Solar Incentives in Texas (Rebates, Tax Credits & More in 2023)

In the chart below, we’ll provide a quick list of all of the solar incentives that are currently available to Texas homeowners. Below that, we’ll provide additional information for each and explain how important each one is to keeping your conversion costs to a minimum.

Federal Solar Tax Credit (ITC) for Texans

The federal tax credit is the most valuable incentive available in Texas. This is provided by the federal government and guarantees a tax credit applied to your income tax burden for 30% of your system value.

It’s important to note that you can only take advantage of the full credit if your income taxes owed are higher than the credit value. You can, however, roll over any unused credit for five years. This helps you take advantage of the full amount, even if your income tax liability is too low the year you install your system.

In Texas, where the pre-incentive solar power system can cost over $30,000, the typical credit amount is $9,281. This assumes that you install a system size of 11.5 kilowatts (kW) and pay the average cost per watt in the area, which is around $2.69.

The federal credit was originally offered in 2006 to all U.S. residents. At that time, the credit amount was also 30%. The rate dropped to 26% in 2022 and was meant to drop again to 22% in 2023 and then expire in 2024.

Thankfully, as part of the Inflation Reduction Act, and in an effort to continue to promote solar adoption throughout the country, the federal government extended the credit and reinstated the original credit rate. The rates are now scheduled to change as follows:

• 30% for all systems installed through 2032
• The rate will drop to 26% for systems installed in 2033
• It will drop again to 22% for systems installed in 2034
• The credit will no longer be available for systems installed in or after 2035²

Texas’ Renewable Energy Systems Property Tax Exemption

The property tax exemption prevents your taxes from increasing after you install your solar system.

Under normal circumstances, a home improvement that raises your property value will also bump up your assessed value. Since your taxes are determined using your assessed value, they will go up as well.

Installing a solar energy system is expected to bump up your Texas home value by over 4%, which is a significant increase.³ This would typically cause your taxes to increase, but the tax exemption in the state of Texas prevents that from happening.

Instead, your system value is not considered when determining your assessed value, which means your taxes shouldn’t change at all as a result of going solar.

It’s challenging to estimate exactly how much this will save you over time, as the savings depend on your home value, your taxes and your system size and value.

However, if we assume you pay around $30,000 for your solar array, the 1.8% property tax rate in TX would equate to an annual savings of over $500 every year on your tax bill.

Disregarding system depreciation, that’s over $10,000 saved on taxes over the life of your system. This benefit is more valuable in areas with high property value, like Dallas, Austin and Houston.

Texas Solar Rights

The last statewide incentive in Texas is the solar rights afforded to property owners. These ensure that all residents have equal and unimpeded access to solar panel installation and solar energy.

The solar rights laws in Texas prohibit homeowners associations (HOA), villages and other entities from preventing rooftop solar installations.

This isn’t a financial incentive, but it does help promote the legitimacy and importance of solar energy in Texas.

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Net Metering Programs in Texas

Net metering is often cited as one of the most appealing solar policies available in the U.S. It affects how you’re billed for electricity as a residential customer.

Basically, you earn credits for any surplus energy you produce with your solar panels. Those credits then roll over and get applied to future utility bills. If your energy demands ever outpace your production, your accrued credits will be used to reduce your bills. Effectively, net metering helps reduce utility bills, maximize savings and reduce your panel payback period.

Net metering is not mandated by the State of Texas, so not all residents will have access to the policy. Instead, the state legislature makes net metering possible and leaves the policy offered up to individual retail electricity providers (REPs).

The rate at which you’re credited is an important consideration. The full retail rate is the best-case scenario, followed by a blended rate and then the avoided-cost rate or wholesale rate. The more you get per kilowatt-hour (kWh) for your excess energy production, the more valuable the policy will be.

Since the electricity market is restructured in Texas, consumers have the opportunity to choose their electricity provider. Below is a brief list of all of the local retail electricity providers and municipalities in Texas that offer net metering, along with the rate each one uses to credit excess energy generation (full retail rate is the best option):

• City of Brenham: Offers the program using the avoided-cost rate⁵
• El Paso Electric Company: Offers the program using the avoided-cost rate to customers in its service area. All unused credits are paid out via check once they top $50⁶
• Austin Energy: offers the program using variable rates based on system size.⁷ All unused credits are rolled over indefinitely
• Green Mountain Energy: This company’s Renewable Rewards Program is basically net energy metering (NEM). All energy is credited at the full retail rate, which is outstanding⁸
• San Antonio City Public Service (CPS Energy): Offers the program using the avoided-cost rate⁹
• American Electric Power (AEP): Offers the program using the avoided-cost rate
• TXU Energy: This company’s Home Solar Buyback program is equivalent to net metering. It provides credits at the avoided-cost rate¹⁰

Green Mountain Energy offers one of the strongest solar buyback plans for Texans.

In some states, net metering policies are becoming less appealing, as Public Utilities Commissions (PUCs) are beginning to mandate lower credit rates in states like California.

Since Texas already doesn’t mandate net energy metering and instead leaves it up to individual utility providers, the likelihood is that the policy won’t change on a state level anytime soon. However, each energy company can always change its credit rate or discontinue net metering altogether.

As such, you should always check with your electric company before installing solar to see if the policy, or an equivalent, will be open to you.

Local Solar Incentives in Texas

As mentioned above, the state incentives in Texas, unfortunately, leave a lot to be desired. However, the local incentives provided by utility companies and municipalities throughout Texas can sometimes make up for the lack of state incentives.

