Solar Panel Costs and Savings in California (2026 Guide)

California remains one of the largest solar markets in the country, though a major 2023 shift in net metering rules changed how the savings math works for new installations. Here’s the current picture.

Why California electricity rates make solar attractive

California has some of the highest average residential electricity rates in the country, among the highest of the 15 states in our state guides. High rates mean each kWh your panels offset is worth more, which is a significant part of why solar remains a strong option here even with reduced export compensation.

The NEM 3.0 shift

In 2023, California moved from its NEM 2.0 net metering structure to NEM 3.0 (officially the Net Billing Tariff), which substantially reduced the compensation rate for excess solar electricity exported to the grid compared to the prior near-retail-rate structure. See our net metering guide for the general concept — the practical effect in California specifically is that self-consuming your own solar production (using it directly or storing it) is now generally worth more than exporting it, which has made battery storage a much more common pairing with new California solar installations than it used to be.

Typical system sizing

California’s abundant sun hours mean systems here can be sized somewhat smaller than in cloudier states to offset the same annual usage — check your own numbers with our calculator, which accounts for California’s specific average sun hours and electricity rate.

Incentives available in California

Federal tax credit: The 30% federal solar tax credit applies to California installations the same as anywhere else in the country.
Property tax exclusion: California excludes the added home value from a solar installation from property tax reassessment, meaning your property taxes don’t increase just because you added solar — a state-specific benefit worth knowing about when weighing total system cost.
No current state income tax credit: Unlike some states, California doesn’t currently offer its own state-level income tax credit for solar, so the federal credit and property tax exclusion are the primary direct financial incentives at the state level.

Some California utilities conduct Public Safety Power Shutoffs during extreme fire-risk conditions, which has increased homeowner interest in battery storage for backup power independent of pure financial savings — worth factoring in if you live in an area with a history of these shutoffs.

Bottom line

Solar remains financially attractive in California thanks to some of the highest electricity rates in the country, even though NEM 3.0 reduced the value of excess exported electricity — many homeowners now pair solar with a battery to maximize self-consumption. Run your specific numbers with our calculator and confirm current program details with your utility before deciding.

Frequently Asked Questions

Is solar still worth it in California after NEM 3.0?

For many homeowners, yes, though the math has changed — NEM 3.0 significantly reduced compensation for excess electricity exported to the grid compared to the earlier NEM 2.0 structure, which is why pairing solar with battery storage has become far more common in California, since storing your own excess production for evening use is now generally worth more than exporting it.

Does California still have a state solar tax credit?

California does not currently have its own state income tax credit for solar, unlike some other states — the main financial incentives are the federal tax credit, plus a state property tax exclusion that prevents your property taxes from increasing due to the added home value of a solar installation.

Why are electricity rates so high in California?

California's residential electricity rates are among the highest in the country, driven by a combination of grid infrastructure investment, wildfire mitigation costs, and state energy policy — this is actually part of why solar remains financially attractive despite NEM 3.0's reduced export compensation, since avoiding high-priced grid electricity through self-consumption still produces meaningful savings.