With the help from CAL SEIA, the State of California has put in place a range of financial incentives that substantially reduce the costs of solar energy systems. Information about these incentives is described below - scroll down for information on whether rebates are treated as taxable income or not (they are not).

Contact a CAL SEIA member company or call your local utility to get specific local information. CAL SEIA members assist consumers in filing these applications!

There are two incentive levels available:

Base incentive: the Expected Performance Base Incentive (EPBI) amount will begin in 2007 based on the reference system receiving$2.50/watt. The actual incentive amount for a particular system and installation depends on the EPBI calculation of the system'sperformance compared to the reference system.

California Public Utilities Commission California Solar Initiative:
On January 1, 2007, PV rebates given through the CPUC California Solar Initiative will change from the current capacity-based payments to
performance-based incentives that reward properly installed and maintained solar systems. The incentives are based on system size, as follows:

For photovoltaic systems greater than or equal to 100 kilowatts in size, incentives will be paid monthly based on the actual energyproduced for a period of five years. This incentive path is called Performance Based Incentives (PBI).
Incentives for all systems less than 100 kilowatts will initially be paid a one-time, up-front incentive based on expected system performance. Expected performance will be calculated based on equipment ratings and installation factors, such as geographiclocation, tilt, orientation and shading. This incentive is called Expected Performance-Based Buydown (EPBB). 

Beginning January 1, 2007, photovoltaic incentives are administered for local electricity customers - contact the organizations listed below. 

Southern California Edison
California Solar Initiative
2131 Walnut Grove Avenue
G01, 3rd Floor, B10
Rosemead, CA 91770
Telephone: 1-800-736-4777

San Diego Regional Energy Office
(customers of San Diego Gas & Electric)
8690 Balboa Avenue, #100
San Diego, CA 92123
1-866-sdenergy or 858-244-1177
E-mail: This email address is being protected from spam bots, you need Javascript enabled to view it

Pacific Gas and Electric Company
PG&E Integrated Processing Center
P.O. Box 7265, San Francisco, CA 94120-7265
E-mail: This email address is being protected from spam bots, you need Javascript enabled to view it

The Sacramento Municipal Utility District (www.smud.org) and the Los Angeles Department of Water and Power (www.ladwp.org) also administer local PV incentives programs.

Incentives for builders and developers 

California Energy Commission
New Solar Homes Partnership
(New residential construction only)
California Energy Commission
1516 Ninth Street MS-45
Sacramento, CA 95814-5512
Telephone: 1-800-555-7794
E-mail: This email address is being protected from spam bots, you need Javascript enabled to view it

Production housing with solar as a standard feature incentive: the EPBI amount will begin in 2007 based on the reference system receiving $2.60/watt. The actual incentive amount for a particular system and installation depends on the EPBI calculation of the system's performance compared to the reference system. To qualify, a builder must commit that a minimum of 50% of the homes/dwelling units in the subdivision, or multi-family housing development with 6 or more homes/dwelling units, will have solar systems that meet or exceed the California Flexible Installation criteria.

Are rebates taxable? NO!

The Internal Revenue Service Publication 525 (Taxable and Nontaxable Income) addresses this question on pages 29 and 33.

Page 29 – PBI-type incentive. Energy conservation subsidies. You can exclude from gross income any subsidy provided, either directly or indirectly, by public utilities for the purchase or installation of an energy conservation measure for a dwelling unit.

Energy conservation measure. This includes installations or modifications that are primarily designed to reduce consumption of electricity or natural gas, or improve the management of energy demand.

Page 33 – buy-down/EPBB incentives:

Utility rebates. If you are a customer of an electric utility company and you participate in the utility’s energy conservation program, you may receive on your monthly electric bill either:

A reduction in the purchase price of electricity furnished to you (rate reduction) or
A nonrefundable credit against the purchase price of the electricity 

The Internal Revenue Code (federal taxes) reference is TITLE 26 > Subtitle A > CHAPTER 1 > Subchapter B > PART III > § 136

The State of California has a law that also excludes solar rebates from income tax. This is in the State's Revenue and Taxation Code Section 17138.1

Revenue and Taxation Code 17138.1 states:

Gross income does not include any amount received as a rebate, voucher, or other financial incentive issued by the California Energy Commission, the Public Utility Commission, or a local publicly owned electric utility, as defined in subdivision (d) of Section 9604 of the Public Utilities Code, for any expenses paid or incurred by a taxpayer for the purchase or installation of any of the following devices:
  
(a) A thermal system as defined in Section 25600 of the Public Resources Code.
  
(b) A solar system as defined in Section 25600 of the Public Resources Code.
  
(c) A wind energy system device that produces electricity.
  
(d) A fuel cell generating system, as described in the California Energy Commission's Emerging Renewable Resources Account Guidebook, that produces electricity.