Solar panels in California: cost, incentives, and quotes

NEM 3.0 (officially the net billing tariff) credits exported solar electricity at an hour-specific rate calculated from the CPUC Avoided Cost Calculator, not the full retail rate. Compensation averages $0.05-$0.06 per kWh against retail import rates of $0.31-$0.39 per kWh, roughly 75% lower than the prior NEM 2.0 structure. To make the economics work, most California solar systems installed in 2026 include battery storage to maximize self-consumption (which is worth full retail) and shift solar value to evening peak hours.

AB 942 implements two changes in 2026. First, effective January 1, 2026, buyers of homes with existing NEM 1.0 or NEM 2.0 solar systems no longer inherit those grandfathered tariffs; they must move to NEM 3.0 instead. Second, effective July 1, 2026, NEM 1.0 customers (and NEM 2.0 customers 10+ years post-interconnection) are force-transitioned to NEM 3.0. The annual California Climate Credit was also eliminated for NEM customers January 1, 2026. These changes substantially reduce the value of inherited solar at home sale.

Yes for most homeowners, but only with battery storage and only with realistic expectations. Payback under NEM 3.0 typically runs 9-14 years for solar-plus-storage in California IOU territories (PG&E, SCE, SDG&E), compared to 6-9 years under the old NEM 2.0 structure with the 30% federal credit. The case is strongest for high-usage homes in hot inland areas (Central Valley, Bakersfield, Sacramento) where AC load aligns with peak solar production hours. Municipal utility customers (LADWP, SMUD, MID) often have better net metering and faster payback.

For most NEM 3.0 customers, yes. Without storage, exported electricity earns $0.05-$0.06/kWh while imports cost $0.31-$0.39/kWh, meaning every kWh exported is effectively a 5x economic loss vs. self-consuming. Battery storage shifts midday solar to evening peak hours when the SGIP rebate, time-of-use rate structures, and the avoided cost of grid power combine to make self-consumption far more valuable than exports. The SGIP rebate offsets a portion of battery cost; the Equity Resiliency tier offers substantially higher offsets for income-qualified households.

California has three major investor-owned utilities (Pacific Gas & Electric in northern and central California, Southern California Edison in the LA basin and inland Southern California, San Diego Gas & Electric in San Diego County) plus dozens of municipal utilities and rural cooperatives. The IOUs are all under NEM 3.0. Municipal utilities (Los Angeles DWP, Sacramento Municipal Utility District, Modesto Irrigation District, Imperial Irrigation District) operate under their own net metering rules, many of which still offer 1:1 retail-rate compensation. Municipal customers often have substantially better solar economics than IOU customers.

The Self-Generation Incentive Program provides upfront rebates for battery storage. Standard residential tier offers approximately $150-$200 per kWh of installed capacity. The Equity Resiliency Budget tier offers substantially higher rebates ($850-$1,000/kWh) for low-income households in high-fire-risk areas served by PG&E, SCE, or SDG&E. Your installer typically handles the application. Funding can exhaust during the program year; applying earlier in the year improves chances of approval. SGIP is administered by the CPUC.

Not for customer-owned systems. The Section 25D Residential Clean Energy Credit ended December 31, 2025 under the One Big Beautiful Bill Act. Cash purchases and solar loans in 2026 receive no federal credit. The commercial Section 48E credit continues for third-party-owned systems (leases and Power Purchase Agreements), and the installer typically passes some benefit through as lower monthly payments. Many California installers shifted heavily toward lease and PPA structures in 2026 because of this credit availability difference. Consult a qualified tax advisor about how the rules apply to your situation.

Timeline from signed contract to a running system in California typically runs 8 to 14 weeks. The steps include structural and electrical design (1-2 weeks), building and electrical permits through your local Authority Having Jurisdiction (varies widely; LA County is fast, others slower), the physical installation (1-2 days), utility interconnection application processing (4-8 weeks for IOUs under NEM 3.0), the final inspection, and Permission to Operate. Battery installations add 2-4 weeks for additional permitting and SGIP review.

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