Solar in California: NEM 3.0, Costs, and Incentives (2026)

California is the biggest solar market in the country, and it is also the state where the rules changed the most. The reason solar still makes sense here is simple: electricity is expensive, so offsetting your own usage with rooftop power saves real money. The complication is NEM 3.0, the Net Billing Tariff that took effect in April 2023 for the three large investor-owned utilities. Under it, the extra power you send to the grid is worth far less than it used to be, which is why a home battery has moved from a nice-to-have to the center of the payback story for most new California systems. This guide is the statewide overview: what solar costs in California in 2026, how NEM 3.0 and net billing actually work at PG&E, SCE, and SDG&E, why LADWP and SMUD play by different rules, the incentives that still apply, and how to check your own address in about a minute.

Updated June 2026 with California’s current NEM 3.0 net-billing rules, the SGIP and income-qualified programs, the property-tax exclusion sunset, and the federal tax-credit change.

Why solar still pays in California

The case for California solar rests on high power prices, not on generous export credits. California homes pay among the highest residential electricity rates in the mainland United States, about 31 cents per kWh on average (EIA, as of April 2026), and in the big investor-owned territories the top tiers and peak-hour rates run higher still. That is the engine of savings here: every kilowatt-hour you generate and use on site replaces some of the most expensive grid power in the country. California also has strong sun, with a typical rooftop producing roughly 1,400 to 1,650 kWh per kW of panels each year depending on where you are and how your roof faces (regional estimate from the DOE/NREL Renewable Energy Data Book; run NREL PVWatts for your address). High prices plus solid production is what keeps solar worthwhile in California even after the federal credit ended after December 31, 2025.

What changed is the value of exported power, so how you use your solar matters more than ever. Because NEM 3.0 pays little for the surplus you send back, the savings now come from using your own generation at home rather than banking it with the utility. That is why pairing panels with a battery, and running big loads like the EV charger, heat pump, or pool pump during the day, does more for your payback in California than in a full-retail net-metering state. Weigh the long-run numbers with our guide on whether solar panels are worth it, and see how storage economics work in our solar battery cost guide.

NEM 3.0: how net billing changed the California math

This is the single most important thing to understand about solar in California: the state is on NEM 3.0, the Net Billing Tariff, and it pays much less for exported power than the old rules did. The California Public Utilities Commission (CPUC) approved the Net Billing Tariff in December 2022, and it took effect on April 15, 2023, for the three large investor-owned utilities, PG&E, SCE, and SDG&E (CPUC Net Billing Tariff, as of June 2026). Under the earlier NEM 2.0 rules, exported power earned close to the retail rate. Under NEM 3.0, the surplus you export is credited at avoided-cost (ACC) values that follow hourly, seasonal wholesale prices, which run roughly 75% below the NEM 2.0 export credits on average. The power you use from your panels in real time still avoids the retail rate, so self-consumption is where the value now lives. For how the underlying mechanism works, see our explainer on how net metering and net billing credit your solar exports and the broader net metering guide.

Feature	NEM 2.0 (legacy)	NEM 3.0 / Net Billing Tariff (new systems)
Export credit	Near full retail rate	Avoided-cost (ACC) value, roughly 75% lower on average, and varies by hour and season
Applies to	Systems interconnected before April 15, 2023	New PG&E, SCE, and SDG&E systems from April 15, 2023 onward
Grandfathering	Legacy terms kept for about 20 years from interconnection	Not applicable; this is the current tariff
Best strategy	Size to annual usage; exports paid well	Add a battery, shift big loads to daytime, and maximize self-consumption

Source: CPUC Net Billing Tariff, as of June 2026. Exact export values change hourly and by utility; confirm current terms with your utility before you sign.

Which utility serves you: PG&E, SCE, SDG&E, and the public power difference

Your utility decides whether NEM 3.0 even applies to you, so your address matters more than your city. The Net Billing Tariff covers the three big investor-owned utilities regulated by the CPUC. The state’s large publicly-owned utilities, most notably the Los Angeles Department of Water and Power (LADWP) and the Sacramento Municipal Utility District (SMUD), are not governed by the CPUC and are not on NEM 3.0. They set their own net-metering and solar-billing rules, which are generally more favorable to exports than NEM 3.0, so if you are served by a municipal utility your math is different (CPUC, as of June 2026). Confirm which utility serves your exact address before you compare quotes.

