We try to keep consumers up to speed on trends and changes in the solar industry, but because solar markets vary so much by state (and sometimes even city), the information can be very broad. In this series of case studies, we’ll explore what it looks like to go solar in California generally and in specific areas. Don’t see your city mentioned? Check back soon for new additions.
The Case for Going Solar in California
Golden State residents who feel like their electricity bill is bleeding their budget have good reason to feel pinched - according to the data - Californians pay among the 10 highest rates for power in the nation. And those rates are going up - 14 percent since 2017 in fact.1 The state of California is also poised to move the homes of residential customers to Time of Use (TOU) electricity rates, which has many customers wondering what their bill will look like in the future.
It may sound bleak for your wallet or confusing at the very least, but don’t despair! California is also one of the best states for solar power, offering residents a more economical choice for electricity and the chance to make their homes a bit greener. Stick with us as we cover clean energy savings in your state, including those confusing TOU rates (spoiler: solar customers can save with TOU).
We’ll start with the information for a solar purchase - meaning you buy your system either outright or with a loan - and then we’ll cover how solar leases and PPAs change things.
Solar Programs and Energy Incentives for Californians
If you’re planning to buy a newly built home in the state of California, you’ll likely get solar panels on your roof automatically. Thanks to an update to the state’s Building Energy Efficiency Standards, homes built starting in 2020 must have a solar energy system installed. This makes the process of going solar very easy for new homebuyers - and saves money since the construction phase is the most cost-effective time to install solar panels.
The Energy Commission estimates that the new building standards (with the solar mandate being a key component) will add about $40 per month to homeowner costs but will, in turn, save $80 per month on heating, cooling and lighting expenses.2 A pretty great deal, if you ask us!
For those of us who live in or plan to purchase a home that’s not brand-new, it takes a little more work to figure out the cost and benefits of going solar. First, let’s review the Renewable Energy Tax Credit, which gives solar customers nationwide access to a tax credit - it’s equal to 30 percent of the cost of a PV solar system (through 2019 with the credit decreasing through 2021) which is a good-sized savings. Some solar providers in the industry will claim the credit (saving you paperwork both on the application and your IRS forms come tax time) and pass the savings on to you.
Though energy incentives for many of California’s major utility companies have been exhausted and the state no longer offers incentives, some local utilities still have California solar rebates available. Most of these local programs range from Roseville Electric’s $240/kW rebate to Silicon Valley Power’s $1,250/kW rebate.3 See if your city or utility is on the 2018 list here. While it would be nice to get additional tax benefits for your renewable energy, these perks aren’t the only way to save with solar.
Net Metering in the Golden State
As a California solar customer, you are eligible to participate in a net metering program through your utility. Read the linked article for the specifics on net metering, but essentially this agreement allows you to send any electricity you don’t use to the grid for a credit from your utility. The credit offsets the cost of buying power from the utility when you need it (after dark, for example).
With a well-designed solar system, this can cut your electricity payment significantly - or even completely. More good news: California net metering credits are calculated using the utility’s TOU schedule - if you export 1 kWh during peak hours, you’re credited the peak price. (More on TOU rates below.)
Return on Your California Solar Investment
Let’s cut to the chase. As California homeowner, is going solar good for your wallet? Yes! In a nutshell, Californians have one of the better returns on investment for solar panels. The estimated savings over 20 years after purchasing solar panels is $21,000 for the average home in California.4 Most solar panels are rated to last 20 years or longer, so that’s a significant return on investment! In fact, it’s one of the best in the country. Check out our post, Which States Are Best for Solar Power to get an idea of how California solar stacks up with the rest of the United States.
Of course, savings will vary based on the size of your home and how much power you use, but you can breathe a sigh of relief no longer being at the mercy of volatile utility rates. Plus, you can’t put a price on knowing your energy comes from a clean, renewable source!
Loans, Leases and PPAs
The calculations and projections above are based on owning your own solar system, but solar plans in the state of California come in other shapes and sizes too. We’ll take a look at each (for more details, visit our Solar Plans page):
- Solar Purchase - this is the most straightforward. You buy your solar system up front, plain and simple.
- Solar Loan - similar to a solar purchase but you finance your system with a loan.
If you use a loan to purchase your system, the savings you see will vary a bit based on your particular loan terms. Some large solar installers offer solar loans, while other providers will refer you to third-party financial institutions for a loan. Some homeowners choose to take out a home equity loan to finance their panels. Exploring more than one loan option can help you get the best rate for your system.
- Solar Lease - you lease the panels while your solar provider maintains ownership.
- Solar Power Purchase Agreement (PPA) - you buy the power your panels produce and your solar provider maintains ownership of the panels.
Solar leases and PPAs are slightly different - you won’t own your panels or be eligible to claim the federal tax credit. The savings should still be passed to you though, as your solar provider can claim those energy incentives and factor them into your monthly payment. As a loan or PPA customer, you’ll still be able to take advantage of net metering and typically won’t be required to make a down payment.
Savings can be easier to compare with leases or PPAs - just take the monthly payment specified on your solar bid and compare it with your average monthly electric bill. Keep in mind you’ll likely still have to pay a small monthly fee to your utility for grid connection and you may occasionally need to buy power from them.
More Energy Savings - Home Batteries, Utility Rate Options and EVs
There are even more ways to save with solar in California - you can choose these products or programs when you have your solar system installed or add them later to maximize your clean energy benefits.
- Add a home battery to maximize flexibility of when to use the power generated by your solar panels. Residents are eligible for a California solar rebate on an energy storage system under the Self Generation Incentive Program.
- The flexibility you get with solar panels - especially when combined with a home battery - makes it easier to save money with TOU rates. New solar customers serviced by one of California’s major utility companies are now required to use TOU rates and solar customers of smaller utilities may also benefit from choosing this rate structure - especially if the “on-peak” hours align with peak solar production hours (in the afternoon). Check out our post, What Are Time of Use Rates? to learn more and to get tips on maximizing savings under a TOU plan.
- Take advantage of California’s Clean Vehicle Rebate program and make the switch to an Electric Vehicle. Learn more about saving energy (and improving air quality) with your own solar EV charging station in this Q&A with a Clean Energy Trailblazer.
Get the Figures for Your Home
There’s no denying that California is a great place to choose solar. This post should give you an idea of how much you can save with solar, but the only way to know the specific dollar amount staying in your wallet is to get a solar bid tailored to your home and electricity use. Let us give you a free one! Start yours here.
4. Project Sunroof