Do Solar Batteries qualify for Tax Credits? – Rebates and Incentives

Solar panels and their entire energy systems can seem to be expensive yet an essential investment that could cost you around $15,000 without incentives or tax credits. However, federal solar tax credits reduce 30% of solar system installation costs.

Various solar incentives offered by the government encourage using renewable green energy, which includes the residential clean energy tax credit applicable for investing in solar, wind, geothermal, fuel cells, and storage batteries. Also, there are State government rebates and SREC (Solar Renewable Energy Certificates) which can help homeowners reduce the expense of solar panels.

Solar batteries are eligible for the ITC (Investment Tax Credit) after the Inflation Reduction Act because the federal solar tax credit has further extended solar tax credits up to 2034 including the solar battery tax credit as a part of it. The Inflation Reduction Act of 2022 focuses on economic, environmental, and social challenges using tax reforms, and provisions to promote clean renewable energy.

Before deciding whether solar batteries are worth it, you must be aware of the benefits of state-level solar battery rebates and incentives provided by utility companies. Let us further discuss whether you can get a tax credit for the battery that has already been used for your solar system.

What is the Storage Investment Tax Credit?

In recent times, the current status of the federal storage investment tax credit has undergone a few changes, especially after passing the Inflation Reduction Act of 2022. The federal storage ITC (investment tax credit) reduces the payable income tax up to a certain percentage of the solar system cost (installed during the tax year).

Solar battery requirements to qualify for the ITC differ as residential properties need to have 100% charged solar batteries to qualify for the ITC, whereas commercial properties have the same criteria with added requirements. The commercial properties need to have battery which is used only for energy storage and not other purpose. In addition to that, these batteries should meet the ITC requirements (including new and original equipment installation).

The policy change in 2023 affects the eligibility of residential storage systems for the tax credit. It requires the battery to be charged up to 100 % by an onsite renewable energy system, such as solar panels, and should be able to provide backup power during outages to qualify for ITC. Therefore, this change focuses on the importance of connecting solar batteries with renewable energy systems, encouraging low-carbon, environment-friendly practices, and making you eligible for the tax credit.

To claim the Investment Tax Credit, taxpayers must properly fill out and submit Form 5695 to their tax return. The significance of tax liability in claiming the ITC can be used to reduce the payable federal tax starting in the same tax year during the battery installation. Hence, this simply means that ITC is capable of directly reducing the payable tax amount and makes it a valuable incentive for homeowners to invest in solar energy systems which also include solar batteries.

State Level Solar Battery Rebates and Incentives

There are various state-level incentives and programs for solar battery installations, that support the adoption of solar energy and storage systems. Let us take a closer look at the Solar battery rebates, incentives, and programs available in California, Hawaii, Maryland, Massachusetts, and Oregon.

California Self-Generation Incentive (SGIP)

The California Self-Generation Incentive Program (SGIP) is a specially developed incentive program to meet electrical demands in California and reduce the GHG (Greenhouse gas) released into the atmosphere.

Specific Eligibility Requirements of California Self-Generation Incentive Program (SGIP):

• Residential customers must show proof that the installation site is their main residence, occupied by the homeowner themselves or any tenants. Also, verifies that the water supply to that residence is not provided by a municipal or private utility.

Benefits of California Self-Generation Incentive Program (SGIP):

• 2 categories of new and higher rebates for SGIP — “Equity” and “Equity Resiliency” provide incentives for battery storage firstly to the lower-income, medically vulnerable, and at-risk fire communities.
• SGIP-offered incentives are not counted as income, and they will not impact the individual’s immigration status or eligibility for Medical benefits.

Homeowners and businesses can navigate and maximize the SGIP for their solar battery installations by getting in touch with their local program administrators who generally carry out many active promotional activities regarding SGIP in their locality. In addition to that, more detailed information about the program such as the SGIP brochure, an eligibility map, and a list of approved installers, can be found on the SGIP page of the CPUC (California Public Utilities Commission) official website. On top of that, they also gain other program benefits, where they will receive their first 50% rebate on approval and a 50% rebate paid over 5 years annually.

California Self-Generation Incentive Program (SGIP) plays a very important role in the adoption of solar batteries and has financially helped a majority of energy storage projects focusing on fire-prone, low-income, and economically disadvantaged communities. On top of that, the SGIP in California has reserved incentives for more than 8,700 energy storage projects and granted more than $240 million in incentives.

