SDG&E has among the highest power prices in the country, with on-peak rates running about 62 to 80 cents per kWh (SDG&E TOU-DR1 rate table, April 2026), so each kWh your panels offset is worth a lot. New systems fall under California NEM 3.0 net billing, which pays a low avoided-cost rate for exports, so pairing solar with a battery is what makes SDG&E solar pay in 2026.
If San Diego Gas & Electric is your utility, this page explains how rooftop solar pays you back in 2026. SDG&E, a Sempra company, has the highest residential rates of California’s big three utilities, which is exactly why the solar case here is strong even after California switched new customers to NEM 3.0 net billing. Below you will find what SDG&E charges, a modeled San Diego production and payback estimate, how net billing changes the math, the incentives that still apply, and how to tell if your roof is a good fit.
SDG&E California at a glance
SDG&E runs the interconnection and billing for solar in its territory, while the net-billing rules and most incentives are set at the California state level.
| Detail | What to know |
|---|---|
| Service territory | All of San Diego County and a southern strip of Orange County, about 4,100 square miles (SDG&E) |
| Residential rates | Among the highest in the US; default TOU-DR1 on-peak runs about 62 to 80 cents per kWh (SDG&E rate table, April 2026) |
| Peak hours | Time-of-use, with the costliest hours from 4 to 9 p.m. daily (SDG&E pricing plans) |
| Solar billing | California NEM 3.0 net billing: exports paid at a low avoided-cost rate, not retail (CPUC Net Billing Tariff) |
| Battery incentive | California SGIP may offer a storage rebate; budgets and eligibility change, so verify current status (CPUC SGIP) |
| Property-tax exclusion | Added home value from solar is excluded from property tax, currently set to sunset January 1, 2027 unless extended (DSIRE California) |
| Before you switch on | SDG&E must grant Permission to Operate |
A standard 6 kW rooftop system in San Diego (ZIP 92101) is modeled to produce about 10,050 kWh a year (NREL PVWatts v8, TMY weather). At California’s average residential price of about 35 cents per kWh (EIA, April 2026), and with SDG&E on-peak hours running 62 to 80 cents, every kWh that solar covers is worth well above the national average of about 17 cents.
Under NEM 3.0 net billing, exported power earns only a low avoided-cost rate, so the value comes from using your own solar during those pricey evening hours, which usually means a battery. On our modeling, a solar-plus-battery home in SDG&E territory offsets roughly $2,500 to $4,000 of electricity in year one, putting a cash system’s simple payback in the range of about 7 to 11 years against an assumed installed net cost of roughly $18,000 to $24,000 for 6 kW plus a battery before any SGIP rebate. This is a modeled estimate, not a quote; your result depends on your usage, whether you add storage, and your installed price, so compare real local quotes before you decide.
Why SDG&E’s high rates make solar worth it
SDG&E’s rates are among the nation’s highest, so solar saves more here. California’s residential power averages about 35 cents per kWh (EIA Electric Power Monthly, Table 5.6.A, April 2026), roughly double the national average, and SDG&E sits at the high end of California.
Its default time-of-use plan, TOU-DR1, charges the most from 4 to 9 p.m., when on-peak pricing runs about 62 to 80 cents per kWh (SDG&E rate table, April 2026). Solar that you store and use in those hours is what carries the payback. To weigh the full cost-versus-savings picture, see the financial case for whether solar panels are worth it, and for how a bill actually drops, read how solar lowers your electricity bill. For the statewide picture beyond SDG&E, see California’s statewide solar rules and rates, and for the city view, how solar pencils out for San Diego homeowners.
How NEM 3.0 net billing works on an SDG&E account
NEM 3.0 pays full retail value only for the solar you use yourself, and a low avoided-cost rate for what you export. That is net billing, not one-for-one net metering. Since April 2023, new solar customers at all three big California utilities, SDG&E included, are placed on the Net Billing Tariff, commonly called NEM 3.0 (CPUC Net Billing Tariff). The power you use in your home the moment your panels make it is worth the full retail rate you avoid, which on SDG&E is high. But the power you export to the grid is credited at an avoided-cost rate that is far below retail and changes hour by hour. That single change is why a battery matters so much here: it lets you store cheap midday solar and use it during the 4-to-9 p.m. peak instead of selling it back for pennies. For the mechanics of how exports are credited, see how net metering credits your solar exports.
| What your solar does | How it is valued under NEM 3.0 |
|---|---|
| Powers your home as it is made | The full retail rate you avoid, which on SDG&E is high, especially 4 to 9 p.m. |
| Charges a home battery | Stored to offset the evening peak, capturing that high retail value later |
| Exports to the grid | A low avoided-cost rate, well below retail, that varies by the hour |
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California incentives for SDG&E customers in 2026
California has no statewide residential solar income-tax credit, but a few programs still help, with a couple of important dates:
- SGIP battery rebate: the Self-Generation Incentive Program can offset part of a home battery’s cost, which matters a lot under net billing. Budgets, reserve tiers, and eligibility change over time, so treat any figure as a snapshot and verify the current status (CPUC SGIP).
- Property-tax exclusion: California excludes the added home value from a solar system from your property-tax assessment under Revenue and Taxation Code section 73. This exclusion is currently set to sunset on January 1, 2027 unless the Legislature extends it, so confirm the current date (DSIRE California).
- Net billing itself: not a rebate, but the retail value you avoid by using your own solar is the largest benefit on a high-rate SDG&E account. For the full incentive list, see the solar incentives that still apply in 2026.
On a lease or PPA, the company that owns the panels typically keeps the incentives and any export credits, while your benefit is a lower or fixed power price with no up-front cost. If you want the incentives and the bill savings in your own name, owning the system through cash or a loan is the path that captures them.
