The California Public Utilities Commission yesterday approved $350 million in rebates to encourage homeowners and businesses to install solar water-heating systems. Industry experts estimate that the program could cut the cost of such systems — also called solar thermal systems — by up to 25 percent. The federal government provides a tax credit worth 30 percent of installed system costs.

Of the funds, $250 million will go towards replacing natural-gas-powered water heaters, while $100 million is ear-marked for replacing electric water heaters.

As reported by the L.A. Times, the rebates will be made available through California’s various utilities:

Customers of Edison International’s Southern California Edison utility who replace their electric water heater with a solar-powered system will be eligible for a rebate. Sempra Energy’s Southern California Gas Co. will offer the rebate to ratepayers who replace a natural-gas water heater. PG&E Corp.’s Pacific Gas & Electric Co. and Sempra Energy’s San Diego Gas & Electric Co. will offer the deal to ratepayers whose solar water heaters displace either electric or natural gas use.

Residential solar hot water systems typically cost between $6,500 and $8,000 in California, according to the article. Homeowners replacing a natural-gas heater can expect to receive a rebate worth up to $12.82 a therm, up to $1,500. While conventional water heaters are much less expensive, their cost of operation is higher, particularly when fuel prices rise.

To learn more about solar thermal technologies, see this post on Active vs. Passive systems. Or, read here, for more info about the different kinds of solar energy.

UPDATE: Check out more in-depth analysis of solar water heating in California in this informative post from CleanTechnica’s Susan Kraemer.