Hawaii (Oahu) Battery Bonus Program

The Hawaii (Oahu) Battery Bonus Program is an initiative put forward by the HECO (Hawaiian Electric Company) which mainly provides incentives for maximizing the number of home energy storage installations. The sole purpose of this program is to bring Hawaii on track to its 100% clean energy by 2045.

Specific Eligibility Requirements of Hawaii (Oahu) Battery Bonus Program:

• Getting involved in approved Hawaiian Electric renewable energy rate programs based on Oahu and Maui (NEM/+, CGS/+, SE, CSS, SIA, SDE).
• Battery installation of any size is possible with an option to add new panels. Keep in mind as long as its capacity is not greater than two times the battery size.
• Projects with equipment are not eligible for the program if it is installed before specific dates.

Benefits of Hawaii (Oahu) Battery Bonus Program:

• System owners will receive an upfront and ongoing incentive payment for the full 10 years of the program.
• Residential and commercial customers on Oahu will receive cash incentives so that they can add new energy storage to an existing one or a new rooftop solar system.
• All customers will receive support for the grid that will contribute to the aim of maintaining 100% clean energy by 2045.
• Effective from 1st June 2022, the program was changed to further improve its reach and efficiency.

Homeowners and businesses can navigate and maximize the Hawaii (Oahu) Battery Bonus Program for their solar battery installations by enrolling in approved Hawaiian Electric renewable energy rate programs. Also, you need to install a battery of any size and stay informed about program updates and changes to maximize benefits.

The Hawaii (Oahu) Battery Bonus Program plays an important role in the adoption of solar batteries as it has played a major part in contributing additional valuable energy storage to Oahu’s grid.

Maryland Energy Storage Tax Credit

The Maryland Energy Storage Tax Credit is a specifically designed incentive program that distributes tax credits to consumers based on FCFS (First Come, First Served).

Specific Eligibility Requirements of Maryland Energy Storage Tax Credit:

All residential as well as commercial property owners are eligible for the tax credit.

• Residential property owners must bear in mind that the deadline for the program’s tax year will be 15th January of the forthcoming year and applications will be accepted on a first-come, first-served basis.
• Commercial business entities should be the purchaser and installers of the energy storage system on their commercial properties.

Benefits of Maryland Energy Storage Tax Credit:

• For residential property owners, the tax credit is either 30% of the energy-storage installation cost or $6000 (whichever is lower).
• For commercial property owners, the tax credit is either 30% of the energy-storage installation cost or $1,50,000 (whichever is lower).

Homeowners and businesses can navigate and maximize the Maryland Energy Storage Tax Credit for their solar battery installations by seeking legal and professional tax advice to verify eligibility and appropriate credit claims. Also, by applying early you will benefit from the FCFS basis and make sure to complete the application process before the deadline.

The Maryland energy storage tax credit has a positive impact on the adoption of solar batteries as it provides beneficial financial incentives for residential as well as commercial property owners. As a result, this tax credit encourages and contributes to many new installations of energy storage systems. Therefore, it promotes using solar batteries for the growth of renewable energy in Maryland.

Massachusetts SMART program

The Massachusetts SMART program (Solar Massachusetts Renewable Target) is a beneficial initiative launched in 2018 to develop solar energy systems across Massachusetts aiming for a total installed capacity target of 3,200 megawatts (MW).

With fixed payments over 10 years for solar energy production, participants are allowed to lock in a compensation rate.

Specific Eligibility Requirements of Massachusetts SMART program:

• The installation location must be within Massachusetts.
• System size for solar installations must be between 1 kW and 5 MW.
• Interconnections between the systems must be with any investor-owned electric distribution companies in Massachusetts.
• Required to comply with all local, state, and federal regulations.

Benefits of Massachusetts SMART program:

• Participants will receive guaranteed payments with a fixed compensation rate for producing each kilowatt-hour (kWh) of solar energy.
• Extra incentives are available for systems that include criteria such as having energy storage, income-qualified, or specific location-based requirements.
• Having more independence with solar battery installations provides great backup during outages and enhances energy independence.
• Lesser environmental impact as it reduces dependency on fossil fuels and encourages using of clean energy.

Homeowners and businesses can navigate and maximize the Massachusetts SMART program by consulting qualified installers to understand the application process and know about potential adders that could increase your compensation rate. Also, you can keep monitoring the remaining capacity in each utility’s block which could affect your compensation rate.

