Solar water heating

Shedding Light on Solar Water Heating Incentives

By Jessica Tellez

Investing in solar energy is a win-win for California businesses: It helps them save money by reducing their utility bills and it helps the environment by reducing their carbon footprint. Solar water heating is a particularly effective way to save money and energy for businesses that use a lot of hot water for manufacturing, laundering, dishwashing and sanitization.

Questions about costs often give business owners or managers pause. How expensive are these systems? If the conventional water heater or boiler will still be working, won't it just cost the business more?

The fact is that purchasing a solar water heating system is an investment—in the business and in the environment. The cost is usually more up front, but the savings in the long run can be substantial and will offset the cost over its lifetime. Thanks to rebates through the California Solar Initiative (CSI) Thermal Program, federal tax credits and financing opportunities, installing a solar water heating system is now more affordable than ever.

The cost of the system and how much a business can save depend on several factors, including the following:

  • The amount of hot water the business uses
  • The type and size of the solar water heating system
  • The business's geographic location and ability to capture the sun
  • The price of natural gas

On average, if a business installs a solar water heater, its cost to heat water is reduced by 50% to 80%1 and the payback can be as little as a couple years. To get a better sense of costs and savings, a local contractor can help business owners or managers assess their hot water needs, design a system and calculate their rebate, tax credit and return on investment as well as help determine financing options.

Available incentives
The CSI Thermal Program through Pacific Gas and Electric Company provides rebate incentives of up to $800,000* to eligible business and multi-family customers that install a solar water heating system.** The incentive amount is based on the size and performance of the system—how much natural gas (therms) is saved. The more water the business heats with the sun, the bigger the rebate. The contractor is usually responsible for determining the incentive amount and submitting the rebate application.

Businesses may also qualify for a 30% federal tax credit (minus the rebate amount) for the installed cost of the system. Business owners or managers should consult their tax adviser to find out more information.

Additionally, there are many ways to help finance the installation of a solar water heating system, including commercial bank and credit union loans, Property Assessed Clean Energy (PACE) and other third-party financing options such as Power Purchase Agreements (PPAs).

Before installing a solar water heater, businesses can drive down the size and cost of the system by first reducing how much hot water it consumes through energy efficiency upgrades and measures. Solar water heating systems are reliable and can last up to 20-25 years. In addition, if installed properly, they require very little maintenance to keep them running smoothly, which results in savings on maintenance costs.

Getting started
The first step is to use the CSI Thermal Program's search tool to find a licensed contractor. PG&E recommends getting at least two to three estimates or bids. There is no obligation and businesses can compare costs, systems and savings from different contractors. They can verify the contractor has an active A, B, C-10 or C-46 license by checking the Contractors' State License Board (CSLB) website. Also, be sure to ask about experience and check references before making a final selection.

To learn more about solar water heating and working with a contractor, download PG&E's free eBook, "How to Make Solar Water Heating Affordable for Your Business."

*Final rebate amount will be based on the estimated savings as determined by the contractor.
**Must currently heat water with a natural gas water heater or boiler. PG&E customers who heat their water with electricity or propane are not eligible.


  1. Pacific Gas and Electric Company

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  • SMB Blog Author
    Jessica Tellez
    Senior Marketing Strategist at PG&E, is a recognized leader in solutions marketing for renewables. Jessica uses her proven and practical expertise to bring renewable education to residential and business customers. In this vital role, she develops and oversees highly successful initiatives that result in the adoption of more renewable projects throughout PG&E's territory.

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