How solar works in California in 2026
The federal tax credit changed
The 30% federal residential clean energy credit (Section 25D) ended for systems installed after December 31, 2025. If you buy a system outright or with a loan in 2026, you cannot claim it. With a lease or power purchase agreement the solar company owns the system and may still qualify for business credits, which can affect the price you are offered. Ask any provider how this applies to your quote.
The Net Billing Tariff
Since April 2023, new solar customers of PG&E, SCE and SDG&E are on the Net Billing Tariff, often called NEM 3.0. Power you send to the grid is credited at values based on the utility's avoided costs, which are generally well below what you pay for grid power. That makes it more valuable to use your solar power yourself.
Batteries
A battery stores daytime solar for use in the evening, when grid power costs the most, and can keep essential circuits running during an outage. Under the Net Billing Tariff most new California systems are designed with one.
SGIP battery rebates
The Self-Generation Incentive Program offers rebates for battery storage, with the largest amounts for income-qualified households and homes in high fire-threat areas. Funding opens and closes in steps and is often waitlisted, so check current availability before you count on it.
Property tax
Adding solar generally does not trigger a property tax reassessment in California. Confirm the current rules with your county assessor.
Utilities: PG&E, Southern California Edison and San Diego Gas & Electric (municipal utilities such as LADWP and SMUD set their own rules).
Common questions
Is solar still worth considering in California under NEM 3.0?
It depends on your home, your usage and your utility. Under the Net Billing Tariff, systems that use more of their own power, usually with a battery, tend to work best. A specialist can walk you through your situation.
Do I need a battery?
Not always, but under the Net Billing Tariff a battery lets you use more of your own solar and can back up essential circuits during an outage.
Official sources
- California Public Utilities Commission
- Self-Generation Incentive Program (SGIP)
- IRS: Residential Clean Energy Credit
This guide is general information, not financial or tax advice. Program rules and rates change; confirm current terms with the program administrator or a tax professional.