We’ll briefly discuss all of the local incentives available in Texas below.

• Oncor Electric Delivery Residential Solar Program: This is Oncor’s rebate program for new, grid-connected solar installations. The rebate amount varies based on eligibility.
• CPS Solar PV Rebate Program: This is a solar rebate from CPS for newly installed solar arrays. The rebate amount varies but averages around $2,000 per system.
• City of San Marcos Distributed Generation Rebate Program: This is a rebate for residents of San Marcos, TX. It provides up to $1 back per watt installed up to $2,500 per solar project.
• Austin Energy Residential Solar PV Rebate Program: This rebate is for up to $2,500 per project for Austin Energy customers who install grid-connected systems.
• Austin Energy Value of Solar Program: This incentive from Austin Energy is similar to Solar Renewable Energy Certificates (SRECs). You get paid for every kWh your system generates at a rate determined by your system size and eligibility.
• Garland Power & Light EnergySaver Solar Rebate Program: This perk from Garland Power & Light is also similar to SRECs. You can earn credits in the amount of $0.0469 for every kWh of energy your panels generate.
• Denton Municipal Electric (DME) Residential GreenSense Energy Efficiency Rebate Program: This is a great solar rebate from DME that provides cash back amounts between $0.40 and $1.50 per watt up to $30,000.
• CenterPoint Energy Residential and Hard-to-Reach Energy Efficiency Program: This is a rebate program for CenterPoint Energy customers. The credit amount is $0.04/kWh produced, which can add up to hundreds of dollars over time.
• CPS Residential Energy Efficiency Rebate Program: This rebate program from CPS provides up to $2,500 or 50% of your system total — whichever is lower — as an upfront rebate.
• City of Plano Smart Energy Loan Program: This is an affordable and accessible loan program afforded to residents of Plano, TX. It provides financing up to $25,000 with low APRs and down payment requirements.
• AEP Texas North and Central Companies SMART Source Solar PV Rebate Program: This incentive provides up to $3,000 back for grid-tied solar arrays, depending on the size of your system and remaining funds. Some restrictions apply, like the requirement for system warranties.
• City of Sunset Valley PV Rebate Program: Finally, residents of Sunset Valley can get up to $1.00 per watt installed in rebates up to 3,000 watts or up to $3,000 total per system.

Which Solar Tax Incentives Are The Best In Texas?

Above, we’ve discussed all of the incentives available in Texas, but not all of them are as worthwhile as the others. Below, we’ll discuss the top incentives that you should be sure not to miss.

The Federal Investment Tax Credit

If you only file for one solar incentive, it should absolutely be the federal tax credit. The federal credit requires just one relatively simple form submitted alongside your taxes for the year your system is installed. Despite the minimal time investment, though, it provides a huge benefit, potentially on the order of over $9,000.

Net Metering (Also Called Solar Buyback Plans in Texas)

If you have net metering available to you, you should definitely take advantage of it. In our opinion, this is nearly as important as the federal credit in Texas.

We recommend contacting your electricity provider before converting to solar to see if there’s anything paperwork you need to file to enroll. In many cases, you’ll get automatic access to this program. Even if it requires filling out an interconnection agreement, though, it’s worth your time.

Net metering helps you reduce your solar costs by reducing your utility bills, and it also helps maximize your long-term savings. Therefore, net metering is worth filing for even if your electric company offers a less-than-ideal avoided-cost rate for the credits.

Remember, customers have the power to choose electricity rates and providers in Texas. So if your current provider does not offer any form of net metering, you can always choose a different provider that does.

Property Tax Exemption

The property tax exemption can also save you several thousands of dollars over the lifespan of your system. Unlike some other states, you will need to file some documents with the Comptroller’s office to take advantage of this perk. Still, it’s well worth the time investment required.

It’s important that you don’t pass this incentive up as Texas has one of the highest property tax rates in the country. That means you’ll be accepting significantly higher tax bills for no reason if you neglect to file the required documentation.

Local Incentives

Finally, we recommend looking through the list of local Texas solar rebates we mentioned above and filing for the ones that provide cashback incentives. These include:

• Oncor Electric Delivery Residential Solar Program
• CPS Energy Solar PV Rebate Program
• City of San Marcos Distributed Generation Rebate Program
• Austin Energy Residential Solar PV Rebate Program
• Denton Municipal Electric (DME) Residential GreenSense Energy Efficiency Rebate Program
• CPS Residential Energy Efficiency Rebate Program
• AEP Texas North and Central Companies SMART Source Solar PV Rebate Program
• City of Sunset Valley PV Rebate Program

Most of these rebate options provide between $2,000 and $2,500 back. Although they typically require that you file some paperwork, none of them require much, so all of them are worth your time and effort if you qualify.

What’s The Near-Term Outlook For More Incentives In Texas?

Incentives across the country change quickly and without warning, sometimes making solar conversion more appealing and sometimes making it less beneficial.

There is also no evidence that the PV incentives in TX will improve in the next two years. If something were to change, it would likely be a statewide push to mandate net metering from all electric companies.

In 2021, TX revamped its Renewable Portfolio Standard (RPS) goal. The new goal was for 28% of the state’s energy to come from clean sources by 2030 and 40% by 2035. The old goal of 25% by 2025 remained in effect.

If local incentives continue to remain available as they are now, TX might not have to change much on a statewide level to reach those goals. However, it’s possible that it will provide additional incentives — like mandated net metering — if the state is in danger of failing to meet its 2025 goal.

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