Texas Solar Panel Incentives: Tax Credits, Rebates and Buyback Programs Texas Solar Panel Incentives: Tax Credits, Rebates and Buyback Programs
Texas might be known for its oil wells and refineries, but the state also has a booming market for renewable energy, including solar power. The... Texas Solar Panel Incentives: Tax Credits, Rebates and Buyback Programs

Texas might be known for its oil wells and refineries, but the state also has a booming market for renewable energy, including solar power. The Energy Information Administration predicts Texas will lead solar energy growth in the US in 2023, according to Reuters.

Along with the federal tax credit for solar panels, Texas provides its own incentives to encourage residents to install solar panels and batteries. Those incentives are strong enough to earn Texas a spot on CNET’s list of most solar-friendly states. These policies to promote solar power can take the form of rebates on solar panels, exemptions from property taxes or money back for excess electricity generated.  

Energy is just different in Texas. The state has its own electric grid called ERCOT and it’s deregulated — meaning you can choose from hundreds of electric companies rather than a single, centralized utility like other states. 

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Energy in most Texas cities is deregulated, meaning about 85% of Texas residents can choose from different electrical providers. 16 cities with municipal utilities — including Austin and San Antonio — are still regulated; their residents don’t have a choice of energy companies. Getting to choose your provider might provide the option of earning a strong financial incentive for installing solar panels.

Learn more about all of the local and state incentives for solar projects in Texas below.

Note: These Texas solar incentives are for residential electric customers only. Texas has additional solar incentives for organizations, companies, schools and farms. These incentives are also accurate as of June 9, 2023 — programs and laws in Texas change on a regular basis, so be sure to follow up with your local government or energy provider to confirm these incentives are currently active.

Comparing Texas solar incentives

Texas incentive Description Eligibility Estimated value*
Solar property tax exemption Value of solar installations are exempt from home assessments for property taxes All Texans $403 per year, though will vary considerably based on home price, solar installation and local taxes
American Electric Power solar installation rebate Rebate for solar panel installations AEP customers $500 (1kW system) to $3,000 (systems over 7.5 kW)
Austin Energy residential energy rebate Rebate for solar panel installations Austin Energy customers $2,500
CPS Energy solar water heater rebate Rebate for solar water heaters CPS Energy customers 60 cents per kilowatt-hour of annual savings up to $2,000
Denton Municipal Electric solar photovoltaic incentive Rebate for solar panel installations DME customers $2,400 to $30,000
Denton Municipal Electric solar water heater rebate Rebate for solar water heaters DME customers 30% of installation cost capped at $300
Oncor solar energy residential rebate Rebate for solar panel installations with battery storage Oncor customers Variable
SMTX Utilities Distributed Generation Rebate Program Rebate for solar panel installations SMTX customers $1 per watt of capacity up to $2,500
Sunset Valley Solar Rebate Program Rebate for solar panel installations Residents of Sunset Valley who have Austin Energy service $1 per watt of capacity up to $3,000
Net metering Money or bill credits for surplus solar energy Customers of participating utilities Variable
Federal solar tax credit 30% tax credit for solar panel installations and batteries All Americans $7,200

Texas state solar tax credits and incentives

Texas currently does not have a state solar tax credit, rebate program or net metering plan. Most incentives for solar energy in Texas come from local governments or specific energy companies. Texas does offer a statewide property tax exemption for solar panels.

Property tax exemption for solar energy systems

Texas is one of many states that carve out a property tax exemption for solar installations. The value of your solar panels and batteries will not be included at all in your home’s assessment for calculating property taxes.

Texas does not have state property tax — all such taxes are levied locally — but section 11.27 of the state tax code says that “Persons who install or construct on real property a solar or wind-powered energy device that is primarily for the production and distribution of energy for on-site use are entitled to exempt the amount of value the device contributes to the property, regardless of whether the person owns the real property on which the device is installed or constructed.”

The average property tax rate in Texas is 1.68%, according to the independent nonprofit organization Tax Foundation. That means that Texas’ property tax exemption on a $24,000 solar installation (the national average) would be worth about $403 per year.


