How to Get the Federal Tax Credit for Solar Batteries
If you follow news about the energy industry, you have surely noticed the growing popularity of solar power. When used in utility-scale projects, solar panels can now produce cheaper electricity than coal power plants. Unfortunately, solar panels are unproductive at night, and their output is drastically reduced with cloudy weather. Fossil fuels don’t have this limitation, since power plants can burn them at any time.
Battery systems are an excellent complement for solar panels: they can store surplus electricity production, and supply that energy when there is no generation. Considering this opportunity, the federal tax credit for solar panels was amended to include batteries in 2018, and the tax credit extension from December 2020 also covers them. However, stand-alone batteries are not eligible, and they must get their charge from solar panels.
Are you considering solar panels with batteries? Get the 26% tax credit with a professional design.
Solar batteries are eligible for the federal tax credit in both residential and commercial installations. However, the eligibility requirements are slightly different in each case. Also, the batteries must be installed within a year after solar panels, or otherwise they don’t quality.
Federal Tax Credit for Residential Solar Battery Systems
If you plan to combine solar panels and batteries in a home installation, batteries only qualify for the 26% tax credit if they are fully charged with solar energy. In other words, you are not allowed to store electricity from the power grid.
Home solar systems in the US currently have an installed price of around 3,000 per kilowatt, before subtracting the federal tax credit and any other incentives available. This estimated cost is for a solar panel system without batteries, and it can vary depending on where you live.
Assuming you want to deploy an 8-kW solar array at home, the estimated cost is 24,000. To add a home battery like the Tesla Powerwall, you can expect an installed cost of around 12,000. When the two systems are combined, the total project cost is 36,000.
- If the home battery only stores electricity produced by the solar panels, the entire project is eligible for the 26% federal tax credit. In this case, you get 9,360.
- If the battery also stores electricity from the grid, only the solar power system gets the tax credit. In this case, the value is reduced to 6,240.
Not being able to charge solar batteries with grid electricity is a missed opportunity. Many grids have surplus generation in the hours after midnight, and this energy could be stored by home batteries. Then, when the power grid is struggling with peak demand, batteries can release their energy to alleviate the grid. In this example, you miss a tax credit of 3,120 if you charge the home battery with grid electricity.
Federal Tax Credit for Commercial Solar Battery Systems
In the commercial sector, there is more flexibility for solar battery systems. They can store electricity from the grid, but must get at least 75% charge from solar panels to earn the federal tax credit. Companies that are billed time-of-use tariffs can take advantage of the lowest rates with a battery system, without missing the tax credit.
Commercial electricity consumers who deploy solar batteries must be aware of an important condition: only batteries that get 100% charge from solar panels get the entire federal tax credit, and the benefit is reduced based on the charging percentage (until 75%). Any battery system designed to get more than 25% charge from the power grid is not eligible.
- The typical cost of a commercial solar system in the US is around 5000,000 per kW, before subtracting tax benefits and other incentives.
- This means a 325-kW installation will cost around 650,000, and the 26% federal tax credit is 169,000.
- Also, since this is a commercial solar project, it benefits from 5-year depreciation under the MACRS (Modified Accelerated Cost-Recovery System).
If this commercial solar array is combined with a 200-kWh battery that costs 160,000, the total project cost is 810,000 and the maximum tax credit available is 210,600. Of the total tax credit, 169,000 is for the solar array and 41,600 is for the battery system. However, the battery portion of the tax credit is reduced for storing grid electricity.
- If the battery system gets 85% of its charge from solar panels and 15% from the grid, 85% of the maximum tax credit is available. 35,360.
- The minimum charging percentage accepted is 75%, resulting in a tax credit of 31,200.
- Below this point, the battery system is not eligible, and only the 169,000 tax credit for solar panels can be claimed.
