planet's resources.
How long until the federal solar tax credit ends?
The federal solar tax credit, formerly known as the ITC and now titled the Clean Energy Credit, is scheduled to end on January 1, 2035. The current 30% credit will end in 2032, replaced by a 26% credit in 2033 and a 22% credit in 2034.
Can I apply for incentives both towards the up-front cost of solar panels, and later as reimbursement?
The order that incentives will be applied in could vary depending on which incentives you receive but typically yes, you can claim multiple types of incentives for your solar project. Check with your solar installer or a local tax professional to make sure you are claiming all possible incentives and applying them in the correct order.
Our goal is to reach as many people as we can with sensible solutions like solar energy. Our team of full-time local researchers collects solar price and installation data for every city in America then compiles it to create these digestible city guides. If you want to read our solar expert's opinion on the top solar companies featured here, follow this link.
Solar incentive research was conducted by Melissa Smith and Karsten Neumeister. Local data analysis was conducted by James Savino. See something we missed or could do better? Email the editor.