Government agencies (both local and federal), organizations, and other entities offer various types of incentives and rebates to help make solar more affordable.
Types of incentives
- Federal Investment Tax Credit
- Solar Renewable Energy Credits (SRECs)
- Property Assessed Clean Energy (PACE)
- State- and utility-specific incentives
Federal investment tax credit
The federal government offers residential and commercial solar owners a federal tax credit which is a percentage of the system cost with no cap on the amount. This is a one-time tax credit that you receive the first year you own your solar system. You will be able to roll over the tax credit to subsequent years if you are unable to use all of the credit in the first year.
This tax credit was originally set to end in 2016, but it was extended until 2021 and will decrease over time.
We are not tax experts, so we cannot give you tax advice. But generally, the installer will give you a receipt for the total cost of your system after it is installed. You can then give this receipt to your accountant and receive a tax credit off the total cost of your system. If you cannot realize the full value of your credit in the first year, you may be able to roll it forward to reduce your tax burden in subsequent years. Eligibility for the tax credit happens after a system has been “placed in service” as stated in the tax code. What “placed in service” means is a gray area. According to the Solar Energy Industries Association (SEIA) a conservative interpretation would be when your system is ready to be connected to the grid. Please consult with a tax expert or your accountant.
Note: The Federal Investment Tax Credit also applies to battery storage. Solar owners who install a battery system at the same time as their solar panels have always been able to roll the storage costs into their tax credit (given the battery is charged entirely from the solar). In March 2018, the IRS indicated that existing solar owners who retrofit their solar array with battery storage are also able to take the full tax credit for the cost of their battery installation.
Solar renewable energy credits (SRECs)
When you generate solar electricity from your system you also generate an associated “green value” for your electricity. This is known as a Solar Renewable Energy Credit (SREC). Every time your system produces 1,000 kWh (1 MWh) of electricity, you earn one SREC. The value of SRECs varies over time, much like a stock.
SRECs can be the most confusing part of going solar. However, they are important to understand. Depending on what state you live in, they could be worth a significant amount of money over the life of your system.
Property assessed clean energy (PACE)
The PACE model is designed to expand access to energy upgrades by creating access to low cost, long-term project financing. PACE-financed projects can include energy efficiency improvements, renewable energy systems, or a combination of the two. Here’s how PACE financing works: A building or homeowner contacts their local PACE administrator, who secures financing for the project. The building owner then repays that financing over a period of multiple years through a special assessment on the owner’s property tax bill or utility bill. Learn more about PACE.
State- and utility-specific incentives
Some states opt to offer state- or county-level incentives to residents. These can take a variety of forms, from grants to waiving permitting fees, to offering additional assistance to low-income homeowners going solar. Some utilities also offer special incentives for their customers. Check with your utility or see your state page (choose from the list below) to see if there are any utility-specific incentives available in your area.
- Database of state incentives for renewables and efficiency – The most complete resource on solar incentives in the country. You can search incentives by state.
- Solar Investment Tax Credit (ITC) – A resource page from the Solar Energy Industries Association on the federal tax credit.
- Residential Energy Efficient Property Credit (Section 25D) at a Glance – A quick overview from the IRS on the federal tax credit.
- SRECs – A video from 1BOG on how SRECs work.
- SREC FAQs – SREC basics from SolSystems.
- Solar Renewable Energy Certificate (SREC) Markets: Status and Trends – A deep dive into SRECs and SREC markets from the National Renewable Energy Laboratories.
- What is PACE? – A PDF from PACENation on the basics of property assessed clean energy.
- PACE programs near you – An interactive map shows active and coming PACE programs.
- Mid-Atlantic PACE Alliance – A resource for PACE programs in the Mid-Atlantic.
- Why a utility front organization is wrong about solar incentives – Explanation of how an Edison Electric Institute report misleads the public about the benefits of rooftop solar.