2026 California Guide
Is solar worth it in California in 2026?
California leads the nation in residential solar adoption and for good reason. Despite changes to net metering policy under NEM 3.0, most California homeowners with moderate to high electric bills still see compelling economics from solar. The key is understanding what has changed, what has not, and how to size your system correctly for 2026.
How NEM 3.0 changed the solar equation
In April 2023, California's major investor-owned utilities (PG&E, SCE, and SDG&E) transitioned from net metering to a Net Billing Tariff, commonly called NEM 3.0. Under the old system, excess solar you sent to the grid earned credits at your full retail electricity rate. Under NEM 3.0, those export credits are roughly $0.05-0.08/kWh, about 75% less than the retail rate.
This change significantly affects solar-only systems, but pairing solar with battery storage largely restores the economics. A battery allows you to store excess solar production during the day and use it during peak pricing hours (typically 4-9pm), when grid electricity costs the most. SMUD and LADWP customers are not subject to NEM 3.0 and still receive full retail rate credits for their solar exports, giving them a meaningful economic advantage.
The federal tax credit situation in 2026
The federal residential clean energy tax credit (IRA Section 25D) for solar panels expired December 31, 2025 and is no longer available for new residential solar installations in 2026. If you installed solar before that date, you can still claim the credit on your 2025 federal tax return.
Despite the expiration, solar panel costs have dropped significantly over the past decade. The average installed cost in California is now around $2.52/watt, meaning a typical 8-9 kW system runs $20,000-23,000 before any remaining state or local incentives. California's high electricity rates mean payback periods of 6-9 years remain achievable for most homeowners even without the federal credit.
State and local incentives still available
California's Self-Generation Incentive Program (SGIP) Residential Solar and Storage Equity pathway remains active with $280 million in funding under AB 209, offering $3,100/kW for paired solar and $1,100/kWh for battery storage. As of early 2026, the budget is fully reserved but new applications are accepted on a waitlist. The DAC-SASH program provides up to $3/watt for income-qualifying homeowners in disadvantaged communities, funded through 2030.
California's property tax exclusion for solar systems remains in effect for systems installed and receiving Permission to Operate before January 1, 2027. This means your home's assessed value does not increase when you install solar, even though it typically adds $15,000-30,000 in market value. No application is required.
How system size is calculated
The right system size depends on your annual electricity usage and your location's peak sun hours. California averages 5.8 peak sun hours per day, though this varies by region. Fresno and Bakersfield see closer to 6.5 hours while coastal areas may see 5.0-5.5. A properly sized system aims to offset 80-100% of your annual usage.
Under NEM 3.0, slightly undersizing your system (offsetting 70-80% of usage) can actually improve your economics for PG&E, SCE, and SDG&E customers, since you earn low credits on exports anyway. Talk to your installer about the optimal offset percentage for your rate plan and usage pattern.
What to look for when getting quotes
Get at least three bids. Compare price per watt rather than total system price (since different installers may propose different system sizes). A competitive 2026 price in California is $2.30-2.70/watt installed. Ask specifically about the interconnection timeline with your utility, the equipment warranty (look for 25-year panel warranties), the workmanship warranty (10 years minimum from reputable installers), and whether the installer is NABCEP certified. Ask which inverter type they are proposing and why, as string inverters, microinverters, and power optimizers each have different performance profiles depending on your roof configuration.