Energy consultants can model several charging scenarios between 75% and 100%, identifying the costs and savings in each case. Commercial electricity consumers are also billed for their peak demand, and batteries can be used to reduce the maximum demand measured, a concept known as peak shaving. Depending on the energy consumption profile of a building, storing off-peak electricity grid in batteries can make sense to trim peak demand as much as possible. This is viable if the extra savings compensate for not getting the complete tax credit.
What solar rebates are available in California?
Solar rebates are offered through your utility company and provide money back to customers who have chosen to go solar. This varies depending on your location and who your utility provider is. Keep reading to find out more.
California has updated its net metering program. NEM 3.0, to reflect a net billing system. The latest version of the policy maintains the ability of solar panel owners to sell back any unused energy to their utility company, but with a few major changes.
Avoided Cost Calculator
Under NEM 3.0, the value of the energy that is sent back to the grid is calculated at a predetermined sell rate, using the avoided cost calculator.
Importance of solar batteries
With a solar battery added onto a solar panel system, homeowners are able to store excess energy for later use. This allows them to bypass high time-of-use rates because they’d be using the stored energy that their system generated.
For more information and updates on the policy, see the California Public Utilities Commission Website.
Is there a California tax credit for solar?
There is not a California tax credit for going solar; however, there is a federal tax credit for going solar that is very generous.
Through 2032, Americans in any state, California included, can take advantage of the most popular incentive for going solar – the Solar Investment Tax Credit. This tax credit, also known as the ITC, is offered by the federal government and allows for up to 30 percent credit on a whole home solar system. Yes, that means even on a solar battery too! Speaking of batteries, let’s talk about the incentive for homeowners who choose to protect their energy with a solar battery next.
What is the SGIP?
The Self Generation Incentive Program, or SGIP, provides perhaps the best incentives for California homeowners to install energy storage systems. The program is one of the first incentives of its kind in the U.S. It has been extremely successful in helping California lead the nation in the adoption of home battery technology. The program is paid for and available to the utility ratepayers of SDGE, SoCal Gas, SCE and PGE.
There’s a more than 450 billion budget for SGIP incentives available in California through 2024. Nearly 60% of the SGIP budget is dedicated for “Equity Resiliency” projects.
If you’re a homeowner that meets certain qualifications, such as living in a high fire risk area, the Equity Resiliency projects portion of the SGIP could work for you. All of this can be a bit overwhelming so we’d be happy to have one of our experts help you navigate the SGIP process – it’s part of what we do!
Local solar tax credits and incentives in California
Beyond the solar incentives at the state level, many cities, towns and municipalities offer additional incentives for residents who invest in solar energy projects.
Alameda Municipal Power income-qualified solar rebate
Residential customers of Alameda Municipal Power can get a small rebate for installing solar panels. You’ll get 500 back for any qualifying solar installation if you earn less than 106,000 and your home was built before Jan. 1, 2020. This incentive is designed to offset any fees involved with installing solar panels.
CleanPowerSF Solar Inverter Replacement Program
The San Francisco Public Utilities Commission and CleanPowerSF are currently running a program to help customers replace old, damaged solar inverters. The program is only available to existing GoSolarSF customers with a solar installation that’s at least 10 years old and no longer covered by warranty.
If your solar inverter needs replacing and you use a participating installer, you can receive up to 3,000 to cover the cost of the replacement.
While the solar inverter replacement program appears to be still active, the CleanPowerSF fact sheet notes that participating installers are current as of May 2022.
Lancaster Energy Power Choice
Residential customers of Lancaster Energy who can’t afford solar panels or don’t want to pay for them can get them installed for free by Tesla with the electric company’s Power Choice program. Tesla will install rooftop solar panels and a Tesla Powerwall Battery for no money at all, and customers will pay for energy usage and storage via their usual electric bill.
However, customers don’t get the tax incentives from the solar panels and can only leave the program by buying out the solar equipment and battery. Also, if a home in the Power Choice program is sold, the contract transfers to the new owner, which could make selling more complicated.