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Local solar tax credits and incentives for Texas

Beyond the solar property tax exemption at the state level, many cities, towns and municipalities offer additional incentives for residents who invest in solar panels.

American Electric Power solar installation rebate

Serving south and west Texas, American Electric Power runs a SMART Source Solar PV Program that gives customers who install solar panels money back to offset the initial investment in renewable energy. 

AEP pays 50 cents per watt for solar systems with capacities less than 3kW, and flat rebates for larger installations — $1,500 for 3kW to 5kW capacity; $2,250 for 5kW to 7.5kW capacity; and $3,000 for systems with more than 7.5kW capacity. Solar panels must be installed before Nov. 30, 2023, to be eligible for this year’s funding. The SMART Source Solar PV Program Guidebook provides all the details and requirements for the solar rebate.

Austin Energy residential energy rebate

Austin Energy provides a hefty $2,500 rebate for new solar panel installations. Solar energy systems must be owned (not leased) and provide at least 3kW of power in order to qualify. Homeowners must also complete a solar energy education course before installing solar panels and applying for the rebate. 

CPS Energy solar water heater rebate

The municipal utility serving San Antonio gives money back to customers who switch to solar water heaters. The rebate is determined by calculating the annual energy savings in kilowatt-hours and then multiplying those savings by $0.60. Qualifying solar water heaters must be new and certified OG-300 by the Solar Rating Certification Corporation. The maximum potential rebate is $2,000.

CPS Energy formerly offered a $2,500 rebate for solar panel installations, but that program ended in December 2022 (PDF).

Denton Municipal Electric solar photovoltaic incentive

The municipal electric company of Denton provides a generous incentive for homeowners who install solar panels. The amount of Denton’s rebate for solar panels (PDF) is determined by the power output of the system, with additional money for installations that include battery storage.

The maximum rebate for solar panels in Denton is $30,000, or 50% of the total cost of installation, whichever is lower. To be eligible, a Denton electric customer must own the property on which the solar panels are installed, and the solar installation must have at least a 3kW capacity. Dentons pays out for solar panels based on the capacity of the system and whether or not it has battery storage.

Solar installations with storage get $1.20 per watt for systems with capacities of 3kW to 5kW; 90 cents per watt for 5.1kW to 10kW; and 60 cents per watt for 10.1kW and above. Without battery storage, you’ll get two-thirds of that payout for the same capacity levels: 80, 60 and 40 cents per watt, respectively.

That means a 5kW system with storage will get you an impressive $6,000 rebate.

Denton Municipal Electric solar water heater rebate

Along with its strong solar panel rebate, Denton also offers a nice rebate for customers who install solar water heaters. Those customers can receive up to 30% of the total installation cost back, with a maximum of $300.

In order to qualify for the rebate, the solar heater must be at least large enough to accommodate a family of four and have a permanently installed electric backup.

Oncor solar energy residential rebate

The biggest electrical utility in Texas offers a rebate on solar photovoltaic systems in order to “offset the initial investment” of installing solar panels. The rebate is only for homeowners and isn’t available for new construction. 

Most notably, the Oncor rebate is only available to solar installations with included battery storage. Qualifying solar installations must also have a capacity of at least 3kW and no more than 15kW. Oncor provides the rebate to solar service providers, who are then supposed to pass on the savings to their customers.

Oncor doesn’t advertise the value of this solar energy rebate, merely stating that it varies based on “size, azimuth and other factors of your installed system.”

SMTX Utilities Distributed Generation Rebate Program

The municipal utility of San Marcos provides a rebate for renewable energy systems, including new solar panels. Residential homeowners who install solar panels can receive $1 per watt of power up to a maximum of $2,500. Your solar system must provide at least 1kW of power and may not be sized to produce more than your annual electrical consumption. 

Eligible solar panels must also be installed by a certified installer and have a minimum 20-year warranty. SMTX Utilities’ rebate for renewable energy also applies to wind systems.

