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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By EcoWatch Local Advisors
Data Analysis: James Savino
Ranking Methodology: Karsten Neumeister
Updated March 14, 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
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
The term "solar incentives" generally refers to financial incentives put in place by solar companies and the government to encourage the adoption and use renewable energy by making the installation and use of solar panels more affordable. Different kinds of incentives, including cash back, discounts or monthly utility bill credits, might be available to you. Some incentives may be provided via the California government, by your utility company or by county or municipality, while other incentives are federal. Some solar incentives you might qualify for are:
- Tax Credits: Different from tax deductions, tax credits reduce, dollar-for-dollar, the amount of income tax that you owe the government.
- Tax Exemptions: Sales tax exemptions are applied at the point of sale for your solar panels. Property tax exemptions allow you to ignore the value added by your solar system when you calculate the amount of property tax you need to pay on your house.
- 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 cash back that you get from the rebates is normally applied before tax credits are calculated.
- Solar Renewable Energy Certificate (SREC): SRECs and similar performance-based incentives are usually handled by your state government. Once your solar system meets the threshold (usually a small amount of energy production), you are eligible to receive SRECs that you can then sell to your utility company or other buyers. The money you receive from the sale is generally considered part of your taxable income.
- Net Metering: You may be able to sign a net metering agreement with your Palo Alto utility company. This agreement may apply to all or a percentage of the excess electricity your solar panels generate. They will then subtract this value from your monthly utility bill.
Federal Solar Incentives
Federal incentives are the kind of incentives that you are most likely to have some knowledge of. The Federal Solar Investment Tax Credit, or ITC, is the most commonly known federal solar incentive. The ITC offers a tax credit for a predetermined percentage of your solar system's cost.
The ITC originally covered 30% of the total cost of installing solar panels, and has fluctuated slightly over the years between 26-30%. The percentage you qualify for will depend on when your solar system was installed. The total installation cost includes the panels themselves as well as the cost of accessories, equipment and labor. There is no maximum claim amount. The ITC can be applied to solar systems installed after January 1, 2006 on your primary or secondary residence. The residence must be owned by you and in the United States.
To understand exactly how much the ITC could save you, contact your local Palo Alto solar panel installation expert.
In August 2022, the ITC (now titled the Clean Energy Credit) was expanded and extended by the passing of the Inflation Reduction Act. The Clean Energy Credit is valid until 2035. Any solar installation project that is completed between January 1, 2022 and December 31, 2032 may qualify for a 30% tax credit. The amount will be decreased slightly each year until the end of the current program. Beginning in 2023, it will also be easier to qualify for credits for energy storage systems under the new laws.
More information about the new Inflation Reduction Act can be found here. Your local Palo Alto solar panel company can answer any questions you have and explain how the new Clean Energy Credit will apply to you.
State & Local Solar Incentives
Federal solar incentives are not your only option; rebates, tax credits and more are often offered at the state and local level. Certain incentives are ongoing, while others might only be available for a limited time. These incentives may be given by your county or municipality, or by the California government.
Next Steps for Installing Solar in Palo Alto
Solar incentives can be offered by the California government, the federal government or your local utility company. The large number of solar incentives available has facilitated the nationwide growth of solar energy use in the last 15 years. When you're prepared to make the change to solar energy, getting in touch with your local Palo Alto solar panel installation expert is a great first step.
Best Regional Coverage
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- Concierge service ensures steady communication
- Slightly limited service offerings
- Price-match guarantee
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- Some reported issues with customer service
- Customer service varies by local dealer
EcoWatch's Palo Alto, CA Solar Incentives FAQs
What if I am planning to add solar panels to a vacation home, rental property or commercial property? Can I still qualify for incentives?
Many solar incentives are intended to apply to a property located within the United States that you own, and most secondary residences fall into this category. There may be other solar incentives available for commercial properties, depending on the specifics. We recommend getting in touch with your local solar installer and/or tax professional to better understand what incentives will apply to your specific situation.
If my house already has solar panels, can I still claim incentives?
You should plan to talk to the company that installed your solar system — or speak to a local Palo Alto solar installer — to clarify which incentives you may qualify for. If your system was installed after January 1, 2022, you likely qualify for the newly increased 30% tax credit under the Inflation Reduction Act. Systems installed between 2006 and 2021 may qualify for a tax credit of 26-30%.
What are some environmental benefits of adding solar panels to my house?
Solar energy is a renewable energy source — by changing where you get your energy, you can help reduce the strain on our planet's resources. A solar system can also lower the CO2 emissions from your home by 250 pounds yearly, or around 5,000 pounds over 20 years.
When does the federal solar tax credit end?
The Clean Energy Credit (previously referred to as the federal solar tax credit, or the ITC), is slated to end on January 1, 2035. Currently set at 30%, the credit will drop to 26% in 2033 and to 22% in 2034.
Can I use multiple types of renewable energy to power my home?
You can use multiple types of renewable energy, or a combination of renewable and non-renewable energy, to power your home. Be sure to go over your ideas with your local Palo Alto solar installation expert. They can help you as you plan for your project and also help you understand the various incentives that you will or won't qualify for.
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.