What the federal tax-credit change means for SDG&E customers
The 30% federal homeowner credit ended after December 31, 2025, but SDG&E’s high rates and California’s incentives did not. The Residential Clean Energy Credit (Section 25D) ended for expenditures made after December 31, 2025, under the One Big Beautiful Bill Act, so an SDG&E customer who buys solar with cash or a loan in 2026 cannot claim it (IRS). California net billing, SGIP, and the property-tax exclusion were not part of that federal change, so at SDG&E’s rates the bill offset alone is substantial. For the full 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 homeowner. For a leased system on an SDG&E account you do not file for a federal credit yourself; the company that owns the panels does. The 25D homeowner credit, by contrast, ended after December 31, 2025.
How to connect solar to SDG&E
Connecting a home system to SDG&E follows a set order, and the key rule is that you cannot turn the system on until SDG&E grants Permission to Operate. The general path is:
- Interconnection application. You or your installer file an interconnection application with SDG&E, selecting the Net Billing Tariff (SDG&E solar).
- Agreement. After SDG&E reviews the application, you sign and return an interconnection agreement.
- Install and inspect. The system is installed and passes your city or county electrical inspection. Many San Diego jurisdictions offer fast online solar permitting.
- Meter and rate. SDG&E confirms your net-billing setup and time-of-use rate.
- Permission to Operate. SDG&E issues Permission to Operate. The system may not run on the grid before this.
A licensed installer normally manages this whole process for you, including sizing the system and any battery for your usage. For the questions to ask before you sign, see the right questions to ask a solar installer.
How to choose a solar installer in SDG&E territory
San Diego is a deep solar market, so you have many licensed installers to compare. Rather than chasing a “best” list, screen any installer against objective criteria:
- NABCEP certification, the industry’s professional standard for PV installers.
- A proper California C-46 solar (or C-10 electrical) contractor license and any required local permits.
- A clear workmanship and equipment warranty in writing.
- Real experience with SDG&E interconnection and NEM 3.0 net billing, plus honest battery sizing, since storage is what makes the economics work here.
- A written production estimate and a transparent quote that is clear about how net billing values your exports. 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.
Frequently asked questions
Is SDG&E solar still worth it under NEM 3.0?
Yes, for most homes, because SDG&E’s rates are among the highest in the country. On-peak pricing on the default TOU-DR1 plan runs about 62 to 80 cents per kWh from 4 to 9 p.m. (SDG&E rate table, April 2026), so every kWh your solar covers in your home is worth a lot. Under NEM 3.0 net billing, exported power earns only a low avoided-cost rate, so pairing solar with a battery to use your own power in the evening is what makes the payback strong.
What is NEM 3.0 net billing on SDG&E?
Since April 2023, new California solar customers, including SDG&E’s, are on the Net Billing Tariff, called NEM 3.0. Power you use in your home as the panels make it offsets the full retail rate, but power you export to the grid is credited at a low avoided-cost rate that changes hour by hour, not the retail rate. That is why storing solar in a battery for the evening peak is worth more than selling it back to SDG&E.
How much can a San Diego home save with SDG&E solar?
A modeled 6 kW system in San Diego produces about 10,050 kWh a year (NREL PVWatts v8). Paired with a battery and used against SDG&E’s high evening rates, our modeling puts first-year bill offset around $2,500 to $4,000 and a cash system’s simple payback in the range of about 7 to 11 years. This is an estimate, not a quote; your usage, whether you add storage, and your installed price all move the number, so compare real quotes.
What happened to the federal solar tax credit?
The 30% federal Residential Clean Energy Credit (Section 25D) ended for expenditures made after December 31, 2025, under the One Big Beautiful Bill Act. An SDG&E customer who buys solar in 2026 with cash or a loan cannot claim it. A separate commercial credit (Section 48E) can apply to leased and PPA systems, but the business that owns the system claims it, not the homeowner. California net billing and SGIP were not affected.
Do I need a battery for SDG&E solar?
You do not have to have one, but a battery changes the economics under NEM 3.0. Because exports earn only a low avoided-cost rate while SDG&E’s evening rates are very high, storing your midday solar and using it from 4 to 9 p.m. captures far more value than selling it back. California’s SGIP may help offset part of a battery’s cost; verify the current program status before you budget for it.
Which areas does SDG&E serve?
SDG&E serves all of San Diego County and a southern strip of Orange County, an area of about 4,100 square miles (SDG&E). If SDG&E is the utility on your bill, the net-billing rules, rates, and interconnection steps on this page apply to your home. For a large SDG&E city with its own guide, see solar in Chula Vista.
Reviewed by the SolarFY Editor. Figures were verified against the linked SDG&E, CPUC, EIA, NREL PVWatts, DSIRE, and IRS sources as of August 2026; SDG&E rates, the NEM 3.0 export values, SGIP funding, and the property-tax exclusion date all change over time, so confirm current terms with SDG&E and the CPUC before you decide. MySolarFY does not provide tax or financial advice; consult a licensed professional about your own situation. Learn more about the MySolarFY editorial team and how we work, and see our data sources and how we research each page.
MySolarFY is a free service that matches homeowners with licensed solar installers. We are not an installer, financing company, or government program. “No up-front cost” refers to qualifying lease or PPA financing, where eligible homeowners may have no out-of-pocket cost at installation. Lease and PPA terms typically run 20 to 25 years, may include an annual price escalator, and total payments may exceed the cost of a cash purchase; on a lease or PPA the incentives and export credits often go to the company that owns the system, not the homeowner. Homeowners do not get the federal residential credit that ended after December 31, 2025. Solar panels are not free and monthly payments apply. Eligibility, savings, incentives, and rates vary and are not guaranteed. See our full disclaimer.
