Last updated: January2025
Written by
Catherine Lane
Solar incentives save Texans about $6,390 on average, making investing in energy independence more affordable. When you go solar, you get to rely less on the utility and instead power your home with power generated right on your roof, all while lowering your energy costs.
While there aren’t many statewide solar incentives and rebate programs, there are additional savings offered by utility companies and local governments. Let’s look at solar incentives in the Lone Star State and how much they can save you when installing a solar panel system.
Incentive | Estimated average annual savings | Eligibility | About |
|---|---|---|---|
Federal solar tax credit | $6,390 | All tax-paying U.S. citizens | Tax credit equal to 30% of installation costs, applied to federal income taxes |
Texas Renewable Energy Device Property Tax Exemption | $407; varies with property and system value | All Texans | 100% exemption of appraised value of solar and other renewable energy systems installed to produce on-site energy. |
Utility rebates and incentives | $2,500 - $6,000+; Varies by utility and system characteristics | Qualified utility customers who install rooftop solar panels | Upfront rebates offered by utility companies to reduce solar installation costs |
Quick Facts
Value: 30% of solar installation costs
Frequency: One-time tax credit; excess credit can roll over
How to apply: File IRS Form 5695 with annual tax return
Texans can use the 30% federal solar tax credit when they install solar panels on their roof. Equal to 30% of solar installation costs, the average solar system in Texas will earn a federal solar tax credit of $6,390.
Keep in mind that you don’t get the tax credit as a lump sum payment, and you won’t see it applied directly to the upfront cost of your solar energy system. The tax credit reduces your federal income tax liability, so you’ll see the savings when you file your tax return for the year.
Sometimes, your tax credit might be worth more than what you owe in taxes. In this case, the tax credit reduces your liability to $0, and the remainder of the credit can be used toward your next tax return.
Quick Facts
Value: 100% property tax exemption of appraised value of solar system
Frequency: System lifespan
How to apply: File Form 50-123 to your county property tax appraiser
In 1978, legislatures enacted a property tax exemption for solar and wind-powered energy devices installed in Texas. Under the exemption, Texas homeowners will not be taxed on the appraised value of solar panels or wind equipment installed on their property as long as the system provides power that is primarily used on-site.
According to the Tax Foundation, the effective Texas property tax rate is about 1.47%. Based on the average estimated value solar panels add to homes in Texas, the solar tax exemption can save about $407!
Texas does not have state property taxes, so the exemption will be carried out through your local assessor.
The state of Texas does not offer any statewide solar rebates. However, some utility companies like Oncor Energy, American Electric Power (AEP) Texas, and Austin Energy provide rebates for solar panel installations. Local governments, like Sunset Valley, offer incentives as well.
Unlike the solar investment tax credit, all of these local and utility incentives are upfront rebates that directly reduce the price of your solar installations. The following table outlines the solar incentives offered by Texas utilities and municipalities:
Utility Rebate | Estimated average annual savings | Eligibility | About |
|---|---|---|---|
Varies by system characteristics | Oncor customers | Upfront rebate for solar + storage installations | |
Up to $3,000 | AEP Texas Central and AEP Texas North customers | Upfront rebate for homeowners who install solar | |
$2,500 | Austin Energy customers | Upfront rebate for homeowners who install solar and take a solar education course | |
Up to $2,500 | SMTX Utilities customers | Upfront rebate of $1.00 per watt, up to $2,500 for homeowners who install solar | |
Up to $3,000 | Sunset Valley homeowners who receive Austin Energy’s solar rebate | Upfront rebate of $1.00 per watt, up to $3,000 for homeowners who install solar |
Quick Facts:
Electric rates average $0.15 per kWh in Texas
Texas does not have a statewide net metering mandate
Some local utility companies and co-ops offer net metering
Some Retail Electric Providers offer solar buyback and “Free nights” plans that maximize solar savings.
Texas does not have a net metering mandate, meaning Texas utility companies and retail electric providers (REPs) are not required to pay customers for the excess energy they send to the grid. However, many companies still offer net metering programs and solar buyback options to help solar owners reduce their energy bills.
Exactly how you’ll be compensated for your solar energy depends on whether or not you live in a regulated or deregulated section of Texas’ grid.
