California is the ideal state for solar power and for a commercial facility to install a solar photovoltaic (PV) system on site. Sunny days mean plenty of solar power, but more importantly, the state offers some of the best financial incentives in the nation. If you’re looking for a list of California solar rebates and tax incentives for commercial properties this is the article for you.
What are the main California solar tax credits and rebates?
The following are the main California solar incentive and tax credit programs available for commercial facilities:
Self-Generation Incentive Program (SGIP)
The Self-Generation Incentive Program (SGIP) was designed to encourage customers of PG&E, SCE, SDG&E, SoCalGas, and LADWP to install technologies that reduce their demand on the grid. Qualifying technologies include advanced energy storage systems, fuel cells, and wind turbines, among several other technologies.
You could take advantage of the SGIP incentive if you install a solar-plus-energy storage system at your facility. You can receive up to $.35 per kWh of a qualifying technology! Find out more about the SGIP here.
Solar Energy System Property Tax Exclusion
Section 73 of the California Revenue and Taxation Code allows property tax exclusion for solar energy systems installed between January 1, 1999 and December 31, 2024. In 2014 an extension was added, and it is now available until January 1, 2025. If you qualify, your property taxes will not increase if you install a solar system on your property.
The property tax incentive for the installation of an active solar energy system is in the form of a new construction exclusion and is not an exemption.
According to the code, qualifying solar energy systems: “are thermally isolated from living space or any other area where the energy is used, to provide for the collection, storage, or distribution of solar energy.”
The section was amended in September 2008 and states, “This bill would modify this exclusion to specify that ‘the construction or addition of an active solar energy system’ includes the construction of an active solar energy system in a new building in which the owner-builder incorporated an active solar energy system in the initial construction of the new building and the owner-builder does not intend to occupy or use the new building. This bill would provide this exclusion to the initial purchaser of the new building, but only if the owner-builder did not receive the exclusion for the same system and the initial purchaser purchased the new building prior to that building becoming subject to reassessment to the owner-builder.”
In 2011, the bill was amended again and states, “This bill would clarify the definition of active solar energy system for purposes of this exclusion to mean a system that, upon completion of the construction of a system as part of a new property or the addition of a system to an existing property, uses solar devices as described above and would make additional findings and declarations, as provided. This bill would also clarify that this exclusion shall remain in effect only until there is a subsequent change in ownership.”
Property-Assessed Clean Energy (PACE)
PACE programs exist for residential and commercial properties. PACE programs allow property owners to finance solar energy and other energy efficiency projects without a large upfront cost. Local or state governments cover the initial cost of the project and the property owner pays back their improvement expenses through property assessments, which are secured by the property itself and paid through the owner’s property taxes.
Default on a payment would result in the same set of punishments as failure to pay other portions of a property tax bill would.
C-PACE or commercial PACE programs are available in dozens of states, regions, and local governments. According to the Department of Energy, C-PACE has financed more than $800 million in energy efficiency projects.
There is a group that aims to generate $600 million in C-PACE investments by 2022. According to the Department of Energy, the Commercial PACE Working Group is, “a cohort of state and local governments working together to learn about, launch, and refine C-PACE financing.”
Local solar rebates
Many cities offer solar rebate programs that you can take advantage of. This would be on top of, or including, the incentives and tax credits offered to your business by the state or federal government.
For example, in the city of Austin, Texas, Austin Energy offers commercial customers up to $0.05 – $0.08/kWh for a solar PV system. Financial incentive amount is based on business size.
You can check with your local municipalities to see what they offer for solar installations. Or connect with our team at U.S. Energy Recovery. We are backed by a dedicated group of incentives specialists that can help you find all available incentives to your business, including local solar rebates.
What net metering laws apply in California?
Net metering (NEM) allows utility solar customers the opportunity to sell the excess solar energy they generate to the grid, reducing their own electricity bill.
Customers can receive a net metering reduction on top of any other incentives or tax credits they receive for their solar installation.
The net energy metering program in California is available to PG&E, SCE, and SDG&E customers.
Customers who participate in NEM receive an electricity bill credit for the excess solar energy sold. The credits are at your utility’s retail rate. After a 12-month cycle, you can roll over credit indefinitely or receive payment for credits at a rate equal to the 12-month average market price during the hours of 7 a.m. – 5 p.m. in the year the excess energy was generated.
According to the Los Angeles Department of Power and Water (LADWP) website, net metering program funds are no longer available for new applications and a waitlist has been created.
What is the federal solar tax credit?
If you’re a commercial customer of a California utility, you can also take advantage of the solar investment tax credit (ITC). The solar ITC is a tax credit that can be claimed on federal corporate income taxes for a percentage of the cost of a solar system that begins construction during a tax year. This allows you to reduce your tax liability by a large percentage and can save you thousands of dollars. Learn more about the federal solar ITC here.
The solar ITC was currently extended for two more years at 26 percent. The 26 percent credit applies to solar projects that begin construction through the end of 2022, as opposed to expiring at the end of 2020 under the old law. The credit will decrease to 22 percent for projects that begin construction by the end of 2023, and then to 10 percent for larger solar projects and zero percent for small projects that begin construction in 2024.
You may also be able to take advantage of accelerated depreciation (Modified Accelerated Cost-Recovery System, or MACRS) to reduce the overall cost of a solar PV project. Learn more about MACRS here.
You can also elect to claim a depreciation bonus. The Tax Cuts and Jobs Act of 2017 increased bonus depreciation to 100% for eligible projects commissioned and put into service after September 27, 2017 and before January 1, 2023. After that, the percentage drops 20% per year until it reaches 0% in 2027.
Take advantage of California solar incentives and tax credits while you still can!
The Golden State is the ideal place to install solar panels . Not only does California offer your facility ample opportunities to generate solar energy, but the state has some of the most robust solar rebates and tax incentives.
If you are considering installing a solar system at our facility, the time is now. Many incentive programs are running out of funds for rebates or are closing soon. Additionally, the longer you wait, the more days you waste not generating solar power.
By taking advantage of California state incentives and rebates, not only will you save money on the cost of installing solar panels on your commercial property, but you will reap the benefits of having a solar system. The benefits include being able to have access to a renewable energy source, the opportunity to be energy independent, cheaper utility bills, decreased maintenance costs, reduced carbon emissions, and an improved brand image due to your focus on green and sustainable energy.
U.S. Energy Recovery is a commercial solar company with decades of experience and will design and build a custom solar project that aligns with your goals and fits your facility. We are excited to learn more about your plans for a commercial solar system and would love to connect with you! Schedule a time to talk or reach out to us directly at 800-834-8737.