The Massachusetts SMART program has a positive impact on the adoption of solar batteries by providing financial incentives with a fixed compensation structure attracting more participants to consider solar battery installations. As a result, the applicants will benefit from both the solar production payments and the additional value of energy storage.

Oregon Battery Incentives

The Oregon Solar + Storage Rebate Program is a beneficial initiative that has come up with numerous battery incentives that are aimed at encouraging the adoption of solar energy storage systems.

Specific Eligibility Requirements of Massachusetts SMART program:

• Consumers must meet certain income criteria to qualify for additional incentives. For example, a family of 4-person is required to have a gross annual income of $120,300 or less to be eligible for the Solar Within Reach program.
• The entire battery system installation must be in connection with a solar energy system to become eligible for the rebates.

Benefits of Massachusetts SMART program:

• Will receive up to $2,400 rebate or more for battery installations under the Oregon Solar + Storage Rebate Program.
• Up to $10,000 as additional cash incentives for income-eligible consumers through the Solar Within Reach program.

Homeowners and businesses can navigate and maximize the Massachusetts SMART program by firstly engaging only with certified solar and battery installation companies because only they will guide you in the right way about incentive programs. Also, keep proper records of your installation, receipts, and any other important documentation, which will help you speed up the rebate application process.

The Massachusetts SMART program has a positive impact on the adoption of solar batteries by removing the financial barriers regarding battery installation. Also, they reduce dependency on fossil fuels by supporting homeowners and businesses to invest in renewable energy solutions.

Incentives Provided by Utility Companies

Utility companies have played an essential role in encouraging users to adopt battery systems for homes and business purposes through several incentive programs. This helps to strengthen the development of energy storage solutions, which can maintain a perfect balance in the grid, minimize peak demand, and promote more renewable energy sources for a clean and green environment.

The three main types of incentives provided by utility companies include Cash Rebate Programs, Bring Your Own Battery (BYOB) Programs, and Battery Pilot Programs, differentiated below along with their benefits in detail:

Cash Rebate Programs

The cash rebate programs directly reduce the cost of solar batteries by providing a one-time investment to minimize the upfront cost of purchasing and installing the batteries.

While calculating the federal tax credits, the cash rebate received is deducted from the overall solar battery system cost before applying any tax credit. For example, if a battery cost is $15,000 and receives a $3,000 rebate, the amount of tax credit of 26% will be $12,000, which is the cost of the battery after the rebate ($15,000-$3,000= $12,000). The tax credit would be $3,120 (26% of $12,000 = 0.26 x $12,000 = $3,120).

These are the existing battery rebate programs you need to know:

1. Fort Collins Residential Battery Storage Program: If you’re a resident of Fort Collins in Colorado, you can receive financial incentives up to $1,500 for installing a new solar battery storage system. In other words, you get $100 per kilowatt-hour (kWh) of usable capacity that the battery has. For example, Tesla Powerwall 2 with a capacity of 13.5 kWh is eligible for a $1,350 rebate.

2. Holy Cross Energy Colorado: Users of Holy Cross Energy can claim an incentive of $250 per kW of battery output rating installed along with a solar power system.

3. Jacksonville Electric Authority Rebate: Customers residing in and around Jacksonville, Florida with rooftop solar power system installations are eligible to receive up to $2,000 rebate while installing a battery.

4. NV Energy Residential Storage Program: A majority of residents from Nevada are provided electricity by NV Energy. It means that new and existing users qualify to receive a rebate when installing solar batteries along with the panels.

Bring Your Battery Programs

Only a few companies offer the “Bring Your Battery Programs (BYBP)” since this kind of incentive is new. Under the program, homeowners should sign a contract to allow the utility to use batteries during limited events for a specified number of years.

The utility companies offer incentives for upfront costs, continuing payments, or even both. As the power consumption increases, particularly during heatwaves, the utility can recharge the batteries to thousands of customers to satisfy the peak demands. This reduces the dependency on backup power during emergencies from fossil fuel plants, which is highly expensive and pollutes the environment.

These are the battery incentive programs currently provided by utility companies:

1. Eversource and National Grid Connected Solutions programs offer incentives for residents in Connecticut, Massachusetts, New Hampshire, and Rhode Island. During peak summer hours, homeowners with solar battery owners can earn incentive payments up to 60 days in a year.