Utility	Who it serves	Solar rules
PG&E	Northern and central California, the Bay Area, Sacramento suburbs	NEM 3.0 Net Billing Tariff for new systems (CPUC-regulated)
SCE	Much of Southern and central California outside Los Angeles city and San Diego	NEM 3.0 Net Billing Tariff for new systems (CPUC-regulated)
SDG&E	San Diego County and southern Orange County	NEM 3.0 Net Billing Tariff for new systems (CPUC-regulated)
LADWP	City of Los Angeles	Publicly owned, not on NEM 3.0; sets its own net-metering rules
SMUD	Sacramento County	Publicly owned, not on NEM 3.0; sets its own solar and storage rates

Service territories overlap at the edges, and some cities have their own municipal utilities. Check your electric bill for the utility name before you budget. As of June 2026.

Note: LADWP and SMUD are public power utilities governed by their own boards, not the CPUC, so they did not adopt NEM 3.0 and their solar credits work differently, generally paying more for exports than the investor-owned utilities. If you live in the city of Los Angeles or Sacramento County, confirm your specific net-metering and storage rules with your utility, because the statewide NEM 3.0 story on this page may not apply to you.

California solar incentives that still apply in 2026

California does not offer a state solar income-tax credit, but it does offer real help through rebates and exemptions. The programs below go to the system owner, so on a lease or PPA the company that owns the panels keeps them. The table sorts what applies from what does not, and for the deep dive on rebates see our guide on solar incentives and the local view in California home solar done the right way.

Program	Applies in California?	What it does
SGIP (Self-Generation Incentive Program)	Yes	A rebate that lowers the cost of a home battery, with larger amounts for eligible and resiliency customers (CPUC SGIP)
DAC-SASH (income-qualified)	Yes	Upfront incentives that help qualifying disadvantaged-community households go solar; the older SASH program is closed to new applications (CPUC low-income solar)
Property-tax exclusion for solar	Yes, but sunsets Jan 1, 2027	The added home value from an active solar system is excluded from your property-tax assessment, scheduled to end for installs after January 1, 2027 (DSIRE)
Net billing / export credit (NEM 3.0)	Yes (replaces NEM 2.0)	Credits exported power at avoided-cost rates, well below retail (see the NEM 3.0 table above)
California state solar income-tax credit	No, none exists	California has no statewide solar income-tax credit; help comes from rebates, exemptions, and net billing instead
Federal residential credit (Section 25D)	No, it ended	The 30% homeowner credit ended for systems placed in service after December 31, 2025 (IRS)

The battery rebate is the incentive most likely to move your numbers in a NEM 3.0 world. Because exported power is now worth so little, storing your midday solar and using it in the evening is what protects the savings, and the SGIP rebate helps offset the cost of that battery (CPUC SGIP, as of June 2026). Income-qualified households should also check DAC-SASH, which can cover a large share of an eligible system; the older SASH program is closed to new applications. One deadline to plan around: California’s property-tax exclusion for solar is scheduled to sunset on January 1, 2027, so an install completed before then locks in the assessment benefit (DSIRE, as of June 2026).

What the end of the federal tax credit means in California

The federal homeowner credit is gone, but California’s own programs are not. The 30% federal Residential Clean Energy Credit (Section 25D) ended for systems placed in service after December 31, 2025, so a California homeowner who buys solar with cash or a loan in 2026 cannot claim it (IRS Residential Clean Energy Credit, as of January 2026). This matters in California specifically, because many installer sites and older guides still show a 30% federal credit running through 2032; for a homeowner buying in 2026, that figure is out of date. California’s SGIP battery rebate, the income-qualified DAC-SASH program, the property-tax exclusion, and your utility’s net billing were not affected. For the full national timeline, see what the federal solar tax credit change means in 2026.