Los Angeles Department of Water and Power Solar Rooftops Program
LADWP’s Solar Rooftops Program gives its customers another way to contribute to solar power generation without spending anything for solar panels. LADWP installs, connects and maintains the solar panels on a homeowner’s property at no cost, and gives the homeowner an annual payment of 240 to 600 each year for 20 years. Customers’ electric bills are otherwise unaffected.
Sacramento Municipal Utility District solar stipend
Along with 7.4 cents per kW back for your surplus solar energy, SMUD also provides a 150 stipend for solar panel installations. The money is targeted to pay for the production meter and other solar equipment for the interconnection, but you’ll need to act quickly. The solar stipend expires on May 31, 2023.
San Diego Green Building Incentive Program
The city of San Diego will waive building permit fees and plan check fees for the installation of residential solar panels.
Silicon Valley Power Low Income Solar Grant Program
Publicly owned Silicon Valley Power.- which mostly serves the city of Santa Clara.- provides grant money for solar panels to residential customers enrolled in its Financial Rate Assistance Program. Eligible customers who own their own solar installations can get 3.50 per watt for solar systems up to 3 kilowatts of power. Solar systems must produce at least 3,800 kWh annually.
SoCalGas Solar Thermal Water Heating System Rebate
SoCalGas customers in Central and Southern California can get a rebate of 5000,500 to 4,000 on qualifying solar water heaters. Your system must have a Solar Uniform Energy Factor of 1.8 or higher, and you’ll need to install a new Energy Star certified water heater along with your solar installation.
Local solar attic fan rebates in California
Many local energy providers offer rebates for energy-efficient appliances, including solar attic fans. These fans usually connect directly to dedicated solar panels to power themselves and cool down attics. Here are the publicly owned electric utilities that are currently offering rebates for solar attic fans.
Azusa solar fan rebate: Customers of Azusa Light and Water can get up to 150 as a credit on their electric bill with the purchase of a qualified solar fan for their attic or home using this application (PDF).
Glendale Water Power solar attic fan rebate: GWP customers who install solar attic fans can get 100 for each, or 125 if the fans were purchased in Glendale. Customers are limited to two rebates every 10 years at the same residence, and can apply for the rebate online.
Gridley solar attic fan rebate: The City of Gridley Electric Utility gives customers
Federal solar tax credits and incentives for Californians
The federal solar tax credit might be more valuable than any of the state and local incentives currently offered in California. It gives you 30% back in tax credit for expenses related to installing solar panels and batteries.
The official name of the federal solar tax credit is the Residential Clean Energy Credit, and though it was expected to expire in 2022, the Inflation Reduction Act extended the tax credit until 2035.
Applying for the federal solar tax credit is simple. Fill out IRS Form 5695 and include it with your tax return for the year in which you installed your solar system, or let the best tax software handle it for you.
The Inflation Reduction Act of 2022 keeps the federal solar tax credit at 30% until 2033, when it will drop to 26%. The credit will further decrease to 22% in 2034 and expire completely in 2035.
The solar tax credit is nonrefundable, meaning the credit you receive cannot be more than the amount you pay in taxes. You can, however, carry over any additional credit beyond your tax burden into future tax years.
.45 per cubic feet per minute back for solar attic fans as a rebate. Fill out the application (PDF) and mail or email it to the electric department.
Imperial Irrigation District solar attic fan rebate: Residential electric customers can get a 125 rebate for solar attic fans using this application (PDF).
Lodi solar attic fan rebate: The Lodi Electric Utility offers a rebate for solar attic fans that’s based on the capacity of your fan.-
Comparing California solar incentives
Values of incentives are based on a national 24,000 solar installation average (5000.99 per watt for a 8kWh system). State property tax is estimated at 1% of home value.
.15 per cubic feet per minute. You’ll need to complete this form (PDF) to apply for the rebate.
