Texas is one of the most deregulated electricity markets in the country, with individual utilities and municipalities that offer their own solar incentives at the local level. Pair these with the Federal Investment Tax Credit (ITC), and homeowners and businesses across the state can get significant savings for solar.

Below is an overview of a few key solar incentives in Texas.

Photo by Yuhan Du.

Utility and Local Government Solar Incentives

Although Texas doesn’t have state-wide solar incentives or programs, many utilities and local municipalities do offer incentives to help residents and businesses go solar. The Database of State Incentives for Renewables lists over 27 local rebate programs across the state; be sure to check with your utility and local government to see if there are any solar incentives you can take advantage of. Your solar installer will also know the incentives available in your area. Here are just a few examples:

  • Austin Energy: Residential solar customers are eligible for a $2,500 rebate after completing an education course and installing PV panels. And commercial solar installations qualify for one-time checks or monthly credits, with the exact amount based on the energy generation potential of the installation.
  • AEP Texas: Depending on the size of the PV system, residential customers qualify for up to $3,000 in rebates, and commercial customers are eligible for $0.25/W to $0.50/W in post-installation rebates.
  • City of Sunset Valley: Residential customers can get a rebate of $1.00 per watt, with a maximum of $3,000 (3 kW) per household, as long as the system costs $6 per watt or less to install.

Local Net Energy Metering Programs

Net energy metering (NEM) isn’t technically an incentive, but it can increase the value of rooftop solar significantly. NEM allows utility customers to get compensated for the extra solar energy they produce and give to their utility — usually in the form of bill credits. Several utilities and municipalities offer NEM, including:

Tax-Based Solar Incentives

Solar Tax Exemption

Under Texas’s Renewable Energy Systems Property Tax Exemption law, homeowners who go solar are “exempt” from paying higher property taxes as a result of their PV installations. Adding solar panels can increase the value of your home (sometimes by a lot), and by taking advantage of this property exemption rule, you can save even more money.

Property Assessed Clean Energy (PACE)

PACE is a loan option that allows property owners to finance the up-front cost of their solar installation (or other eligible improvements) through their property taxes. Several cities and counties in Texas offer PACE, learn more about them here.

The Federal Investment Tax Credit (ITC)

Though not a Texas-specific solar tax incentive, the Federal ITC provides additional and significant savings for solar installations. Every homeowner who buys and owns their PV system can claim and deduct 26% of their solar installation costs from their federal taxes (tax liability) this and next year — 2022 and 2023. 

For example, if you install a PV system that costs $13,500, and you owe $4,000 in taxes, you can reduce your tax liability from $4,000 to $490 by applying your $3,510 ($13,500 x .26) solar installation tax credit.

If the value of your tax credit exceeds your tax liability, you can apply the unused credit to the following year’s taxes. Using the same example above, if your tax liability was $2,000 instead of $4,000, you can roll over the unused $1,510 ($3,510 – $2,000) to next year’s taxes. 

Note: You can only roll over any unused credit once, and the ITC is in addition to all state and local solar rebates and incentives you receive. Also, the value of the ITC stepped down from 30% to 26%; it will drop to 22% in 2023, then to zero for residential installations in 2024.


If you’re thinking about installing energy storage at the same time, it’s also eligible for the ITC. Here’s one good ITC primer.

PSA: Over half of the states have a solar access law that protects a homeowner’s right to go solar, including Texas, California, and Florida. Texas’ Solar Rights Law forbids homeowners’ associations (HOAs) from preventing or enacting unreasonable restrictions on residents from installing solar. There are instances where Texas law does allow HOAs to restrict solar, e.g., if they’re installed without prior approval or in a manner that voids the warranty, if the ground mount extends above the homeowner’s fence, and if the system has an element that isn’t silver, bronze, or black in tone.

If you are part of a HOA and are looking to go solar, check out our guide on how to expedite the application process

Want to learn more? Check out our Beginner’s Guide to Solar Financial Incentives. 

If you’re an installer, download The Pocket Guide to Selling Storage to get tips on how to add storage to your pitch.

 

 

Featured image by Daniel Lloyd Blunk-Fernández.

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