US Solar Battery Incentives 2026: ITC, SGIP & More

Update (September 2026): The US federal Section 25D Residential Clean Energy Credit was terminated for residential property placed in service after 31 December 2025. The credit is unavailable for new 2026 residential battery purchases. See the dedicated ITC update page for details.

An ordinary homeowner buying and owning a battery for personal residential use does not receive a replacement personal credit under Section 48E. Section 48E is a separate business and entity investment credit with a 6% base rate and a potentially higher rate where statutory requirements or exceptions apply.

Some states and utilities offer performance payments or upfront rebates, which vary significantly by location and current funding availability.

This guide explains how these programmes work and which states offer dedicated battery funding.

1. Federal Investment Tax Credit (ITC)

Status (2026): Section 25D terminated for residential installations placed in service after 31 December 2025.
Value: 30% of qualified costs, where qualified cost and incentive treatment control the basis — applicable only to qualifying installations placed in service by 31 December 2025.
For 2025 filers: If you installed before 1 January 2026 under Section 25D and had insufficient tax liability, unused residential credit may be applied in future tax years via IRS Form 5695.

Commercial Credit (Section 48E) for Third-Party Ownership

A qualifying commercial or third-party owner may potentially claim the Section 48E Clean Electricity Investment Credit, depending on taxpayer, ownership, project, equipment, placed-in-service and other statutory requirements.

If you lease a battery or enter a Power Purchase Agreement (PPA), the third-party owner might claim this credit if they meet all statutory requirements.
Any benefit passed to a residential customer through a lease or PPA is contractual — it is not a tax credit claimed directly by the homeowner.

Key Rules (Historical — for eligible pre-2026 filers)

Standalone is OK: You did not need to have solar panels. A standalone battery charged from the grid qualified.
Size Limit: Must have been at least 3 kWh.

For full details on carry-forward rules and tax treatment, see our Federal Tax Credit Guide.

2. State-Specific Incentives

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With no federal residential ITC available for 2026 purchases, state programmes are the primary source of incentives for new US buyers.

California: SGIP (Self-Generation Incentive Program)

Source: CPUC SGIP
Value: Up to $1,100/kWh under the current Residential Solar and Storage Equity budget.
Qualifications: The CPUC has prioritised remaining residential SGIP funding exclusively for the Residential Solar and Storage Equity budget, which requires paired solar-and-storage, low-income verification, and is subject to cost-cap, technical and budget qualifications.

Maryland: FY26 Energy Storage Grant Program

Source: Maryland Energy Administration
Status: Closed for FY26 (applications were accepted until June 5, 2026 or until funding was exhausted).
Note: The previous Maryland Energy Storage Income Tax Credit ended in 2024. For the successor FY26 grant program, the application portal is closed to new applications because total funding requests exceeded the FY26 programme budget. Existing applications remain subject to review, reservation, and disbursement.

Massachusetts: ConnectedSolutions

Source: Mass Save ConnectedSolutions
Type: Performance Payment (Not upfront cash).
Value: $275 per kW of average summer contribution.
Impact: Payments are based on measured performance during dispatch events. Eligibility depends on the customer, sponsor and qualifying equipment.

Hawaii: Smart DER / Bring Your Own Device (BYOD) Plus

Source: Hawaiian Electric Customer Choice
Programs: Hawaiian Electric currently offers Smart DER and BYOD Plus. (The legacy Battery Bonus program is closed to new applicants).
Value: Upfront cash incentive based on committed kW and ongoing monthly credits (for BYOD Plus).

3. Utility Virtual Power Plants (VPP)

Virtual Power Plants (VPPs) are utility programmes that offer incentives to participating customers who agree to defined battery dispatch rights under the programme's specific terms.

Structure: Programmes vary by utility. Some offer an upfront equipment discount, while others provide ongoing performance payments based on capacity contribution.
Dispatch Events: Participating customers agree to defined dispatch rights under the programme's specific terms. Event frequency and depth of discharge are governed by these specific programme terms.

4. Rural Energy for America Program (REAP)

The USDA REAP provides assistance to agricultural producers and rural small businesses.

Status (2026): REAP is currently accepting applications for guaranteed loans. However, the grant portion of the programme is not accepting new applications and further grant awards are paused.
Eligibility: Rural small businesses and agricultural producers (not residential homeowners).

