Residential Solar Incentives for California Homeowners

California is a national leader in solar energy, with an impressive 49,421 megawatts of solar capacity installed as of mid-2024. This remarkable growth powers over 14.8 million homes and contributes to 30.1% of the state’s electricity generation. Residential solar, in particular, has gained immense popularity, driven by increasing consumer interest in clean energy and rising energy costs. With $106.8 billion invested in solar projects, California’s solar industry continues to grow, cementing its place as a top choice for homeowners seeking sustainable energy solutions.

For California homeowners, the ITC is especially valuable when paired with the state’s high electricity rates and abundant sunshine. By combining the tax credit with other local incentives and the potential to save thousands on utility bills over time, solar becomes a financially attractive option.

The ITC also aligns with California’s push for clean energy adoption, helping homeowners reduce their carbon footprint and gain energy independence. As solar systems increase property values and provide protection against future utility rate hikes, the ITC makes transitioning to solar a smart, sustainable choice.

The ITC will stay at 30% until 2032, then decline to 26% in 2033 and 22% in 2034 before terminating in 2035 unless extended by the federal government. This long-term stability is a big benefit for homes contemplating solar systems in California.

1. Own Your Solar System
   The ITC is available only to homeowners who purchase their solar energy systems outright, either with cash or through financing. If you lease your solar panels or enter into a power purchase agreement (PPA), you will not qualify for the ITC because the third-party provider retains ownership of the system.
2. Install a Qualifying System by 2032
   Your solar system must be installed and operational by the end of 2032 to take advantage of the full 30% credit. The ITC applies to systems installed through 2034, but decreases after 2032.
3. Meet Federal Tax Liability Requirements
   The ITC is a nonrefundable credit, which means you must owe federal income taxes to benefit from it. If your tax liability is less than the credit amount, you can carry over any unused portion to the following tax year. For example, if your ITC credit is $6,000 but you owe only $4,000 in federal taxes this year, the remaining $2,000 can be applied next year.
4. Install the System on Your Primary or Secondary Residence
   The system must be installed on a home you own and use as your primary or secondary residence. Rental properties do not qualify unless you also reside there part-time and meet other conditions.

Under California’s net billing tariff, solar system owners earn credits — determined at a specified rate — for surplus solar power sent back into the grid. This benefits solar homeowners when their systems produce more electricity than they can use at a time. Solar energy is a use-it-or-lose-it item — meaning energy unused by your household must be stored in a battery or sent to the grid.

While California’s NEM 3.0 reduced the benefits of sending unused energy to the grid, homeowners can continue to benefit under the policy with the right system. NEM 3.0 incentivizes the addition of home batteries to home solar energy systems. Home batteries store unused solar-generated energy for later use. This is especially beneficial for homeowners under Time-of-Use (TOU) billing schemes.

The program is backed by the California Public Utilities Commission for residential customers living in high fire-threat areas, customers in communities that experienced two or more utility Public Safety Power Shut-offs (PSPSs), low income customers and medically vulnerable customers. Homes with solar energy and battery storage systems that are designed to operate in a power outage are eligible for the SGIP rebate.

The SGIP financial incentives for a proposed system are calculated by multiplying the capacity of the system by the incentive rate for the appropriate technology type. The program is a tiered-block program and depends on the level of funding available. As a tiered-block program, the SGIP incentive will gradually decrease over time as more people install battery storage.

For information to see how to apply for the SGIP, contact your California-based utility company’s program administrator:

• Pacific Gas & Electric Company for PG&E electric and gas customers in Northern and Central California
• Southern California Edison for SCE customers in Southern California
• Southern California Gas Company for SoCalGas customers serviced by a non-SCE entity in Southern California
• Center for Sustainable Energy for San Diego Gas & Electric customers in the San Diego region

An active solar energy system, as defined by the California Board of Equalization, includes:

• Domestic, recreational, therapeutic or service water heating
• Space conditioning
• Production of electricity
• Process heat
• Solar mechanical energy

The property tax exemption does not apply to:

• Solar swimming pool heaters
• Hot tub heaters
• Passive energy systems
• Wind energy systems

The program was created by the California Public Utilities Commission and nonprofit GRID Alternatives to encourage more home customers in underserved locations to switch to clean solar energy. DAC-SASH seeks to offer $8.5 million in incentives yearly through 2030.

