California Solar Incentives, Cost & Payback (2026)
Is solar worth it in California in 2026? Yes for most homeowners, but the Net Billing Tariff (NEM 3.0) means pairing solar with a battery now matters more than it used to.
$165
Avg. monthly bill
34.74¢/kWh
Avg. rate
$4.25/W
Real installed cost
LBNL Tracking the Sun
10 yrs
Est. payback (solar + battery)
typical household
Cost of solar in California
California's real median installed residential cost is $4.25/watt, computed from LBNL's Tracking the Sun public data file (host-owned residential systems, 2023-2024). LBNL's own data also shows a typical installed system size of 6.59 kW at a typical gross cost of $28,700 before any incentives.
For a household using California's average 5,690 kWh/year, that works out to roughly a 3.5 kW system costing about $14,704 gross. Since the federal residential clean energy credit (§25D) doesn't apply to systems completed after 2025-12-31, the 2026 net cost for a cash/loan purchase is the same $14,704 — no federal credit applies.
Solar only, no battery
~37% self-consumption — most production happens midday, when nobody's home to use it
$1,000 / yr
13-year payback · $34,102 over 25 years
Solar + battery
~60% self-consumption — battery shifts midday production to evening use
$1,357 / yr
10-year payback · $46,256 over 25 years
Battery hardware cost isn't included in either estimate above — see our best solar battery guide for real installed battery prices to add to the solar+battery scenario.
Incentives & rebates
| Program | Amount | Status |
|---|---|---|
| Self-Generation Incentive Program (SGIP) — battery storage rebate | $0.15-$1.10 per Wh depending on budget category and income tier (e.g. Small Residential Storage $0.15/Wh; Residential Solar and Storage Equity $1.10/Wh storage + $3.10/W solar). Rates step down as each budget category's funding is claimed. | waitlist |
| Single-Family Affordable Solar Homes for Disadvantaged Communities (DAC-SASH) | $3.00 per watt for solar systems between 1 kW and 5 kW (up to roughly $15,000 on a 5 kW system). | open |
| Active Solar Energy System New Construction Exclusion | 100% exclusion of the added value of a qualifying solar (and paired storage) system from the property's assessed value for property tax purposes — i.e. installing solar does not raise your property tax bill. | open |
Sales tax: None for typical homeowners. California does not exempt residential rooftop solar or home battery purchases/installations from state sales and use tax; CDTFA treats roof-mounted solar as a fixture, and installing contractors owe tax on the full contract price (utility or SGIP rebates do not reduce the taxable amount). A separate partial sales/use tax exemption (AB 398, extended through July 1, 2030) applies only to qualified persons generating/storing electric power at a commercial or utility scale, and a manufacturing equipment exclusion (SB 71) applies to solar-equipment manufacturers — neither applies to a homeowner buying a residential system.
Net metering / export rules
California's current statewide solar export policy is the Net Billing Tariff (NBT), commonly called NEM 3.0. Exported electricity is no longer credited near the retail rate — it's paid using the CPUC's Avoided Cost Calculator (ACC), an hourly, time-varying value that averages roughly 75% below the old NEM 2.0 rate.
Customers who applied for interconnection on or before April 14, 2023 stay on the older, more favorable NEM 1.0/2.0 retail-rate tariff for 20 years (grandfathering). A 2024 bill that would have replaced NBT (AB 2619) has not been enacted, and after a 2026 state Supreme Court decision declining review, NBT is now settled law with no further appeal available.
| Policy | Net Billing Tariff (NEM 3.0) |
| Effective for new applications | April 15, 2023 |
| Export valued by | CPUC Avoided Cost Calculator (hourly, time-varying) |
| Export rate vs. old NEM 2.0 | ~75% lower (blended ~7.5¢/kWh vs. ~27.5¢/kWh) |
| Export rate lock-in | 9 years from interconnection |
| Grandfathering | NEM 1.0/2.0 customers keep their old tariff for 20 years |
| Legal status | Settled law — CA Supreme Court declined review, June 2026 |
Export credit is calculated hour-by-hour using the CPUC Avoided Cost Calculator and varies by month and time of day; independent estimates put the blended average around $0.05-$0.10/kWh versus roughly $0.25-$0.30/kWh under the old NEM 2.0 retail-rate credit — a reduction of about 75% on average. The export rate a customer locks in at interconnection is guaranteed for 9 years. Monthly export credits in dollars roll over to future bills within the same 12-month cycle and are reconciled at the annual true-up; unused non-bypassable charges cannot be offset by export credits.