5. Regional Considerations

Availability of battery incentives varies by location and depends on current local energy policy and utility structures.

California: The CPUC SGIP programme offers incentives for qualified equity applicants, subject to budget caps.
Massachusetts: The Mass Save ConnectedSolutions programme offers performance-based payments for battery dispatch.
Hawaii: High electricity rates combine with Smart DER/BYOD Plus programmes.
Texas: Utilities like Austin Energy offer Value of Solar (VoS) rates, which affect battery economics, though Austin Energy does not provide a direct battery equipment rebate.

6. Evaluating Battery Economics in 2026

With the expiration of the Section 25D federal residential ITC, state and utility programs are the primary drivers of battery incentives.

State and Utility Focus: Assess local programmes, such as performance payments or direct rebates.
VPP Participation: Evaluate utility VPP programmes that provide revenue for grid support.

Be aware that programme terms, budget limits, and technical requirements can significantly affect the realized value of these incentives.

Use our calculator to review regional assumptions and battery recommendations.

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State-by-State Incentive Comparison

State	Key Incentive	Estimated Value	Direct Link
California	SGIP Rebate	Up to $1,100/kWh (subject to budget/eligibility)	CPUC
Massachusetts	ConnectedSolutions	Performance-based ($275/kW average contribution)	Mass Save
Hawaii	Smart DER / BYOD Plus	Upfront cash + ongoing credits (based on kW)	Hawaiian Electric
Texas (Austin)	Value of Solar (VoS)	Bill crediting rate (9.91¢/kWh for 2026)	Austin Energy

Engineering Reality

US battery incentive programmes carry specific administrative details for claiming them.

ITC non-refundability (relevant for 2025 carry-forward filers). The historical Section 25D credit is non-refundable and reduces Federal tax liability. Full utilisation requires sufficient Federal tax liability. Unused residential credit may be applied in future years.

Battery-only ITC claims (2025 filers, carry-forward). For eligible installations placed in service before 1 January 2026, standalone residential battery storage (minimum 3 kWh capacity) qualified for the Section 25D credit.

VPP programme terms allow dispatch events. Participating customers agree to defined dispatch rights under the programme's specific terms. Event frequency and depth of discharge are governed by these specific programme terms.

When This Approach Breaks Down

US incentive stacking is frequently presented as an additive calculation. Several programme limitations make the full stack unavailable in specific circumstances.

Tax households with complex liability situations (2025 carry-forward filers). The historical Section 25D credit is non-refundable. Households with complex tax situations should confirm with a tax professional regarding their credit utilisation timeline before counting on full Year 1 absorption.

Leased systems and the commercial ITC. For 2026 residential installations, the Section 25D homeowner credit is unavailable. However, for homeowners who select a lease or PPA arrangement, the third-party owner may potentially claim the commercial Clean Electricity Investment Credit (Section 48E) if all taxpayer, ownership, project, and statutory requirements are met.

States with income-tested rebates. Some state programmes — particularly Equity-based tiers within SGIP — target low-income households explicitly. Middle-income homeowners in these states may not be eligible for these specific tiers.

Engineering Recommendation

Historical Note on the Federal ITC (Pre-2026 installations only):

For property placed in service by 31 December 2025, homeowners must file IRS Form 5695 correctly in the tax year the system was placed in service. This guidance applies only to the original eligible credit or its carry-forward. It does not apply to a new 2026 installation.

For 2026 programme-specific eligibility verification:

SGIP: Check CPUC's SGIP database and your utility's SGIP administrator (PG&E, SCE, SoCalGas, CSE, or LADWP) to confirm current funding tier and eligibility status.
Massachusetts ConnectedSolutions: Your utility (Eversource, National Grid) administers the programme — contact them directly to confirm your battery qualifies for dispatch participation.

Use our battery sizing calculator to estimate how many units you need. For current programme eligibility and funding, check each programme administrator directly.

Solar Battery Payback Reality: UK vs US vs Global — US payback including incentive stacking
Biggest Mistakes Homeowners Make with Solar Batteries — US incentive claim errors
When NOT to Buy a Solar Battery — When incentives can't fix the underlying economics

Prepared by the BatteryBlueprint Editorial Research Team using publicly available manufacturer documentation, regulator guidance, standards and market data.

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