There are two programs under the 2007 California Public Utilities Commission renewable energy program guidelines, one for existing homes and one for new home construction. The California Solar Initiative (CSI) establishes the incentive guidelines for existing residential and commercial customers. Under CSI residential and commercial customers can choose between two different financial incentive options.
Option 1:
Expected Performance Based Buydown (EPBB) incentive. The customer can elect to receive a one-time lump sum rebate from the California Public Utilities Commission (CPUC). Local electric utilities administer these rebate payments. Currently, grid tie systems are eligible for a $2.50/Watt rebate.
One very important note: Incentive payment rates will automatically be reduced over the duration of the CSI program in 10 steps, based upon the volume of megawatts of solar reservations issued. Essentially, this means that customers who reserve their rebates earlier will receive a larger rebate. Visit http://www.sgip-ca.com to see the statewide trigger tracker which shows the current rebate incentive rate.
Option 2:
Performance Based Incentive (PBI). The PBI payments will be made over a 5-year period following system installation, submission, and approval of incentive claim materials. Payments will be made monthly and will be calculated using the per-kWh incentive rate multiplied by the actual energy (kWh) produced in that time period. As with the EPBB program the per-kWh incentive rate will automatically be reduced over time. For many customers, such as in the high desert where sunshine is abundant throughout the year, this can be an excellent option because the incentive payments are based upon the actual kWh energy that is produced by the solar system. Thus, over a five year period the customer can end up with a significantly larger "rebate" than had they elected to go with the lump sum payment under EPBB.
Financial incentives for solar energy on new home construction will be administered through the New Solar Homes Partnership (NSHP). This program is significantly different than the CSI program in that it puts an emphasis on energy efficient home design. In addition the new home owner is only qualified to receive a lump sum EPBB rebate in the same fashion as the CSI program.
For residential solar energy systems (solar electric and solar domestic water heating) the tax credit is 30 percent of the cost up to $2,000. However, the individual is limited to $2,000 a year in credits for spending on photovoltaic property and another $2,000 a year for spending on solar water heating property. Essentially, the government pays 30% of the first $6,667 in the cost of photovoltaic property and the same amount for solar hot water heating property. It is not possible to maximize credits by spreading expenditures on the property over the two years in which the credit is available, an individual is considered to have spent the full amount in the year that installation of the qualified solar property is completed. If the system is included as part of construction of a new house, then the spending occurs when the taxpayer takes residence of the house.
For business solar energy systems (solar electric and solar domestic water heating) the tax credit is 30 percent of the cost. Systems must be placed in service between January 1, 2006 and December 31, 2007. Systems designed to provide pool heating are not eligible for the tax credit. For tax credit forms, visit the Internal Revenue website at www.irs.gov The National Solar Energy Industries Assocation (SEIA) has published a guide to the Federal Solar Tax Credits. Download the guide here.
Solar energy systems are unique in that they begin paying for themselves immediately after being commissioned. Due to this fact one can expect an increase in appraisal value when adding a grid tie solar system to their home. Since changes in appraisal value vary from region to region and the fact that appraisers do not yet have a specified valuation for solar systems we cannot guarantee a specific increase in appraisal value. However, national data on this topic suggests that for every one dollar saved annually on your utility bill there is a $20 increase in appraisal value. For example, a home that offsets $100/month in electricity would have an added appraisal value of $24,000 ($100/month x 12 months x $20 = $24,000). This information is outlined the "Appraisal Journal" article "Evidence of Rational Market Valuations for Home Energy Efficiency."
Section 73 of the California Revenue and Taxation Code allows a property tax exemption for certain types of solar energy systems installed on or before December 31, 2009. (The original expiration year of 2005 was extended by AB 1099 [2005].) Qualifying active solar energy systems are defined as those that "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." These include solar space conditioning systems, solar water heating systems, active solar energy systems, solar process heating systems, photovoltaic (PV) systems, and solar thermal electric systems, and solar mechanical energy. Solar pool heating systems and solar hot-tub-heating systems are not eligible.
In essence 100% of the added value to your home due to a customer's solar system is exempt from inclusion in your assessed taxable value for county property taxes.