Top utilities
| Utility | Residential rate | Customers |
|---|---|---|
| Southern California Edison Co | 32.43¢/kWh | 3,219,520 |
| Pacific Gas & Electric Co. | 39.62¢/kWh | 1,856,780 |
| Los Angeles Department of Water & Power | 23.84¢/kWh | 1,410,191 |
Residential rate and customer counts are from EIA-861 (see Data sources below); California's mix of investor-owned utilities and municipal utilities like LADWP means rates vary significantly by provider.
Batteries & VPP programs
Self-Generation Incentive Program (SGIP)
California's long-running, CPUC-administered upfront rebate for behind-the-meter battery storage (and some other distributed generation). Rebates are paid per Wh of usable storage and are highest for income-qualified and wildfire/medical-resiliency (equity) applicants. As of September 2026 most General Market, Equity, and Non-Residential Storage Equity budget steps are closed or waitlisted for the year; a few equity sub-categories (e.g. Residential Solar and Storage Equity — AB 209 POU) remain open. Check selfgenca.com's live Program Metrics dashboard before assuming any given budget is open.
Demand Side Grid Support (DSGS) Program
A California Energy Commission program (part of the state's Strategic Reliability Reserve) that pays residential and commercial customers, including aggregated home-battery/VPP fleets, for reducing net load during grid emergencies. For the 2026 program season, funding is constrained: Participation Option 1 is suspended, battery storage participation requires a permission-to-operate date on or before Dec 31, 2025, and Option 3 participation is limited to aggregations that already took part in October 2025 (with an exception for bidirectional EV chargers). The state has signaled DSGS customers may shift into CPUC-run programs after the 2026 season.
PG&E SHARE (Smart Home Assets for Reliability and Efficiency)
A 2026-launched PG&E virtual power plant, developed with Rewiring America, Google, Tesla, Sunrun, and Renew Home, that aggregates home batteries, smart thermostats, and battery-enabled heat pumps in Bay Area communities to shift demand during peak periods. PG&E is enrolling roughly 21,000 existing flexible-energy devices for grid support starting fall 2026; eligible Tesla Powerwall owners enroll via the Tesla app, subject to PG&E eligibility review.
Emergency Load Reduction Program (ELRP)
A CPUC/statewide demand response program run through the investor-owned utilities (PG&E, SCE, SDG&E) via administrator Olivine, paying enrolled customers — described by PG&E as available to business customers, with battery aggregators (e.g. Tesla, Sunrun VPP fleets) also participating on the residential side through their own enrollment — for reducing load during Flex Alerts and grid emergencies.
Lease vs. buy in California
The 0% federal credit in 2026 applies only if you own the system. A lease or PPA company still owns the panels, so it can still claim its own separate federal credit (§48E) as a business — and some of that savings gets passed through to you as a lower monthly lease payment. See our full lease vs. buy vs. PPA guide for the full comparison.
Estimate your own numbers
The numbers above are for a household at California's average usage. Use the solar calculator with your own usage and any quote you've received.
FAQ
Is solar still worth it in California under NEM 3.0?
Usually yes, but the math changed. Under the old NEM 2.0, exports were credited near the retail rate (34.74¢/kWh). Under NEM 3.0's Net Billing Tariff, exports are paid an hourly avoided-cost rate that's roughly 70-75% lower — so pairing solar with a home battery to self-consume more of your own production in the evening is now the financially dominant strategy, not exporting.
What incentives are actually available to homeowners right now?
DAC-SASH ($3/W, income-qualified) is open. SGIP battery rebates are mostly waitlisted for 2026 except a few equity sub-categories. The property tax exclusion (no added assessment for solar) is open. There is no residential sales tax exemption in California — see the note below the incentives table.
How is the payback estimate on this page calculated?
For a household using California's average 5,690 kWh/year, sized to a 3.5 kW system at California's real $4.25/W installed cost: the solar-only scenario assumes 37% self-consumption, the solar+battery scenario 60%, both against a 7.5¢/kWh export credit (the midpoint of the CPUC Avoided Cost Calculator's cited blended range). Edit any of these assumptions yourself in the solar calculator.
Data sources
Last updated 2026-09-22
- U.S. Energy Information Administration — Electricity Data Browser — accessed 2026-09-22
- NREL PVWatts — accessed 2026-09-22
- NREL Solar Resource Data — accessed 2026-09-22
- LBNL Tracking the Sun (public data file, host-owned residential systems) — accessed 2026-09-22
Written by GoSolarIndex Team