The Texas solar industry and installed capacity have exploded since 2020, making Texas one of the country’s most popular states for solar energy. The state led all states in newly installed capacity in 2023 and 2024, with no signs of that changing anytime soon.
A significant portion of Texas’s solar growth has been in the utility-scale sector. Texas currently ranks fourth in residential capacity and first in utility-scale capacity. SEIA notes that less than 4% of homes in Texas have solar on them, and solar powers just under 8% of the state’s total electric use.
At its current growth pace, Texas could overtake California as the #1 state for solar capacity in the near future. New bills are being proposed in the Texas Senate that could have a burdensome effect on solar permitting. But parts of those bills also seek to enhance consumer protections and establish more industry standards, so the tradeoff may end up being a net positive.
While there aren’t many statewide incentives available, many local utilities have incentives and net metering policies beneficial to consumers. Combine that with an average electric rate of almost 15 cents / kWh, and solar makes for a great investment. A full list of incentives, including commercial incentives, can be found by talking with your solar installer or at DSIRE.org.
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Federal Incentives
Federal Investment Tax Credit (ITC)
Residential solar systems installed in Texas are eligible for the Federal ITC, which provides up to 30% credit toward the total cost of a solar system. The Inflation Reduction Act (IRA) of 2022 extended the 30% credit through 2032. Starting in 2033, the ITC value will drop to 26% followed by a drop to 22% in 2034.
The credit is non-refundable, meaning it cannot exceed the amount you owe in tax and would not directly increase any refund you would receive. Excess credit can be carried forward and used in future years.
The IRA also included standalone or retrofitted energy storage projects, so batteries added to the system’s quality for the 30% tax credit.
Modified Accelerated Cost Recovery System (MACRS)
IRS section 179 depreciation allows certain qualified properties to be classified as 5-year properties, and tax credits are taken on the depreciation. This credit applies to commercial sites and certain investment properties. Specific information on what qualifies can be found on the IRS website.
State Incentives & Programs
Renewable Energy Device Property Tax Exemption
Texas has no state property tax, instead, property taxes are assessed and administered locally. This means different towns, cities, and municipalities can collect varying tax rates. A provision of the Texas tax code allows solar homeowners to be exempt from increased property taxes due to home value increases associated with installing a solar energy system. Solar panels can add between 5% and 10% additional value to a home, so this exemption has high potential savings.
Austin Energy – Residential Solar PV Rebate Program
Austin Energy, an electric utility, offers a rebate of $2,500 for qualified solar energy systems. Homeowners must work with an approved contractor and use approved materials to receive the credit. Eligible solar systems have to be at least 3 kW (DC) or larger, with no stated maximum. The credit must be applied for and confirmed by Austin Energy before installation to receive the credit.
As part of the application process, homeowners also have to complete a solar education course put together by Austin Energy. Solar leases and PPAs are not eligible to receive this incentive.
City of Sunset Valley Solar Rebate Program
The city of Sunset Valley offers an incentive to residents of $1/watt up to $3,000. So any system above 3 kW would be able to take the full incentive. This incentive is designed to be an add-on to the Austin Energy incentive, and customers must first qualify for that incentive before they are eligible for the Sunset Valley incentive. This incentive also mandates that installation costs be under $6/kW, which we’re guessing is a typo for $6/W.
Oncor Residential Solar Rebate Program
Oncor Electric, which serves many areas around Dallas, Fort Worth, and Midland, offers an upfront incentive to homeowners who install new PV and battery storage together. The amount of the incentive varies depending on many factors, including system size and azimuth (direction it faces). Eligible systems have to be at least 3 kW and no greater than 15 kW.
The Oncor site does not list any specific incentive amount guidelines, but TexasStateSolar.org estimates the incentive could be as high as $9,000.
New Braunfels Utilities Residential Solar Rebate
The electric utility in the city of New Braunfels offers an upfront rebate that is credited to the utility account for customers who install qualified solar on their property. Systems must be owned, so PPAs and leased systems are not eligible. The rebate offers a maximum incentive of up to $3,000, depending on the size of the system and the direction it faces. The incentive is broken into two tiers:
- Tier 1: Azimuth must be between 45° and 315° and Tilt between 0° and 70° = $0.25 (maximum $1,000)
- Tier 2: Azimuth must be between 200° and 290° and Tilt between 15° and 60° = $0.50 (maximum $3,000)
Based on the azimuth tiers, the utility is giving preference to western-facing systems. Directionally, 180° would be directly south, and 270° would be directly west. Homeowners must work with an approved installer, complete a solar education course, and have a system size of at least 3 kW.
AEP Texas – SMART Source Solar PV Program
Available to customers of both AEP Texas Central and AEP Texas North, this incentive gives residential customers a fixed rate for solar PV installation. Systems must be new and connected to the electric grid. The program has a maximum residential incentive of $3,000, with the following rate structure:
- 3 kWdc – 4.999 kWdc = $1,500
- 5 kWdc – 7.499 kWdc = $2,250
- 7.5 kWdc + = $3,000
SMTX Utilities Distributed Generation Rebate Program
SMTX utility customers in good standing with the utility can apply for this incentive of $1/W up to $2,500. That means anyone installing larger than a 2.5 kW solar array could get the full incentive. Systems have to be larger than 1 kW in size and cannot produce more than 100% of the homes annual electric consumption. Solar arrays taking this incentive need to be on a southern facing roof and have to be installed by a NABCEP certified installer who provides at least a 5 year warranty to their customers.
Net Metering
Net metering policies in Texas are dependent on the electric utility a homeowner takes their electric service from. In Texas, transmission and delivery is separate from supply in roughly 85% of the state. This 85% is the deregulated part of Texas meaning customers have a choice of which company supplies their energy. Different companies offer different rates so it’s important for solar homeowners to dig into the different plans available. The other 15% of the state, the regulated market, does not allow customers to choose their electric supplier, so they are stuck with whatever their utility provides.
There are a few different types of net metering, or solar buyback plans, that utilities will adopt:
- Real-time – credit is given back in real time as excess energy is produced, so rates depend on the going retail electric price. Because the value isn’t netted from the entire month, credit has the potential to be lower. But if retail rates are high, credit could be high as well.
- Capped Credit Plans – In these plans, utilities will cap the amount of credit given to homeowners based on the amount of energy their home used in that month. So if a home uses 400 kWh in a month, they can get a maximum of 400 kWh worth of credit. Any power sent to the grid beyond that provides no benefit to the homeowner.
- Uncapped Credit Plans – Utilities will pay customers for any and all power that is sent back to the grid.
Many utilities offer net metering and for specific rates you can check each company’s website. Here are some of the options that offer solar buyback:
- Gexa Energy
- TXU Energy
- Rhythm Energy
- Champion Energy
- Chariot Energy
- Shell Energy
- Green Mountain Energy
- Direct Energy
- Ambit Energy
Solar In Texas
Despite the lack of statewide incentives, many utilities and cities are offering their own incentives for solar and storage, making it possible for more homeowners to switch to solar every day. Not only will we see more solar PV installed in the future, but with grid instability and extreme weather events in Texas, battery storage will also continue to grow.
