2025 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 2024 and beyond)
- Ways to optimize your solar investment
Solar installers are experts in maximizing your solar tax credits and rebates.
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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 propertyThe 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 are intended to make renewable energy usage more affordable through financial incentives for individuals who install solar panels on their homes. Incentives can include things like discounts, cash back or monthly utility bill credits. Some incentives are provided by the federal government, while others are handled by the state of California or by your utility company, county or municipality. Categories of solar incentives include:
- Rebates: A rebate is a partial refund credited to your account after you've paid for your solar system. Rebates might be offered by your local utility company, your state or your county. The cash back that you get from the rebates is normally applied before tax credits are calculated.
- Tax Credits: Tax credits decrease, dollar-for-dollar, how much income tax you owe the federal government. These differ from tax deductions.
- Tax Exemptions: These may come in the form of property tax exemptions, which let you exclude the value added by your solar panels when calculating the taxes you pay on your home. They may also include exemptions on sales tax at the time of purchase.
- Solar Renewable Energy Certificate (SREC): SRECs and similar performance-based incentives might be available to you if your solar system produces over a specified (generally small) amount of electricity. This category of incentives is typically handled by the state government. You can sell SRECs to your utility company or other buyers, and the money you make is usually considered part of your taxable income.
- Net Metering: Be sure to talk to your Palo Alto utility company about signing a net metering agreement. This will allow you to get a credit towards your monthly utility bill for the value of excess energy your solar panels generate. You may receive either a dollar-for-dollar credit or a percentage of the value.
Federal Solar Incentives
When you think about solar incentives, you probably think of federal incentives first. The Federal Solar Investment Tax Credit, or ITC, is the most well-known federal solar incentive. The ITC offers a tax credit for a specific percentage of your solar system's cost.
The ITC can be applied to the total cost of installing solar panels, including the panels themselves as well as accessories, labor and equipment. You can claim this credit for panels installed after January 1, 2006, on a primary or secondary residence that you own and that is located in the United States. From its original value of 30% of the total cost, the credit has fluctuated slightly between 26-30%, and you may qualify for varying percentages depending on when your project was completed. There is no maximum claim amount.
Reaching out to your local Palo Alto solar panel installer is the best way to understand how the ITC may apply to you.
The Inflation Reduction Act, passed in August 2022, expanded and extended the ITC (as well as renaming it to the Clean Energy Credit). Now, solar installation projects that are completed between 2022 and 2032, can qualify for a 30% tax credit. This percentage will then see a slight annual decrease until the current Clean Energy Credit expires in 2035. The program expansion also makes credits for energy storage systems even easier to claim, starting in 2023.
More information about the new Inflation Reduction Act can be found here. The easiest way to fully understand how the new Clean Energy Credit will apply to you is to talk with your local Palo Alto solar panel installation expert.
State & Local Solar Incentives
Some solar incentives may be provided by state and local governments. Like with federal incentives, these may include tax credits, rebates and more. These incentives might be offered by the California government, or by your county or municipality. Some incentives may be available for a limited time, while others are ongoing.
Next Steps for Installing Solar in Palo Alto
Solar energy use nationwide has significantly increased in the past 15 years, in part due to the proliferation of solar incentives. You may get these incentives from the federal government, the California government or your local utility company. Your local Palo Alto solar panel installation expert can provide you with more details about which incentives you might qualify for, and get you feeling good about making the change to renewable energy today.
EcoWatch's Palo Alto, CA Solar Incentives FAQs
How can I learn if I qualify for specific solar incentives?
It's a smart idea to get in touch with your local Palo Alto solar installer for a better understanding of which incentives your project will qualify for. Typically, solar incentives apply to new solar panel systems installed on property you own (in the U.S.) within a specified date range. Some incentives, like those provided at the level of the California government, may have additional requirements.
If I already have a solar system installed on my house, can I still claim incentives?
An excellent idea would be to talk to someone from the company that installed your system – or reach out to a local Palo Alto solar installer — to clarify which incentives you might 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. Solar systems installed between 2006 and 2021 may qualify for a tax credit of 26-30%.
How much can I save on my electric bill annually if I add solar panels to my Palo Alto home?
Once you add solar panels to your home in Palo Alto, you can anticipate savings of approximately $1,623.19 per year, or approximately $30,840.65 over 20 years.
What are some environmental benefits of installing solar panels on my house?
You can lower your carbon footprint by 250 pounds of CO2 a year when you install solar panels. This adds up to around 5,000 pounds in 20 years. In addition, solar power is a renewable energy source, which means that switching your home over lessens the drain on our planet's resources.
Can I apply for incentives both towards the up-front cost of solar panels, and later as reimbursement?
The order in which incentives are applied may vary depending on which incentives you are claiming but usually yes, you can claim multiple types of incentives for your solar project. Get in touch with your solar installer or a local tax professional to be sure you are claiming all the incentives you're eligible for and applying them in the correct order.
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