Eligible homeowners must live in one of the top 25% most disadvantaged communities in California and meet the CARE and FERA guidelines. Additionally, homeowners must be residential customers of Pacific Gas & Electric (PG&E), Southern California Edison (SCE), or San Diego Gas & Electric (SDG&E). To see if you qualify for DAC-SASH, you can check out CalEnviroScreen.

While federal and state incentives are typically more impactful — homeowners can sometimes take advantage of  municipal, county, utility and nonprofit incentives in their area. In California, a number of municipal governments provide further incentives:

• For solar systems, the Rancho Mirage Energy Authority (RMEA) offers a $500 rebate.
• Through the GreenFinanceSF initiative, citizens of San Francisco can use their property taxes to finance solar systems, which might result in cheaper interest rates.
• The San Diego Green Building Program lowers permit costs for home improvements that incorporate solar panels by up to 7.5%.

California’s solar market has been significantly impacted by the mix of federal, state and municipal incentives:

• Affordability: After using only the federal tax credit, the average cost of a 6-kW solar installation in California decreases from $18,000 to $12,600. The out-of-pocket expense for customers can be further decreased by taking into account additional California incentives.
• Adoption of Energy Storage: The SGIP has been very successful in encouraging the use of battery storage devices. This is essential for grid resilience and stability, particularly in regions that often experience power outages.
• Equity in Solar Access: Initiatives such as DAC-SASH have addressed issues regarding the fair distribution of clean energy technology and assisted in bringing the advantages of solar to low-income areas.
• Payback Period: In California, a solar plus battery system typically takes eight years to pay for itself. Many homeowners find solar to be an appealing investment due to its comparatively quick payback period.
• Property Values: The absence from property taxes for solar systems improves the long-term value proposition of solar for homeowners in addition to offering immediate financial advantages.

Installing solar panels helps California homeowners reduce their carbon footprint by generating clean, renewable energy. By replacing electricity from fossil fuel-based power plants with solar energy, homeowners contribute to decreasing greenhouse gas emissions and air pollution. California’s abundant sunshine makes solar an especially effective solution and every home that goes solar plays a part in meeting the state’s ambitious renewable energy goals. Opting for solar also aligns with California’s strong environmental ethos, creating a positive impact at both the local and global levels.

Solar energy systems offer long-term financial advantages for California homeowners. While the upfront investment in solar panels may seem significant, federal tax credits, state incentives and financing options make solar more accessible than ever. Over time, the savings on energy bills can pay for the system itself and many homeowners see a strong return on investment. Furthermore, solar panels can increase property value, as homes with solar installations are often more attractive to buyers seeking energy-efficient, lower-cost living solutions. In California’s competitive real estate market, this added value can be a significant selling point.

Enact makes the process of going solar simple and stress-free for California homeowners. Using advanced solar design software, our team of energy advisors customizes solar panel systems tailored to your home’s unique needs. Whether you want to reduce your energy bills, add a battery for backup power, or even include an electric vehicle charger, Enact designs a system that maximizes energy savings and matches your lifestyle. With just a copy of your latest utility bill and satellite imaging of your home, we can quickly generate a free, personalized solar quote and proposal to kickstart your solar journey.

At Enact, we prioritize transparency and choice, ensuring you feel empowered at every step of your solar installation. Our advisors help you select from a variety of solar panels, inverters and battery options to build the optimal system for your needs. We also provide guidance on payment and financing options, making solar accessible for a range of budgets. During your consultation, we’ll walk you through the installation process, address your questions and keep you informed with regular updates throughout your project.

From design to installation and beyond, Enact is by your side. Once you’ve selected the ideal solar system, we connect you with trusted local installers in your community to bring your project to life. Post-installation, Enact provides ongoing support with our Enact Home app, allowing you to monitor energy production, track utility savings and calculate your return on investment. Our commitment doesn’t end with installation — Enact ensures you have the tools and insights to maximize your solar benefits for years to come. Start your solar journey today with a free consultation and custom solar proposal designed for your California home.