Solar Rebates and Incentives
Overview
Solar rebates and incentives are available to all US citizens. In this section, we discuss in detail the most common rebates and incentives for those considering installing solar systems:
- Federal tax credit
- State of California rebate
- State of New Jersey rebate
- Other state rebates
It should be noted that, in many cases, there are similar rebates and incentives for small residential wind turbines, fuel cells and other renewable energy technologies.
Federal Tax Credit
The federal government allows you to deduct 30% of your solar system costs off your federal taxes through an investment tax credit. The Investment Tax Credit (ITC) is effective through December 31, 2016. The ITC reduces the overall tax liability for individuals or businesses that make investments in renewable energy technologies. Key provisions of the bill include:
- 30% tax credit on solar energy systems through 12/31/2016
- No maximum on the amount of tax credit for solar electric systems
- Ability to offset AMT liability (you get credit even if you pay AMT)
- Ability to carry unused credits into the next tax year
The federal tax incentives are similar for businesses, but we suggest discussing the business ramifications with a qualified tax accountant.
California Solar Rebates and Incentives
In 2006, the California Public Utilities Commission (CPUC) started a program called the California Solar Initiative (CSI) to provide more than $3 billion in incentives for solar-energy projects. The program’s objective is to provide 3,000 megawatts (MW) of solar capacity to California by 2016. The CPUC, along with the California Energy Commission (CEC), are jointly working to help increase the adoption of photovoltaics (PV) throughout the state.
How does the CSI rebate program work? The short answer is that they pay you a certain amount based on the amount of energy your solar system produces. For most residential solar installations, the rebate amount is calculated using an Expected Performance-Based Buydown (EPBB) system. This is a fancy term for a simple concept. Based on the specifications of your system (any reputable solar installer will provide all the required specifications) an equation is used to determine how much energy your system is expected to produce each year. Your rebate is based on this expected amount of energy production per year. Since energy output is measured in kilowatt-hours (kWh) your rebate is the calculated output in kWh times a specified dollar amount per kWh. This amount varies by utility, but for most CA homeowners the amount in 2010 will vary from $1.10 to $1.50 per kWh. This amount decreases over time, so it’s important to install solar panels sooner than later!
For example, if your system is expected to produce 5,000 kWh per year, then you can expected to get approximately $5,500 to $7,500 back from the State of California. This a one-time rebate and greatly helps offset the initial cost of the system.
Fortunately for you, almost all reputable solar installers in California do all the necessary paperwork and file for this rebate on your behalf. Your rebate, in many cases, is instantaneous (i.e., the installer subtracts the state rebate amount from the total cost of the system).
For larger solar installations (typically >30kW) the CSI offers Performance-Based Incentives (PBI). Unlike the EPBB, the PBI rebate is based on the actual (not estimated) amount of energy your system produces each month. Typically, only large scale businesses or commercial systems benefit from a PBI rebate.
California also offers a property tax exemption for solar electric systems and other renewable energy sources. Unlike other home improvements, you do not have to pay increased property taxes even though the value of your home will increase with a solar electric system. Did you know that a typical residential solar system may increase the value of your house by $10-30K?
New Jersey Solar Rebates and Incentives
Solar electric (PV) systems are eligible for incentives based on the rated DC capacity of the system installed. In New Jersey, systems (residential and non-residential) installed on the properties that have participated in state energy efficiency programs (such as Home Performance with Energy Star) are eligible for slightly higher incentives.
As with many states, New Jersey residential incentive levels will be decreased as certain installed capacity benchmarks are reached. Again, there is a strong incentive to start considering a solar system today! As of now, the rebate levels for new 2010 applications are:
- Standard Residential: $1.55 per watt
- Residential with Tiers I and II of Home Performance with Energy Star: $1.75 per watt
For example, if your system is expected to produce 5,000 watts, then you can expected to get approximately $7,750 to $8,750 back from the State of New Jersey. This a one-time rebate and greatly helps offset the initial cost of the system.
New Jersey also offers a full exemption from state sales tax for any residents purchasing a solar electric system.
New Jersey also offers a property tax exemption for solar electric systems and other renewable energy sources. Unlike other home improvements, you do not have to pay increased property taxes even though the value of your home will increase with a solar electric system.
Other Solar Rebates and Incentives
Established in 1995, the most comprehensive database of state and federal incentives is the Database of State Incentives for Renewables and Efficiency (DSIRE), funded by the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy (EERE).
To learn more about state specific rebates and incentives, visit the DSIRE website.