Modesto Irrigation District solar attic fan rebate: Residential customers of MID can get some money back (PDF) after purchasing a solar attic fan.- 100 for appliances with 20 watts of power or greater; 50 for fans with 10 to 19 watts. The application form (PDF) must be snail mailed back to the electric company.
Pasadena solar attic fan rebate: If you’re a Pasadena Water Power customer, you can get 80 back on a rebate for solar attic fans, plus another 20 if you purchased the fan in Pasadena. You’ll need to sign into your online account to apply for the rebate.
Riverside solar attic fan rebate: The electric company of Riverside provides a number of rebates for energy-efficient appliances, including solar attic fans. To claim the 100 rebate for a solar attic fan, complete and mail or email this form (PDF).
Ukiah solar attic fan rebate: Ukiah also provides a rebate for solar attic fans based on the capacity of the appliance. The city utility pays
California power purchasing agreements
If you don’t want to install solar panels yourself, a solar power purchasing agreement lets another company install solar on your property then charge you a predetermined amount for that solar energy.
Solar power purchasing agreements are an easy way to get solar power at no cost upfront, but you won’t get any of the tax incentives related to solar panels, and you’ll need to watch out for potential rate hikes over time.
Here are a few of the local public solar power purchasing programs available in California.
Santa Barbara Home Power Program
All Santa Barbara County residents can now get solar power installed in their homes at no cost upfront and without a lien on their property. Instead of paying for solar installations, participants in the Santa Barbara Home Power Program have solar panels installed for free and then pay for the energy generated by them.
The program is only available to residents without existing solar systems. Customers currently pay 24 cents per kWh for the first year of service, with rates increasing 2.9% annually.
Santa Clara Solar Water Heating Program
For homeowners who don’t want to install their own solar water heaters, the city of Santa Clara leases and maintains solar water heating equipment for its residents. Homeowners pay an installation fee and a monthly utility fee for the equipment, and the city takes care of the rest.
.20 per cubic feet per minute. Residential customers can apply for the solar attic fan rebate with this form (PDF).
Community solar programs in California
California has allowed community solar programs by law since 2013. Community solar projects let people use solar energy without installing solar panels on their property. The electricity comes from a large shared solar installation.
California recently passed the Community Renewable Energy Act, a law that aims to make community solar projects more accessible for renters and homeowners who cannot afford solar panels.
The Community Solar Green Tariff program provides a 20% discount on community solar energy for people living in disadvantaged communities. Also, some municipal power companies in California, such as the city of Anaheim, provide community solar discount programs for residential customers.
You might be surprised.
PGE’s Smart Battery pilot studies the best ways to connect batteries at customer homes to PGE’s grid. At times of peak energy usage, we’ll charge or discharge your battery to either store or provide energy to the grid. Your batteries will remain fully available to you during a power outage or upon request – you’re in control of how much energy you wish to contribute.
You can rely on back-up power if there’s an outage.
Choose your savings
Save on your bill based on the amount of battery capacity you choose to contribute.
You’ll get the most of your solar panels. A battery lets you store the energy you generate during the day.
For PGE customers there are two ways to be a part of the Smart Battery pilot.
Shift energy and get rewards
PGE customers with a qualifying battery system can enroll and earn rewards for participating in Peak Time Events. You are eligible to participate if you own one of the following batteries:
Purchase a battery storage system as part of the Smart Grid Test Bed.
PGE is planning to offer incentives to customers living in specific areas of our service territory. As program details continue to evolve, we’ll post updates here and reach out to eligible customers.
Why does my participation in this Pilot matter?
By adding your battery system to the grid, you’re part of a community that is creating a “virtual power plant”. one that lets us store and draws energy when needed. It’s an important step towards a clean energy future and a vital one as we add more renewables like wind and solar to the grid.
