2022 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 2022 and beyond)
  • Ways to optimize your solar investment

Solar installers are experts in maximizing your solar tax credits and rebates.
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EcoWatch Local Advisors

By EcoWatch Local Advisors

Updated 11/09/2022

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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

Incentive Type:
Property Tax Incentive
100% of system value; 75% of system value exemption for dual-use equipment

Western Riverside Council of Governments - Home Energy Renovation Opportunity (HERO) Financing Program

Incentive Type:
PACE Financing
Eligible products can be financed for up to 25 years, depending on the useful life of the eligible product.
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

Incentive Type:
PACE Financing
Locally determined

Self-Generation Incentive Program

Incentive Type:
Rebate Program
For projects 30 kW or larger, 50% of incentive will be received up-front; 50% will be received based on actual kWh production over the first 5 years. For projects under 30kW, 100% of the incentive will be paid up front.
Incentives will step down over time. See below for incentive amounts.

Renewable Market Adjusting Tariff (ReMAT)

Incentive Type:
Feed-in Tariff

LADWP - Feed-in Tariff (FiT) Program

Incentive Type:
Feed-in Tariff
$0.17/kWh adjusted by a time of delivery multiplier
Base price will step down over time as certain MW goals are met

California Solar Initiative - Solar Thermal Program

Incentive Type:
Rebate Program
Step 1 Incentive Rates (contact utility to determine current incentive levels):
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

Incentive Type:
Leasing Program

City of Palo Alto Utilities - Solar Water Heating Program

Incentive Type:
Rebate Program
Single-family residential gas-displacing systems: $18.59 per therm displaced
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

Incentive Type:
Personal Tax Credit
30% federal tax credit for systems placed in service after 12/31/2021 and before 01/01/2033. Good for: solar water heat, solar photovoltaics, biomass, geothermal heat pumps, wind (small), fuel cells using renewable fuels.

Source: https://www.dsireusa.org/


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. You might qualify for any of the following types of solar incentives:

  • Net Metering: Don't forget to speak with your Palo Alto utility company about signing a net metering contract. This allows you to get a credit towards your utility bill every month 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.
  • Tax Exemptions: These may come in the form of property tax exemptions, which can let you exclude the value of your solar system when paying property tax on your home. They may also include exemptions on sales tax at the time of purchase.
  • Tax Credits: Unlike tax deductions, tax credits are dollar-for-dollar reductions in the amount of income tax that you owe the federal government.
  • Rebates: Solar rebates may be provided by your local utility company, or by your state or county. These rebates work as partial refunds that are applied after you pay for a solar system and before tax credits are calculated.
  • Solar Renewable Energy Certificate (SREC): SRECs can be sold to your utility company (or other buyers) for cash that is generally considered part of your taxable income. Generally, a certain (small) threshold of energy production must be met before your solar system qualifies for SRECs or other performance-based incentives. These kinds of incentives are normally handled at the state level.

Federal Solar Incentives

Federal solar incentives are likely to be the first thing that you think of when you think about solar incentives. The solar incentive that you're most likely to have heard of is the Federal Solar Investment Tax Credit (ITC), which gives you a credit on your taxes equal to a certain percentage of your solar system's cost.

The ITC can be credited towards the value of a solar system installed on your primary or secondary residence in the United States. The solar panels must have been installed after January 1, 2006 on a property you own for you to claim the credit. Originally, the ITC covered 30% of all costs (panels, labor, equipment and accessories), although the amount has fluctuated slightly over time between 26-30%. The installation date of your solar system will determine what percentage you are eligible for. There is no cap on the claim amount.

Your local Palo Alto solar panel installation expert can give you more information about the ITC and how it applies to your situation.

The ITC was both renewed and expanded by the passage of the Inflation Reduction Act in August 2022. It's also now called the Clean Energy Credit. For solar system installations that begin after January 1, 2022 and are completed by the end of 2032, homeowners can receive a credit equal to 30% of the total cost. After 2033, the percentage will decrease annually until the Clean Energy Credit expires in 2035. The expansion also makes credits for energy storage systems even easier to claim, beginning in 2023.

Click here to learn more about the new Inflation Reduction Act. Your local Palo Alto solar panel installer can answer your questions and explain how the new Clean Energy Credit will apply to you.

State & Local Solar Incentives

Some solar incentives are often also offered at the local or state level. As with federal incentives, these could include rebates, tax credits and more. Some incentives are ongoing, while others may only be available for a limited time. These incentives may be provided by the California government, or by your county or municipality.

Next Steps for Installing Solar in Palo Alto

There are many kinds of solar incentives: those given by the federal government, those given by the California government and those given by local utility companies, to name a few. Solar energy utilization has increased enormously in the last 15 years, partially thanks to these incentives. We recommend talking to your local Palo Alto solar installation expert for more information about these incentives and to make sure that you're getting all of the money you can for your solar system.

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EcoWatch's Palo Alto, CA Solar Incentives FAQs

What if I am planning to add a solar system to a vacation home, rental property or commercial property? Do I still qualify for incentives?

While we recommend speaking with your local solar installer and/or tax professional to better understand what solar incentives apply to you, many incentives will apply to a second home, provided that it is in the United States and owned by you. There may be other incentives available for commercial properties specifically, depending on the details.

How do I learn if I qualify for different solar incentives?

Generally, solar incentives apply to:

  1. a new solar system
  2. installed on property you own
  3. within the U.S.
  4. within the date range specified by a particular incentive.

Specific incentives, including ones handled by the California government or by your county/municipality, may have additional qualifications. Speak with your local Palo Alto solar installer to learn more about what incentives your project may qualify for.

I already have solar panels. Does my system qualify for any incentives?

An excellent idea would be to talk to someone from the company that installed your solar system — or speak to a local Palo Alto solar installer — to learn about which incentives you may qualify for. If your solar panels were installed after January 1, 2022, you likely qualify for the newly increased 30% tax credit under the Inflation Reduction Act. Solar panels installed between 2006 and 2021 may qualify for a tax credit of 26-30%.

What are the top solar panel installation companies near me?

To find the best solar panel installer in your area, check out our guide to the best solar companies in Palo Alto.

Can I qualify for incentives both towards the initial cost of solar panels, and later as reimbursement?

The order that incentives will be applied in might vary depending on which incentives you are eligible for but in most cases yes, you can claim multiple types of incentives for your solar project. Talk with your solar installer or a local tax professional to ensure you are claiming all the incentives you are eligible for 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.

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