Sunset Valley Solar Rebate Program

The tiny enclave of Sunset Valley (located to the southwest of Austin) gives its residents who are electrical customers of Austin Energy an additional rebate on top of the $2,500 mentioned above.

Residents who qualify for the Austin Energy solar rebate can get an additional $1 per solar panel wattage up to $3,000. The city says that funds are available on a “first come first serve basis,” but competition for that money is limited — the US Census Bureau estimates the population of Sunset Valley to be 643 people.

Net metering and solar buyback programs in Texas

Net metering and solar buyback programs give money back to households with solar panels that generate more electricity than they consume. Texas doesn’t have a state net-metering program, but local electric providers and municipal power companies have their own plans that compensate customers for giving energy back to the grid.

Net metering plans generally give customers credit toward their electric bill for any surplus energy generated, up to the amount of their total electrical bill. Solar buyback programs may instead pay solar energy producers money directly for excess electricity. Credits for surplus energy are calculated by multiplying a fixed rate by the kilowatt-hours generated back into the system. Some utilities use the terms interchangeably or have unique terms of their own for similar programs.

The following Texas utilities provide net metering or solar buyback programs for their customers. This list of providers is not exhaustive. Be sure to check with your electric company to see if it offers net metering for excess solar energy production.

Austin Energy

Austin Energy gives money back to customers who provide excess solar energy to its grid using what the utility calls a Value of Solar rate. That VoS rate depends on the size of the solar system. Solar installations with capacities under 1 megawatt AC currently receive 9.91 cents per kWh, while installations larger than that get 7.24 cents per kWh.

Brenham distributed generation program

The municipal electric utility operated by the city of Brenham provides money back for surplus energy generated by solar panels, usually in the form of credits on electric bills. The excess energy put back into the Brenham electrical grid will be paid based on an “avoided cost of generation” rate equal to the wholesale cost Brenham pays its commercial energy providers.

Brownsville PUB solar buyback program

The city of Brownsville will buy back excess electricity generated from solar panels, at the same price that it pays other solar energy providers. The current rate for that electricity is about 6 cents per kWh, but the rate was under 3 cents for several years.

CPS Energy

CPS Energy in San Antonio reimburses customers with surplus solar energy at what it calls the “avoided cost rate,” according to the Database of State Incentives for Renewables & Efficiency. That means that customers are credited for excess energy based on the rates that CPS Energy would have to pay for it elsewhere.

El Paso Electric

Like CPS Energy, El Paso Electric also provides a net metering program that reimburses customers for excess solar energy at the same rate that the utility would pay for that electricity if it acquired it from a commercial provider.

Green Mountain Energy

The Renewable Rewards solar buyback program from Green Mountain Energy provides customers with bill credits when they provide excess energy back to the utility. The excess energy credits are capped at your total energy usage from the grid. 

We weren’t able to find current rates for excess solar energy on the Green Mountain website, but the example on the Renewable Rewards page shows a rate of 13 cents per kWh.

Reliant Energy

Reliant’s Solar Payback Plan provides net metering for its customers with solar panels. Participants receive unlimited bill credits for the surplus solar energy that they generate. The plan is available to all customers with solar installations smaller than 50kW capacity who have existing interconnection agreements with their utilities.

Shell Energy solar buyback program

Serving Texas energy customers across the state, Shell Energy Solutions gives credit for the excess energy that customers with solar panels create. The money back is provided in the form of renewable energy certificates

Shell doesn’t advertise its payment rate for excess solar energy. Its residential terms of service state that credit value will be established when a customer enrolls in the solar buyback program. 

TXU Energy

TXU Energy provides net metering for customers across the state. Its Home Solar Buyback program reimburses customers for excess solar or wind energy up to 100% of their electrical bills. Any excess energy you generate that goes beyond your billing does not carry over to future months.

Federal solar tax credits and incentives for Texans

The federal solar tax credit might be the most valuable incentive for installing solar panels in Texas. Technically called the residential clean energy tax credit, the incentive gives eligible taxpayers 30% of the cost of their solar panel installation back as a credit on their federal taxes.

