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 solar financial incentives in the nation. If you’re looking for a list of California commercial solar incentives 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 Pacific Gas and Electric (PG&E), Southern California Edison (SCE), San Diego Gas & Electric (SDG&E), SoCalGas, and Los Angeles Department of Water and Power (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.
A battery storage system is a great way to store your solar energy for later use. You can choose to use your stored energy when electricity rates are cheaper. If the grid goes down or there are rolling blackouts in your area, unlike those that don’t have a battery storage system, you can operate as normal with your stored energy.
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 $0.35 per kWh of a qualifying technology!
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 panel 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 before 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 homeowners and commercial 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 California 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.
You can check with your local municipalities to see what they offer for solar installations. Or connect with our team at WattLogic. We have a team of dedicated incentives specialists that can help you find all available incentives for your business, including local solar rebates.
What net metering laws apply in California?
Net metering (NEM) allows solar customers the opportunity to sell the excess solar energy they generate to the grid, reducing their electricity bills.
According to California’s net energy metering incentive, the three investor-owned utilities – PG&E, SDG&E, and SCE – are required to buy homeowners’ and businesses’ excess solar energy at near retail rates.
Homeowners and businesses can receive bill credits for the excess electricity their solar electric system produces, as long as the system is less than 1,000 kilowatts (1 MW). Net metering can lead to huge electricity savings for some customers.
Customers receive a per-kWh credit for excess solar electricity that is equal to the value of a kWh of the normal utility electricity.
Customers can receive a net metering reduction on top of any other incentives or tax credits they receive for their solar installation.
The first net energy metering program (NEM 1.0) set caps for PG&E, SDG&E, and SCE. Due to the huge growth of solar in the Golden State, the utilities would reach their caps before 2020. To continue to encourage solar installations and help clean energy thrive in the state, the California Public Utilities Commission (CPUC) created a next-generation program known as “Net Metering 2.0” (NEM 2.0). Since July 2017, all the investor-owned utilities have operated under NEM 2.0.
NEM 2.0 added some rules that were not present with NEM 1.0. NEM 2.0 requires all solar customers to switch to Time of Use (TOU) electric plans. Under a TOU plan, you’re charged different electricity rates depending on the time of day.
Residential and commercial solar PV system owners also have to pay a one-time “interconnection fee” to connect their solar PV system to the electric grid. For SDG&E customers, the fee is $132, PG&E customers pay $145, and SCE customers pay the least at $75.
There is also another added charge called non-bypassable charges (NBC). NBC refers to a charge that is added to energy charges.NBC cannot be earned as credit when it is sold back to the grid. NBC causes some to argue that net metering does not exist under NEM 2.0, but NBC only makes up a small portion of your overall electricity bill.
After a 12-month cycle, if you still have excess credits, you are credited at a lower, wholesale rate. This rate is known as the net surplus compensation rate (NSCR) and changes from month to month.
NEM 3.0 may soon replace NEM 2.0. NEM 3.0 would make it hard for homeowners and businesses to go solar and may also take away net metering from those customers who already have it.
NEM 3.0 is under consideration, but until it is approved by the California Public Utilities Commission the NEM 2.0 rules will remain in effect.
What is the federal solar tax credit?
If you’re a commercial solar customer of a California utility, you can also take advantage of the solar investment tax credit (ITC). The solar ITC is a federal investment tax credit that is claimed on federal corporate income taxes for a percentage of the cost of a solar system that begins construction during a tax year. The federal tax credit allows you to reduce your tax liability by a large percentage and can save you thousands of dollars.
The solar federal tax credit was recently updated in August 2022 and is now at a higher percentage and was extended until 2032. Solar systems installed between 2022 and 2032 will receive a 30% tax credit. The average solar tax credit is over $5,000 dollars.
For example, let’s say your business uses the calendar year as your tax year. You began construction of a $1,000,000 solar PV system in 2023 and placed it in service in 2024. Your solar PV property is eligible for a 30% ITC. When the tax basis is $1,000,000, the 30% ITC reduces tax liability by $300,000.
If you are not able to use the full amount of your tax credit in the year you apply, you may be able to roll it over to future tax years.
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.
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 your solar panel system. Not only does California offer your facility ample opportunities to generate solar energy, but the state has some of the most robust solar incentives for California homeowners and business owners.
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 commercial solar incentives, not only will you save money on your solar panel installation, but you will reap the many 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.
WattLogic is a commercial solar installer with decades of experience and will design and build a custom solar project that aligns with your goals and fits your facility. We will also research and apply for any available rebates on your solar project on your behalf as part of our turnkey promise! 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.