Is Solar Still Worth It in California in 2026?

Solar still makes financial sense for most California homeowners in 2026. The math looks different than it did a year ago because the federal residential tax credit is gone and NEM 3.0 continues to reduce what you earn for exported electricity.

But California’s sky-high utility rates, state-level incentives, and the growing value of battery storage keep the return on investment strong for households that size their systems correctly.

What Changed for California Solar in 2026?

Two major shifts hit California solar this year. The federal 30% Residential Clean Energy Credit (Section 25D) expired on December 31, 2025, with no phase-down period. And NEM 3.0, which cut grid export credits by roughly 75%, continues to shape how solar owners earn back their investment.

Together, these changes mean the old strategy of oversizing your system and selling excess power back to the grid no longer works.

The One Big Beautiful Bill, signed into law on July 4, 2025, ended the residential tax credit abruptly. Homeowners who purchased and installed solar before the deadline can still claim their 30% credit on their 2025 tax return. But for anyone installing in 2026 or later, that credit is no longer available for customer-owned systems.

There is one federal option still on the table. Third-party ownership (TPO) arrangements, such as solar leases and power purchase agreements, still qualify for the Section 48E business tax credit through the end of 2027.

In these setups, the solar company owns the system, claims the credit, and passes the savings to you through lower monthly payments. For homeowners who do not want to pay full price upfront, this is worth exploring with the team at Cali Solar.

How Much Do California Homeowners Pay for Electricity Right Now?

California electricity rates remain among the highest in the country, averaging roughly 30 to 35 cents per kWh depending on your utility. Southern California Edison’s average residential rate sits at about 34.5 cents per kWh as of January 2026. PG&E recently announced a 5% rate decrease for bundled customers, but their rates still run well above the national average of about 19 cents per kWh.

On top of that, PG&E is introducing a new Base Services Charge of approximately $24 per month starting in March 2026, paired with a slight reduction in the per-kWh rate. SCE implemented a similar fixed-charge structure in late 2025. These fixed charges mean a portion of your bill cannot be offset by solar, but the usage-based portion, which solar does reduce, still makes up the majority of most bills.

For a household spending $283 per month on electricity (the California average reported by EnergySage), residential solar panels can still eliminate a large share of that cost over 25 years.

How Does NEM 3.0 Affect Solar Savings in 2026?

Under NEM 3.0 (officially called the Net Billing Tariff), the credit you receive for sending excess solar electricity to the grid dropped by about 75% compared to the old NEM 2.0 rates. Export credits now average roughly $0.05 to $0.08 per kWh instead of the $0.30 to $0.35 per kWh that earlier solar customers received.

This means the real value of solar in 2026 comes from self-consumption: using the electricity your panels produce inside your own home rather than sending it to the grid. Every kWh you generate and consume directly offsets a kWh you would have purchased at full retail rates. That is where the savings add up.

This is exactly why battery storage has become so important. A solar battery system like the Tesla Powerwall stores the energy your panels produce during the day and releases it during expensive peak evening hours (typically 4 PM to 9 PM). Instead of exporting midday solar at $0.06 per kWh and then buying grid power at $0.50 or more during peak hours, you use your own stored energy. Cali Solar installs battery systems designed to maximize this time-of-use advantage.

What Is the Payback Period for Solar in California in 2026?

For a solar-plus-battery system, most California homeowners can expect a payback period of 5 to 8 years, depending on system size, electricity usage, and utility territory. Solar-only systems without a battery may take 9 to 13 years to break even under NEM 3.0, because so much of the value now depends on self-consumption rather than grid exports.

Several factors work in solar’s favor even without the federal credit:

1. California’s property tax exclusion means installing solar does not trigger a reassessment or increase your property taxes
2. Electricity rates keep climbing. California utility rates have roughly doubled over the past decade, and further increases are expected
3. Panel costs have dropped. Industry-wide manufacturing improvements mean the equipment itself is more affordable than it was even two years ago
4. TPO options still carry a tax credit. Leases, PPAs, and prepaid solar products benefit from the 48E business credit through 2027

If you are considering solar for a commercial property, the economics can be even stronger. Commercial utility rates in California average about 27 cents per kWh, and businesses may still qualify for the commercial investment tax credit directly.

What Solar Incentives Are Still Available in California?

Even without the residential federal credit, California homeowners still have several incentives to reduce costs. The state’s property tax exclusion prevents your home’s assessed value from increasing after a solar installation, saving hundreds per year.

The SGIP Equity Resiliency program offers battery rebates of $1.10 per watt-hour for qualifying low-income households or those in disadvantaged communities, though many utility territories have waitlists.

The Residential Solar and Storage Equity (RSSE) program can cover up to 100% of installation costs for income-qualified households. And homeowners who go the lease or PPA route benefit indirectly from the 48E business tax credit, which lowers their monthly payments or upfront prepaid cost.

For a full breakdown of what applies to your situation, check out Cali Solar’s page on available solar rebates and incentives.

Should You Buy, Lease, or Use a PPA in 2026?

With the residential tax credit gone, the choice between buying and leasing looks different than it did in 2025. Buying with cash still gives you full ownership, the property tax exclusion, and long-term savings, but the upfront cost is higher without a 30% credit to offset it. Solar loans work the same way, though monthly payments may feel steeper without the credit to reduce principal.

Leases and PPAs now have a distinct advantage: the solar company still qualifies for the 48E business credit and can pass those savings to you through lower rates. Prepaid solar (paying a lump sum for a lease term) has re-emerged as a popular option because the total cost can be lower than a cash purchase while still removing maintenance and performance risk from the homeowner.

If you want help comparing these options for your home, a local solar consultant can walk you through the numbers. Check out the best home solar panels for 2026 or request a free consultation to get a quote tailored to your usage and utility territory.

Frequently Asked Questions

Is there still a federal tax credit for solar in 2026?

Not for homeowner-purchased systems. The 30% Residential Clean Energy Credit (Section 25D) expired on December 31, 2025. However, solar leases, PPAs, and prepaid solar products still qualify for the 48E business tax credit through the end of 2027.

Do I need a battery with solar under NEM 3.0?

A battery is not required, but it significantly improves your return on investment. NEM 3.0 pays very little for exported solar, so storing energy for evening use avoids expensive peak-hour grid purchases.

How much does a solar system cost in California without the tax credit?

A typical residential solar-plus-battery system costs between $25,000 and $40,000 before any state or local incentives. Leases and PPAs can bring the effective cost lower because the provider claims the available business tax credit.

Will California electricity rates keep going up?

Historically, California rates have increased 5% to 8% per year. PG&E announced a slight decrease for 2026 bundled customers, but overall, state rates remain among the highest in the nation with further increases expected long-term.

Does solar increase my property taxes in California?

No. California’s property tax exclusion (Revenue and Taxation Code Section 73) prevents solar installations from triggering a reassessment of your home’s value.

How long do solar panels last?

Most modern solar panels carry 25-year performance warranties and can produce electricity for 30 years or more. Battery warranties typically cover 10 to 15 years.

Can I still go solar if I missed the 2025 tax credit deadline?

Yes. Solar is still financially viable without the federal credit, especially with California’s high electricity rates. Third-party ownership options like leases and PPAs still offer federal tax credit benefits through 2027.

Ready to find out what solar can save you in 2026?

Cali Solar designs solar and battery systems for California homes and businesses, sized for your actual usage and optimized for NEM 3.0. Get a free solar quote or call 916-237-8288 to speak with a solar consultant today.