California Commercial Solar Incentives: How Do They Work?

California is famous for its ideal conditions for solar power. This makes it a top choice for businesses looking to install solar PV systems. California provides financial incentives and tax credits for commercial solar installations. This is because of the state’s sunny weather and strong support for renewable energy.

Primary Tax Credits and Rebates for Solar Energy in California

California offers a range of solar incentives and tax credits for commercial properties, including the following key programs:

Self-Generation Incentive Program (SGIP)

The SGIP program in California assists customers of large utilities in using technologies to reduce their dependence on the power grid. Technologies that qualify encompass advanced energy storage mechanisms, fuel cells, and wind turbine systems.

A battery storage system lets you save solar energy for later use, especially when electricity prices are cheaper. During a power outage, a battery system allows you to keep functioning by using stored energy.

You can receive incentives by installing a solar-plus-energy storage system at your facility through SGIP. These incentives can earn you up to $0.35 per kilowatt-hour (kWh) for certain technologies.

Solar Energy System Property Tax Exclusion

The Solar Energy System Property Tax Exclusion in California allows property owners to avoid increased property taxes when installing solar energy systems. Here are the key details:

Eligibility and Duration

• Eligibility Period: This rule is for solar energy systems that were installed between January 1, 1999, and December 31, 2024. An extension is in place until January 1, 2025.
• Tax Benefits: Property taxes will not increase because of the installation of a solar panel system.

Exclusion Details

• New Construction Exclusion: This is not an exemption but a new construction exclusion.
• Qualifying Systems: Systems must be thermally isolated from living spaces or areas where energy is used, focusing on collecting, storing, or distributing solar energy.

Legislative Amendments

• 2008 Amendment: Expanded to include new buildings with integrated solar systems not intended for owner-builder occupancy.
• 2011 Clarification: Defined “active solar energy system” to include systems using solar devices upon completion of construction, effective until a change in property ownership.

This tax exclusion encourages the adoption of solar energy while providing financial incentives for property owners in California.

Property-Assessed Clean Energy (PACE)

Property-Assessed Clean Energy (PACE) programs are available for both residential and commercial properties. They assist individuals in financing solar energy and energy efficiency projects without requiring a large upfront payment. Here’s how it works:

Financing Mechanism

• Government Support: Local or state governments fund the initial project costs.
• Repayment: Property owners repay the project costs through property assessments, which are added to their property taxes.
• Security: The assessments are secured by the property itself.

Key Points

• Payment Default: Missing payments incurs penalties similar to those for failing to pay property taxes.
• C-PACE Programs: Available across many states and regions, C-PACE has financed over $800 million in energy projects.
• Goals: The Commercial PACE Working Group wants to create $600 million in C-PACE investments by 2022. They will work with state and local governments to improve C-PACE financing.

PACE programs help property owners pay for energy improvements over time through property taxes, making clean energy more accessible.

Local Solar Rebates

California cities have solar rebate programs that help businesses save money with state and federal incentives and tax credits.

How It Works

• Additional Savings: Local rebates add to existing state and federal incentives for solar installations.
• Availability: Check with your local municipality to discover specific offerings for solar projects.
• Need help with incentives for your business? Contact Solar Earth for expert guidance from our incentives specialists who can help you find and maximize available rebates.

California offers rebates to make solar installations more affordable and appealing for businesses interested in going solar.

Net Metering Laws in California

Net Energy Metering (NEM) in California lets solar customers sell extra solar energy to the grid, lowering their electricity costs.

Key Points:

• • Participants: Homeowners and businesses with solar electric systems less than 1,000 kilowatts (1 MW) can participate.
  • Credit System: Customers receive credits for excess solar electricity at near-retail rates, equivalent to the utility’s kWh rate.
  • Financial Benefit: Net metering leads to significant savings on electricity costs.

• Program Evolution:

• NEM 1.0: Initially capped by PG&E, SDG&E, and SCE because of rapid solar growth.
• NEM 2.0 began in July 2017 with updated regulations. These changes introduced Time of Use plans and a fee for connecting solar panels, which typically ranges from $75 to $145.
• NEM 3.0: NEM 3.0 replaces NEM 2.0, potentially impacting future solar adopters.

Additional Considerations:

• Non-Bypassable Charges (NBC): Small charges not credited when selling excess energy back.
• Net Surplus Compensation Rate (NSCR): Lower wholesale rate for excess credits after a 12-month cycle.

Net metering laws in California, also known as NEM 2.0, promote the growth of solar energy. Homeowners and businesses that install solar systems receive financial benefits.

Federal Solar Tax Credit Explained

The federal solar Investment Tax Credit (ITC) is a financial incentive for businesses using solar energy in California and the US. Businesses can receive a tax credit for installing a solar energy system. The tax credit applies to their federal corporate income taxes. The credit covers a portion of the system’s cost.

Key Benefits:

• Tax Reduction: The ITC allows businesses to lower their taxes by a large percentage of the cost of installing solar panels.
• The solar Investment Tax Credit (ITC) has been increased to 30% starting in August 2022. This credit will be available for solar systems installed until 2032.
• Financial Impact: On average, businesses can save over $5,000 through the solar tax credit.

Example: For example, if a business installs a $800,000 solar PV system in 2023 and puts it into operation in 2024, they can qualify for a 30% ITC. This results in a $240,000 reduction in their tax liability.

• Roll-over Option: Unused tax credit amounts can potentially be carried forward to offset future tax years.
• Accelerated Depreciation: Businesses may utilize the Modified Accelerated Cost-Recovery System (MACRS) to further decrease the overall cost of solar PV projects.
• Depreciation Bonus: Under the Tax Cuts and Jobs Act of 2017, eligible projects commissioned between September 27, 2017, and January 1, 2023, can claim 100% bonus depreciation. This percentage decreases by 20% annually until it phases out in 2027.

The federal solar tax credit offers financial benefits to businesses that invest in solar energy. This helps support sustainability efforts and lowers operational costs through tax incentives.

Take advantage of California’s solar incentives and tax credits now!

California stands out as the perfect location for installing your solar panel system. The state has lots of chances for solar energy and great incentives for homeowners and businesses.

Why Act Now?

• Hurry! Incentive programs are running out of funds or ending soon. Now is the best time to take advantage of rebates.
• Delaying installation means missing out on days of potential solar energy production.

Benefits of Going Solar:

• Access to Renewable Energy: Embrace a sustainable energy source that reduces reliance on traditional utilities.
• Energy Independence: Gain autonomy over energy consumption and costs.
• Cost Savings: Lower utility bills and decreased maintenance expenses contribute to significant financial savings.
• Environmental Impact: Reduce carbon emissions, contributing to a cleaner environment.
• Enhanced Reputation: Display commitment to green energy, improving your brand image.

Partner with Solar Earth

Solar Earth, backed by decades of expertise, specializes in designing and constructing tailored solar solutions for your facility. We manage the entire process, including researching and securing rebates on your behalf, ensuring a seamless experience.

Call us at 805-691-8000 to discuss your business solar project and start moving towards eco-friendly energy solutions. Let’s make your solar vision a reality!