What incentives are available for home batteries?
Like home solar systems, if you obtain a battery via third-party ownership (for example, in conjunction with a solar lease or PPA), you are not eligible for any incentives since you don’t own the battery. Read more about third-party ownership for home solar here.
If you purchase your home battery system (including purchasing via a loan), and it is installed with or within one year of installing a home solar system, the cost of your home battery system is eligible for the Federal Solar Investment Tax Credit or ITC (26% of the total project cost in 2021). But the battery must be charged by the home solar system 100 percent of the time. If your batteries are charged by energy from the grid at all, they are technically not eligible for the ITC.
How do you know whether the batteries are being charged by the grid or your home solar system?
DC-coupled home batteries are connected to your solar panels and charged directly from the DC electricity that your solar panels produce. It’s pretty clear that a DC-coupled home battery is eligible for the ITC.
On the other hand, AC-coupled home batteries are physically connected to a source of AC electricity which could be the grid and/or the AC output of a home solar system’s inverter. Therefore, it’s less clear if the home battery system is being charged by the home solar system or the grid. So how do you know if your AC-coupled home battery is eligible for the ITC?
AC-coupled home batteries come with monitoring equipment and software controls that can monitor both the production of the home solar system and limit charging to only use electricity produced by the home solar system. Additionally, your home solar and battery systems can be designed so that the home solar system isn’t generating more electricity than your home uses each day. By default, that means the battery will only be charged from excess electricity produced by your home solar system during the day and then used when your home solar system is not producing as much electricity as your home is consuming.
If you have trouble sleeping, read the full IRS ruling here.
Other tax incentives are available for home battery systems in certain states (for example, Maryland and California). For more information on whether any rebates or incentives are available in your particular state, visit www.dsireusa.org, click on your state or search by your zip code, and look for “storage.”