The tax credit is nonrefundable, meaning it can only be used to offset the taxes you’d otherwise owe, but extra amounts can be carried over to future tax years. There’s no limit to the amount of the tax credit for solar panel installations.

To claim the federal solar tax credit, taxpayers should file IRS Form 5965, which is easily managed by all of the best tax software.

Texas solar power purchase agreements

Solar power purchase agreements allow customers to add solar panels to their homes without paying for the installation or maintenance. Customers then lock in a rate for that solar power that’s lower than what they usually pay for electricity. 

While solar power purchase agreements let customers get solar power with no upfront costs, there are a few important disadvantages to note. Since you don’t own the solar panels and equipment, you can’t take the federal solar tax credit and won’t qualify for most local solar incentives. Also, the solar power purchase agreement will be tied to your home for the length of the contract, making it potentially more difficult to sell your house.

Solar power purchase agreements are legal in Texas, although they seem more common at solar companies, not electric utilities. Alba EnergySunnova and Wells Solar are three major solar companies currently providing solar power purchase agreements to Texans.


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Texas community solar programs

Community solar projects help provide solar energy to electric customers who don’t own their homes or can’t afford to install solar panels. Instead, they join a community with a large-scale industrial solar panel installation and then purchase the renewable energy it provides, getting the environmental and economic benefits of solar energy without installing panels on their property.

Some Texas community solar programs are currently at capacity, but they all suggest joining their waiting lists for when spots become available.

The following Texas electric providers provide community solar projects:

Green Mountain Energy offers a program that’s similar to community solar but with a twist. Instead of purchasing your electricity from one community solar project, Green Mountain’s Go Local Solar plan buys renewable energy certificates that are used to purchase your power from multiple solar installations across the state.

Texas solar panel incentives FAQs

Is it worth going solar in Texas?

Whether or not installing solar panels will be a good financial investment for you will depend on many factors such as your energy provider, electricity usage, home size, sun exposure and cost of solar panel installation.

The average time across the US for solar panels to pay for themselves generally ranges from six to 12 years. Several online energy calculators estimate the time to pay off solar panels in Texas to be closer to the upper range of that average. If your electrical utility provides a rebate on solar panels, that will improve your financial equation considerably. 

How do solar tax credits work?

Solar tax credits provide monetary relief for taxpayers who install solar panels. When it comes time to file state or federal taxes, taxpayers eligible for credits generally get a percentage of their installation cost back as a reduction in their taxes. Tax credits for solar are usually only available for the tax year in which the solar panels were installed.

How does the federal solar tax credit work?

The federal solar tax credit, technically called the residential clean energy credit, provides tax relief to Americans who install new “clean energy” systems. Along with solar panels, eligible systems include solar water heaters, wind energy, geothermal heat pumps, biomass fuels and fuel cells.

The tax credit gives back 30% of the cost of solar panels installed between 2022 and 2033. The credit drops to 28% for solar panels installed in 2034, and then 26% in 2035, after which the credit is scheduled to expire. Taxpayers can claim the residential clean energy credit by filing IRS Form 5695.

How many times can you claim solar tax credits?

Solar tax credits can usually only be claimed once, for the tax year in which you installed your solar panels. One exception occurs with the federal residential clean energy tax credit — if the amount of your tax credit is more than the total taxes you owe, you can carry that credit over to subsequent tax years.

How does energy deregulation work in Texas?

Since the passage of Senate State Bill 7 in 2002, the energy market in Texas has been “deregulated.” Deregulation means that companies need to compete on the market for customers, who have a larger array of energy utility choices. Prior to deregulation, most Texans had no choice of energy providers.

Not only can multiple companies now compete for the same energy customers, but different companies can provide different energy services. Instead of one utility handling all energy-related services like electricity generation, delivery, billing and power-line maintenance, those services can all be performed by different companies.

Confusingly, deregulation doesn’t mean there are no regulations for energy companies — they are still governed by the Public Utilities Commission of Texas and there are strict licensing requirements.

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