For example, if our solar panels or wind turbines are generating more than usual, we can store this extra clean energy in batteries and use it later to power your neighbors’ homes and businesses. That strengthens reliability and makes us better equipped to incorporate more low-cost, renewable energy sources into the grid.
Here’s some more details on the paths you can take to be a part of this pilot:
Simply choose the amount of kWh you wish to allow PGE to use of your battery during a scheduled Peak Time Event and earn bill credits of 450.70 per kWh per event.
There are three tiers available to choose from. Each is based on a percentage of your battery’s total nameplate capacity:
- Maximum: 80%. Gives you the highest amount of credit on your bill.
- Balanced: 50%. A great way to balance your bill credit with your battery’s energy.
- Moderate: 30%. Minimum bill credits while maintaining most of your battery’s capacity.
If you do not email us to choose a tier, you will be added to the Moderate capacity by default and will contribute 3kWh per hour for a total of 9kWh based on a 3-hour Peak Time Event.
No matter which tier you choose, your battery system will remain fully available to you during a power outage. Preserving the resilience you receive from your battery system is among our top priorities.
To be enrolled in the Smart Battery Pilot you must provide a minimum capacity of 3 kWh.
Potential Bill Credit
The amount of bill credit received during each event depends on the actual amount of energy your battery provides during each Peak Time Event. This chart includes examples of potential bill credits a customer would receive sharing 80% of their capacity and participating in Peak Time Events.
Answers to Smart Battery pilot questions
What is the Smart Battery pilot?
PGE launched its five-year Smart Battery pilot in 2020. Through this program PGE partners with residential customers with home battery storage systems. The program seeks to install and connect residential energy storage batteries that will contribute up to 9.5 megawatt hours of energy to our grid. Once installed, these battery storage systems will help create a Virtual Power Plant (VPP) that is made up of residential battery systems that can be operated individually or combined to serve the grid, adding flexibility that supports our transition to a cleaner energy future. In addition, these home battery storage systems provide customers with a backup energy resource they can rely on in the event of a power outage.
As we build a cleaner energy future and add more renewable power like wind and solar to our mix, we’re developing energy storage so we can make the best use of these more intermittent resources. This is one of five projects that the OPUC (Oregon Public Utility Commission) approved to test different storage solutions to learn more about the most efficient and effective ways to store power and further modernize our grid.
PGE will schedule times for your battery to be dispatched to provide energy at times of peak energy usage when are higher and electricity may be more carbon intensive. During these peak time events, you always have the option to opt out and your batteries remain fully available to you during a power outage.
Will PGE discharge my battery during an outage?
No, batteries are not dispatched during an outage event. All batteries remain fully available to customers during a power outage. PGE monitors weather conditions very closely, and in the event that severe weather is predicted that may be more likely to cause outages your battery will not be dispatched for grid purposes. Preserving customer resilience from their battery investment is among our top priorities of this Pilot.
What incentives are available if I already have a battery storage system?
In exchange for allowing PGE to connect to and operate their battery system to the grid, participating customers will earn bill credits of 450.70 per kWh of energy each time they participate in a Peak Time Event. Batteries will remain fully available during a power outage. Questions? Contact a PGE Battery Storage expert for assistance. smartbattery@portlandgeneral.com.
What incentives are available if I don’t have a battery storage system?
Eligible residents living within specific neighborhoods in North Portland and Hillsboro, can receive a rebate of 405 per kWh of energy storage committed if they purchase a battery through the Energy Trust of Oregon. Contact an Energy Trust of Oregon solar trade ally
for a bid on a battery storage system (If you don’t have a solar system, now’s a good time to add it but it’s not required to participate in this pilot). Currently, there are rebates available.
How do I install my battery system?
Your solar installer will guide you through the process of installing your battery system (see the list of qualified products below) and connecting it to our grid. Your rebate will be reflected as a reduction on your final invoice. After your battery is installed, you’ll receive a link to connect your battery to PGE. That’s it! Have a question? Email us.