One federal exception exists, and it is not the homeowner’s to claim. A separate commercial credit, Section 48E, is claimed by the business that owns a leased or PPA system, not by the resident. So on a lease or PPA you do not file for a federal credit yourself; the system owner does. The 25D homeowner credit, by contrast, ended after December 31, 2025.

What a California system might save: our estimate

Here is our own math for a California home, built from the 31 cent retail rate, a typical production range, and the NEM 3.0 export penalty. Under net billing, a kilowatt-hour you use in your own home is worth the full retail rate, but a kilowatt-hour you export is worth only the avoided-cost value, which is a small fraction of retail. So the single biggest lever on your savings is how much of your solar you use on site. The table below models a panels-only system, where roughly half your production is exported at the low rate, against a system with a battery, where you self-consume most of it. We use a production estimate of about 1,500 kWh per kW a year (within the DOE/NREL range) and an installed cash price near $3.00 per watt (EnergySage California, as of June 2026). These are estimates to show the shape of the numbers, not a quote for your roof.

In short, a 6 kW California system saves an estimated $1,620 a year with panels only, or about $2,440 a year paired with a battery, for a simple payback near 11 years (our estimate, June 2026).

System size	Est. annual production	Installed cost at ~$3.00/W	Est. savings/yr, panels only	Est. savings/yr, with a battery	Simple payback, panels only
5 kW	~7,500 kWh	~$15,000	~$1,350	~$2,030	~11 years
6 kW	~9,000 kWh	~$18,000	~$1,620	~$2,440	~11 years
8 kW	~12,000 kWh	~$24,000	~$2,160	~$3,250	~11 years
10 kW	~15,000 kWh	~$30,000	~$2,700	~$4,060	~11 years

Our estimate, as of June 2026. Panels-only assumes about 50% of production is used on site at the 31 cent retail rate and the rest exported at a low avoided-cost value; the battery column assumes about 85% self-consumption. A battery adds hardware cost, partly offset by the SGIP rebate, so its payback depends on your rate plan and usage. Figures ignore any utility fixed charges and are not a quote. Run PVWatts for your address and get local quotes before you decide.

Two honest takeaways from those numbers. First, because exports earn so little under NEM 3.0, a battery that lets you use your evening power from your own panels is what protects the savings, which is the opposite of the old full-retail net-metering math. Second, right-sizing the system to your actual usage, rather than overbuilding to export, is the smart move in a net-billing state. Payback reads about the same across system sizes here because cost and output scale together; your real number shifts with your rate plan and how much solar you use on site. Pressure-test the decision with our guide on whether solar panels are worth it.

Paying for solar in California: cash, loan, lease, or PPA

How you pay decides who keeps the incentives and how much the NEM 3.0 change affects you. If you want the SGIP rebate, the property-tax exclusion, and full control of your battery strategy to be yours, you own the system through a cash purchase or a solar loan. A lease or PPA can mean no up-front cost for eligible homeowners, but it is a long-term agreement with monthly payments, not free solar, and the company that owns the panels keeps the incentives while you get a lower or more predictable power price. Because a battery matters so much under net billing, ask any financing offer how storage is included and who owns it.

Path	Up-front cost	Who keeps the incentives	Best when
Cash purchase	Full system cost	You, the owner	You want the fastest payback and the most lifetime value
Solar loan	Little to none, financed	You, the owner	You want ownership without paying cash up front
Lease or PPA	$0-up-front where eligible	The third-party owner	You prefer no up-front cost and a simpler, fixed monthly bill

California guides and next steps

City-level and topic guides help you go deeper once you know your utility. For a plain-language walkthrough of going solar as a California homeowner, read California home solar, done the right way. If you are in the Los Angeles, San Diego, or Inland Empire area, our guide to solar permitting in Southern California covers the local approval process. More California city and utility guides for the PG&E, SCE, SDG&E, SMUD, and LADWP metros are on the way. California is not the only state that moved off full-retail net metering, so it helps to compare: see our guides to Arizona solar, Massachusetts solar, and New Jersey solar, or browse every state on the Solar by State hub. For how we run the production and rate numbers behind these guides, see our data and methodology.

