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Feb 14 2024
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reason to go solar in 2024

The $7 Billion Reason to Go Solar in 2024

By Federal Solar Tax Credit, Solar Rebates & Incentives No Comments

Tax season is a drag — unless you recently installed solar.

This year, US homeowners are expected to claim an estimated $7 billion in tax credits for the solar systems they installed in 2023. (And that doesn’t even include tax credits for home batteries!)

The federal solar tax credit is worth 30% of the installed cost of a residential solar system, with no maximum amount. So, whether you spend ten thousand or fifty thousand on a solar system, Uncle Sam is offering to eat 30% of the cost.

This tax credit was extended through 2032 with the passage of the Inflation Reduction Act (IRA). However, this incentive can — and almost certainly will — be repealed in early 2025 if a new administration takes the White House.

That would make 2024 the last year to qualify for this tax credit and a very good year to go solar.

$7 billion in solar tax credits for 2023

A record 7,000 Megawatts (MW) of residential solar capacity was installed in 2023, according to data from Wood Mackenzie. To break that down, the average home solar system has roughly 7 kilowatts of capacity. So, 7,000 MW is an average-sized system on 100,000 homes.

residential solar installed through 2028

Wood Mackenzie also reports the average cost of a solar system in 2023 was $3.42 cents per watt (1 MW = 1,000,000 watts). At that price point, Americans spent a combined $23.9 billion on residential solar in 2023 — making them eligible for a total of $7.2 billion in federal income tax breaks.

In early 2024, these new solar owners are claiming their tax break and enjoying their first full year of generating their own clean electricity.

Will 2024 be the last year to qualify for the solar tax credit?

There’s a reasonable chance that 2024 is the last year for homeowners to install a solar system that qualifies for the 30% federal tax credit. It depends on how that 2024 general election pans out.

Political opinions aside, it’s a matter of fact that former President Donald Trump has vowed to repeal clean energy tax credits if he is re-elected in 2024. This presumably includes the tax credits and rebates for solar, batteries, EVs, EV chargers, and a wide range of home electrification upgrades.

In this scenario, US homeowners would still have all of 2024 to install systems that qualify for this incentive before the Trump administration takes over in 2025.

However, given the average solar project timeline of 3-4 months, waiting for election results in November may not leave enough time to install a system before the end of the year — especially if there is a rush to claim the credit before it expires.

The safe bet is to start a project early in 2024 to ensure eligibility. Plus, it’s a good idea to have your solar system up and running before your high summer electricity bills kick in.

 

 

Claiming the solar tax credit

The federal solar tax credit is claimed on IRS Form 5695 for the tax year the system was installed. We have a detailed walk-through here, but please consult a licensed tax professional with questions about your personal tax situation.

The credit is worth 30% of your total project cost after rebates and discounts are applied. So, if your out-of-pocket cost was $25,000, you can claim a $7,500 tax credit for the year it was “deemed operational” (i.e., installed and passed inspection).

Here are some things to keep in mind:

  • This incentive is not a check that simply comes in the mail — it’s a non-refundable tax credit.
  • As a non-refundable credit, the solar tax credit is used to reduce your tax liability (i.e., your taxable income) to increase your refund or reduce the amount of tax you owe.
  • It must be claimed on the tax return for the year the system was installed and passed inspection. (You can’t install it in 2023 and wait until your 2025 tax return to claim it)
  • If the tax credit amount is greater than your tax liability for the year, you can carry the leftover credit forward to future tax years

In many cases, claiming the credit is simply following the instructions on Form 5695. But if you’re unsure consult a licensed tax advisor with questions about claiming this credit. 

The bottom line

The 30% tax credit is a great incentive that boosts the cost savings of solar and undoubtedly played a role in the record number of systems installed in 2023.

This incentive is scheduled to remain until 2032. However, there is a reasonable chance that 2024 could be the last year to install a system that qualifies for his tax credit.

Start your solar project today to ensure eligibility for the 30% solar tax credit.

Feb 13 2024
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CPUC SGIP proposal 2024

California Proposes Beefed-Up Solar and Battery Rebates for Low-Income Households

By Solar Incentives by State, Solar Rebates & Incentives No Comments

Low-income households in California may soon have access to one of the best solar and battery incentives in the country and an opportunity to drastically lower their energy costs.