Regulated Texas: If you live in the regulated part of Texas, you will be eligible for whatever solar billing program your utility company or electric co-op offers. If there are no solar buyback options, there is little you can do.
Deregulated Texas: 85% of Texas is deregulated, so you can choose an electric provider. When you go solar, you’ll want a REP with a solar buyback program, like those listed in the table below:
REP | Plan |
|---|---|
Total Solar Buyback | |
Smart Battery | |
Direct Solar Unlimited | |
Solar Export | |
Renewable Rewards / Renewable Rewards Essential | |
Octo 12 | |
Solar Payback Plus | |
Texas SB Select | |
Solar Buyback | |
SoFed Solar Buy-Back | |
Solar Buyback Saver |
It’s important that you read the fine print of a REP solar buyback plan. Solar panels last 25 years, and if the contract doesn’t include a term limit, you might find yourself having to search for another buyback plan in the future, and there’s no guarantee you’ll get the same energy credit value for your excess kilowatt-hours of solar energy.
Learn more about what to look for in a solar billing plan in our complete guide to Texas Net Metering and Solar Buyback Plans.
Texas does not offer solar battery incentives, but there are a couple of local battery incentives you can take advantage of as a Texan:
Federal solar tax credit: The 30% solar tax credit covers batteries installed with solar panels or on their own, as long as they are at least 3 kWh in size.
Oncor Residential Solar Program: Oncor’s solar incentive is only available to homeowners who install solar panels paired with energy storage systems.
Tesla Electric’s Virtual Power Plant: Powerwall owners in certain areas of Oncor and Centerpoint’s service territory can use Tesla Electric as their REP and participate in a virtual power plant. Tesla pays you $10 per month as an electric bill credit. In exchange, you give Tesla permission to discharge the stored energy in your Powerwall to reduce stress on the grid.
Batteries are a popular option in Texas as power outages become more frequent. Texas’ lack of net metering also makes batteries a solid investment, as energy storage can help maximize solar energy savings.
Solar panels in Texas cost about $3.00 per watt, meaning you can expect to pay $21,300 for the average 7.1 kilowatt (kW) solar installation before incentives. Once you take the federal tax credit into account, that cost drops to $14,910. Keep in mind that the cost of solar panels will vary depending on where in Texas you live, the system size, and the installer you choose.
There are also those utility rebates we mentioned earlier. Those are not available to all Texans, but it’s important to note that those rebates would be applied before the tax credit is calculated. Let’s take a look at an example of a system installed in Austin Energy’s territory:
Austin Energy Rebate: $2,500
System cost after rebate: $21,300 - $2,500 = $18,800
Federal tax credit: $18,800 x 30% = $5,640
Total savings: $8,140
Effective system cost: $21,300 - $8,140 = $13,160
How do solar incentives and rebates work together? The value of the federal solar tax credit is calculated using the total cost of a solar installation after upfront rebates have been applied. Always make sure to subtract upfront incentives before calculating the tax credit.
Solar panels can be a great investment in Texas, especially when you live somewhere with local and utility incentives. However, Texans should be careful when selecting their solar buyback plan. You want to make sure you’re getting as much money back for the energy you send to the grid as possible!
You can install a solar battery to ensure you’re always getting the most value out of your solar energy, but remember that energy storage adds to the cost of your photovoltaic installation. Many Texans find the additional cost worthwhile as the grid becomes less reliable and power outages more frequent.
To ensure you’re always getting the most value out of your solar energy. Solar batteries are becoming increasingly popular in Texas as the grid becomes less reliable and power outages become more frequent.
The best way to determine if solar power is right for your home is to speak with a local solar installer. Solar companies near you will know your neighborhood just as well as you do and can give you the ins and outs of going solar in your area.
That’s where SolarReviews comes in. We have an extensive list of qualified solar contractors in Texas that can help you take back your energy independence and rely less on the grid.
Catherine has been researching and reporting on the solar industry for five years and is the Written Content Manager at SolarReviews. She leads a dynamic team in producing informative and engaging content on residential solar to help homeowners make informed decisions about investing in solar panels.
Catherine’s expertise has garnered att...
Learn more about Catherine Lane