How to choose a solar installer in California

California has the deepest, most competitive installer market in the country, which is good for you because it means real competition on price and service. Rather than chasing a “best installer” list, screen any company against objective criteria:

• A valid CSLB contractor license (California’s C-46 solar or C-10 electrical classification) in good standing.
• NABCEP certification, the industry’s professional standard for PV installers.
• A clear workmanship and equipment warranty in writing, plus a realistic battery plan for NEM 3.0.
• Real experience with your specific utility’s NEM 3.0 interconnection (PG&E, SCE, or SDG&E) or your municipal utility’s rules if you are with LADWP or SMUD, plus the SGIP battery rebate paperwork.
• A written production estimate and a transparent quote that does not count the federal credit that ended after December 31, 2025. For a checklist, see the right questions to ask a solar installer.

MySolarFY matches you with licensed installers that serve your area so you can compare real local quotes side by side, with no obligation. To see how we research and match, read how MySolarFY works and meet our editorial team.

Check which California solar programs are available at your address →

Frequently asked questions

Is solar worth it in California in 2026?

For most California homes, yes, because electricity here is expensive, about 31 cents per kWh on average (EIA, as of April 2026), so offsetting your own usage saves a lot. The catch is NEM 3.0, which pays little for the power you export, so the payback now depends heavily on using your own solar at home and often on adding a battery. Your savings depend on your roof, your utility, your rate plan, and how you pay, so size the system to your usage rather than overbuilding to export.

What is NEM 3.0 in California?

NEM 3.0 is the Net Billing Tariff the CPUC approved for California’s investor-owned utilities, effective April 15, 2023 (CPUC, as of June 2026). It replaced NEM 2.0 for new PG&E, SCE, and SDG&E solar customers. Under NEM 3.0, the power you export to the grid is credited at avoided-cost rates that run roughly 75% below the old NEM 2.0 credits and change by hour and season. The power you use from your panels in real time still avoids the retail rate, which is why self-consumption and battery storage now drive the savings.

Am I grandfathered if I already have solar under NEM 2.0?

Yes. Homeowners who interconnected their systems under NEM 2.0 keep those legacy terms for about 20 years from their interconnection date, so the NEM 3.0 change does not apply to your existing system (CPUC, as of June 2026). If you expand or significantly modify an older system, check with your utility, because changes can affect your grandfathered status.

Does California have a state solar tax credit?

No. California has no statewide solar income-tax credit, and the federal residential credit (Section 25D) ended after December 31, 2025 (IRS, as of January 2026). California’s help instead comes from the SGIP battery rebate, the income-qualified DAC-SASH program, the property-tax exclusion that is scheduled to sunset January 1, 2027, and your utility’s net billing. Plan your California project around those programs rather than a state or federal tax credit.

Do LADWP and SMUD use NEM 3.0?

No. LADWP and SMUD are publicly owned utilities governed by their own boards, not the CPUC, so they are not on the NEM 3.0 Net Billing Tariff and set their own net-metering and solar-billing rules, which generally credit exports more than the investor-owned utilities do (CPUC, as of June 2026). If you are served by LADWP in the city of Los Angeles or SMUD in Sacramento County, confirm your specific rules with your utility, because the statewide NEM 3.0 rules do not apply to you.

Is the 30% solar tax credit going away in 2026?

It is already gone. The 30% federal Residential Clean Energy Credit (Section 25D) ended for systems placed in service after December 31, 2025, so a homeowner who goes solar in California in 2026 cannot claim it (IRS, as of January 2026). Many California pages still show the credit running through 2032; that is out of date. The credit was not reduced for 2026, it ended, so plan your California project around the state’s own programs instead, which the change did not touch.

Can I get solar with no up-front cost in California?

Some homeowners can, through a lease or power purchase agreement (PPA) where eligible, which can mean no out-of-pocket cost at installation in exchange for monthly payments. This is not free solar; it is a long-term agreement, typically 20 to 25 years, and total payments may exceed the cost of a cash purchase. On a lease or PPA the third-party owner, not you, collects the SGIP rebate and the other incentives, while your benefit is a lower or more predictable power price. If you want to own the system, capture the incentives, and control your battery strategy under NEM 3.0, a cash purchase or solar loan is the path that keeps them. Check what you qualify for before deciding.