2. Bring Your Own Device program by Green Mountain Power allows the utility to offer payment to customers of $850 for 3 hours $950 for 4 hours and an additional $100 for individuals purchasing a battery for their present solar system.

3. Battery Rewards program by PSEG Long Island means that the PSEG can gain access to your battery during particular events every summer when the grid power consumption is extremely high.

4. Rocky Mountain Power (RMP) Programs of the Utah residents can earn cash rebates and payments for annual participation. However, homeowners are required to sign up for a 4-year contract to provide energy to the grid during peak times in the evening. In exchange, the RMP pays $400 per kilowatt at the beginning of the agreement and an additional $15 per kW every year after your joining for four years.

Battery Pilot Program

Battery pilot programs (BMP) are small-scale projects developed by utilities to examine the effectiveness of combining distributed energy storage into the grid. It helps reduce stress on the grid, saves electricity bills, increases stability, and provides backup power during blackouts or outages.

One of the major limitations of these programs is their limited availability and there isn’t any guarantee for a huge number of customers to sign up.

These are the two main incentives under the BMP:

1. Arizona Public Service (APS) Residential Battery Pilot Program states that the customers must be located within the territory to submit a pilot enrollment and an interconnection application. Most importantly, you need to have a licensed professional installer submit the interconnection application so that you can connect your new energy system to the power grid. However, the paperwork must be reviewed and approved before the connection is set up.

2. Xcel Energy’s Battery Connect Program offers a $2,500 upfront cost for every battery you install. Additionally, you can claim $100 for actively participating every year.

Are Solar Batteries Worth It?

Yes, Installing solar batteries is worth your investment in the long run. However, the decision to invest in solar batteries varies according to certain factors such as energy needs, location, and financial preferences. You should also know how to choose the best solar battery for your solar panel system.

There are several benefits of installing solar batteries to your solar system, of which the main ones are listed below:

1. Less Dependent on Energy: Solar batteries are capable of storing power during the day and making it available for use at night. This results in converting your off-grid solar power system into an emergency backup system during power outages.

2. Electricity Bills savings: Solar batteries assist users in reducing money on electricity bills by allowing them to acquire less power from the grid. In simpler terms, consumers can power their home appliances by harnessing the energy of the sun.

3. Minimizes Carbon Footprint: Solar batteries produce solar energy in the presence of sunlight which can be used to power devices or recharge a phone battery or laptop. As a result, the usage of fossil fuels is minimized to safeguard the environment.

4. Taking part in various energy programs: Based on your region, you can sell additional stored energy back to the grid which creates an opportunity for alternative sources of income.

5. Increasing Grid Stability: Solar batteries can stabilize the grid by minimizing the peak demand and supply fluctuations. It can complement services such as frequency regulation and voltage control, thereby enhancing grid stability.

6. Improved Efficiency: The battery storage systems can maximize the overall efficiency of solar installations by utilizing the highest possible energy, minimizing waste, and improving the system performance.

Can I Get the Tax Credit for a Battery That Has Already Been Used for Your Solar System?

Yes, You can get a tax credit for a battery that has been used in your solar system. Although the Internal Revenue Service (IRS) and Department of Energy (DOE) are yet to provide clear guidance on the matter, the homeowners will be able to claim credits for adding battery storage to their existing solar power systems. For example, if you purchased your solar panels in 2023 and applied for the tax credit, you can add the battery storage system in 2024 and take advantage of that tax credit too.

Under the Residential Clean Energy Credit System, you can claim up to 30% of the cost of what you have spent on the equipment anytime between 2022 and 2032. The percentage rate decreases down to 26% for properties installed in 2033 and 22% in 2034. However, you will be able to take the credit only if your house equipped with solar power systems is located within the United States to qualify for this energy savings scheme.

Most importantly, you need to know that this credit can be used to reduce your tax bill to zero, but you won’t gain back extra money if the credit exceeds more than what you owe in taxes. In simple words, it is a non-refundable credit to reduce your federal tax charges or carry forward any unused credit to reduce your taxes in the upcoming years.

According to the Inflation Reduction Act, the capacity of your battery storage should be equal to or more than 3 kWh to receive the credit, only if you’re a resident of the US.

Finally, it is recommended to consult an expert tax advisor to get personalized advice to meet all your requirements before planning to install a solar power system.