On November 2, the California Public Utilities Commission (CPUC) proposed rules for allocating $280 million for the Self-Generation Incentive Program (SGIP). Historically, this program has been restricted to rebates for battery storage. However, the CPUC proposal would increase the battery incentive and create a solar rebate for eligible low-income households.

Keep in mind, this is only a proposal at this point! A final vote could come as early as March 7 and changes could be made before then. Check back for updates.

New SGIP incentive amounts proposed in 2024

Under the new proposal, the “Residential Equity” SGIP incentive would increase from $850 per kWh of battery storage to $1,100 per kWh of battery storage plus $3.10 per watt of solar. This category would also be renamed “Residential Solar and Storage Equity” to match the new incentives.

So, let’s say you are an eligible low-income household and want to install an 8 kW solar system with 10 kWh of backup battery, here’s how much your SGIP incentives would increase under the new proposal.

Existing incentive Proposed incentive
SGIP category Residential Equity Residential Solar and Storage Equity
Battery incentive (10 kWh) $8,500 $11,000
Solar incentive (8 kW) N/A $24,800
Total incentive amount $8,500 $35,800

That’s a massive difference! And while we hate to throw around the term “free solar,” there may be cases in which the proposed SGIP incentives cover the entire cost of a solar and storage project.

It’s worth noting that this incentive does not apply to roofing costs. However, up to $3,500 can be put toward wiring and panel upgrades and it can cover inverter replacements, if necessary.

Qualifying for new SGIP incentives

So who would qualify for for the expanded incentives? First off, this incentive would be reserved for battery storage projects and solar plus battery storage projects. It does not apply to solar-only projects.

Fortunately, the CPUC proposal would also make it easier to qualify for the Residential Solar and Storage Equity incentive by removing the “resale restriction” criteria and expanding the programs that automatically qualify households.

Existing eligibility criteria Proposed eligibility criteria
Verify household income is 80% or less of area median income AND the property has a resale restriction/equity sharing agreement Verify household income is 80% or less of area median income
OR OR
Household previously reserved funds through SASH or DC-SASH Household previously reserved funds through SASH, DC-SASH or is participating in CARE or FERA rates or the Energy Savings Assitance program

So, the CPUC proposal expands eligibility requirements and increases the incentive amount. What’s the catch?

There are two things to be aware of.

1) Demand Response Programs

The CPUC proposal would require all SGIP participants to enroll in a “Qualified Demand Response Program” through their utility.

In a demand response program, utility customers are asked to reduce their electricity consumption during high-demand events to reduce stress on the grid. The utility may drastically increase prices during high-demand events and/or pay battery owners to export power onto the grid — it depends on the program.

In California, residential demand response programs include:

  • SCE Summer Discount Plan
  • SCE Smart Energy Program
  • PG&E ART
  • PG&E SmartRate
  • SDG&E EECC-TOU-DR-P

Demand response programs can help prevent power outages. However, if you’re not careful you could end up paying even higher electricity prices during high-demand events.

2) Enrolling in the Net Billing Tariff (NEM 3.0)

CPUC is also proposing that all future SGIP customers — except those in the Residential Solar and Storage Equity group — enroll in the new Net Billing Tariff (aka NEM 3.0).

NEM 3.0 is a billing structure that pays solar customer far less for their excess electricity than what they buy it for. On average, NEM 3.0 solar owners earn 8 cents per kWh for the excess production and buy electricity from the grid for 30-40 cents per kWh, depending on their utility rate plan.

This rule would substantially impact current solar owners who have better compensation under NEM 1.0 or NEM 2.0 and wish to add battery storage without switching to NEM 3.0.

Again, this is only a proposal and the California Solar and Storage Association (CALSSA) has promised to push back on this criteria.

The bottom line

In general, solar incentives get worse over time as the cost of solar plummets. However, the CPUC is proposing an extremely valuable solar and battery incentive for eligible low-income households.

This incentive would put the cost-saving benefits of solar and battery in reach for low-income households that spend a disproportionate share of their income on California’s expensive grid electricity.

Connect with an Energy Advisor to create a plan for capturing this incentive!