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2016 California Solar Incentives - What you need to know

With another year come and gone, the time is now to focus on the future!  2016! And with changes abound in the incentives structures for solar, OCR felt it a great first assignment for our new Associate Simo Yezrour was to publish an article concerning what you need to know about going solar in California in 2016.  Without further delay!:

Today, power from the sun is the fastest growing source of energy in the US. The country already has enough installed solar capacity to power nearly 4 million homes (out of about 85 million total in the US) and progress continues as there are still many incentive programs helping lower the cost of solar systems for consumers.

In California, the solar business continues to show strength. How so? The combination of yearlong sunshine with layers of supportive solar policy continues to encourage more business and consumers to go solar.

Furthermore, the CA carbon reduction plan is expanding, the average photovoltaic system price continues to fall and incentives continue to allow businesses and homeowners to save on their bill with solar.  It is projected that 2016 will see an additional 1,940 MW of solar installed in California, which is by far the largest installed capacity in a single year, growing the total capacity by about 20% (from ~ 10 GW today to an estimated 12 GW)

What does this mean for YOU?:

At the Federal level, the Database of State Incentives for Renewables & Efficiency (DSIRE) contains many grant and loan programs for the residential sector in California. The most known of them all is the Residential Renewable Energy Tax Credit incentive also known as the ITC, that has recently been extended by the congress, with a gradual step down of the credits between 2019 and 2022. The solar system must be placed in service before December 31, 2021 to be eligible.

The ITC states that a taxpayer, either a professional or individual, may claim a credit of 30% of qualified expenditures for a solar photovoltaics or a solar water heating system that serves as a dwelling unit, located in the United States to be owned and used as a residence by the taxpayer.

The Investment Tax Credit has been the main Federal policy mechanism supporting deployment of solar systems all over the US. Before the recent policy decisions for the future of the ITC, modeling conducted by IHS Technology, a global energy analyst, prior to the extension of the ITC, forecasted that U.S. solar installations would have reached nearly 17 gigawatts in 2016 driven by the rush from developers to finish projects ahead of the December deadline. This would then lead to a drop to just 6.5 GW in 2017. The jury is still out on the effect of new ITC legislation on planned 2016 projects, but it is safe to say the pressure is off to get projects completed in 2016.

The Federal ITC provides tax credit for expenditures on newly installed solar systems.  Expenditures include labor costs for on-site preparation, assembly or original system installation and piping-wiring to interconnect a system to the home. If the federal tax credit exceeds your 2016 tax liability, the excess amount may be carried forward to the succeeding taxable year.

Advantages of installing these systems include a non-limit credit if your system is installed before December 31st, 2021. In addition to this, the home served by the solar installation doesn’t need to be the taxpayer’s principal residence. However, heating swimming pools and hot tubs using water-heating systems won’t provide you extra tax credit as well as some other conditions that apply to these properties.

Other DSIRE Federal programs are expiring by the end of 2016. Most of these incentives are Energy Rebate programs that provides a cash rebate for customers planning to install new solar systems. They are all provided by local utility companies like SoCalGas, SCE, PG&E, SDG&E and depend on the solar capacity installed on your roof.

All these rebates can be found on the Database of State Incentives for Renewables at: http://www.dsireusa.org/

Benefits at the state level are led by the California Solar Initiative(CSI), a solar rebate program for California consumers, provides upfront cash incentives. In aggregate, these incentives are worth more than $2 billion to customers installing photovoltaic and electricity displacing solar thermal systems. CSI benefits are available within the service areas of the three major California investor-Owned Utilities service territories: Pacific Gas and Electric Company, based in the Bay Area, California Center for Sustainable Energy, based in San Diego and finally Southern California Edison Company, based in Rosemead. CSI incentives, combined with federal tax incentives, could cover up to 50% of the total cost of a solar system.

Depending if you have a single-family or multi-family house, the incentives amounts differ. The Affordable Solar Housing Program offers rebates based on the size and performance of the system installed. The incentives range from $1.90 – $2.80 per watt depending on whether common area load or tenant load is offset for multi-family house. On the other hand, the single-family house incentives amount depends on your income level and your program eligibility. The DSIRE page has all the information you will need about CSI as well.  CSI is also running until the end of the 2021.

On the municipal / local level, green building incentives and rebate programs exist for many cities including high profile programs in Santa Monica, San Diego, San Francisco & Los Angeles. For example, the Property Assessed Clean Energy (PACE) financing program allows homeowners in SoCal and the Bay Area to borrow money for energy improvement projects which are repaid through their property taxes. It is administered by the FIGTREE Energy Financing that also finances a variety of renewable energy and energy efficiency products. Click the link here to see if your city is participating.

Overall, the ITC has been largely responsible for the over 1,600% YoY growth in CA solar installations since it was implemented in 2006.  The Dec, 2015 decision to clarify the ITC for solar until 2022 will no doubt has a very positive effect on the stability of the industry in the US and, by proxy, the world.

~Simo, Associate @ OCR