Even though we’re going to get pretty granular here, let’s start with the big picture: you’re thinking about installing a solar hot water system in California. Since you’re probably wondering how much it costs, you’ll want to know how much the state is willing to pay you in rebates. The California Solar Initiative (CSI) Thermal Program has ample funds that have yet to be tapped, since they only began issuing rebates in May. It’s a great time to get solar hot water in the land of the Governator.

CSI Thermal operates as a “Step Down Program,” meaning that a certain portion of the budget is allocated for rebates at a certain price. As funds are used up and more systems are installed, the rebates available for new systems decrease. Systems that replace natural gas and electric water heaters are funded under separate rebate plans. The majority of systems, however, replace natural gas, and they are funded according to this structure:

What is “therm displaced” you ask? A therm is equal to 100,000 British Thermal Units (BTUs) or, put otherwise, the amount of energy in about 100 cubic feet of natural gas. Basically, under Step 1 here, California will pay you $12.82 for every 100 cubic feet of natural gas you don’t use every year as a result of going solar. The exact amount of natural gas you save depends on your location (ie how much sunlight you get) and compliance with the OG-300 rating for solar water heaters. With those two pieces of information, the Solar Rating and Certification Corporation can determine the exact number of therms that a given system will displace.

That’s a lot of detail to take in, but as a rule of thumb, assume that your rebate will be $1,875 for an up to date, quality solar hot water system that displaces natural gas. This is the maximum allowable incentive, and given that many systems displace enough therms to earn an uncapped rebate of $2,200 or more, it’s safe to assume that most could qualify for the maximum available.

For solar hot water systems that replace electric water heaters, rebate levels are based on kilowatt hours displaced:

This system is very similar since most systems will easily be able to qualify for the maximum residential incentive at each step. As of August 2010, residential systems displacing electric water heaters should qualify for $1,263 in rebates through CSI Thermal.

We will cover more details on the costs  associated with solar hot water in California and the rebates that are available in future posts.