California solar incentives & net metering (2026)

In 2026, the California solar incentive stack is the thinnest it has been in over a decade: the federal residential tax credit expired at year-end 2025, the SGIP battery rebate is effectively closed for most homeowners, and net metering now pays export rates roughly 25% of retail. The property-tax exclusion on solar installations remains, but it sunsets January 1, 2027 for new systems unless the legislature acts.

The federal tax credit is gone for 2026 purchases

The federal residential solar tax credit—IRC §25D, commonly called the 30% ITC—expired on December 31, 2025 and was not renewed in the One Big Beautiful Budget Act (OBBBA). Purchasing and installing a home solar system in 2026 yields a federal credit of $0.

The magnitude of that loss is worth stating plainly. For years, a $30,000 system came with a $9,000 federal tax credit, cutting the effective cost to roughly $21,000 before other incentives. That offset is gone for outright buyers in 2026.

Leases and power purchase agreements (PPAs) do not change your personal tax situation—the third-party owner claims the credit, not you. The commercial Investment Tax Credit (§48E) may still apply to those providers. If you are weighing a lease or PPA, ask the company explicitly how their §48E benefit is priced into your rate and whether any of it is passed through as a lower cost per kilowatt-hour. Get any claimed pass-through in writing before signing.

For buyers using a cash purchase or solar loan, the absence of the federal credit extends the payback timeline by several years compared to 2024 or 2025. Review the solar panel cost in California page for current installed price ranges and what post-incentive costs look like across different system sizes.

No California state income-tax credit—and there never was one

California does not have a state income-tax credit for residential solar, and it never has. There is no Form 540 line item for it. A sales pitch that mentions a “state credit” is either confused or misleading.

What California does have is a property-tax exclusion on the added value of a solar installation—a different benefit, addressed next.

The property-tax exclusion is real—and its deadline is approaching

When you add solar to your home, California law currently excludes the value of that system from your property-tax assessment. Your assessed home value does not rise because of the panels. On a system valued at $25,000–$35,000, that exclusion saves roughly $250–$500 per year in property taxes (estimate based on a 1% effective tax rate). Compounded over 25 years, that is a meaningful number.

The critical detail: this exclusion sunsets on January 1, 2027 for newly installed systems. As of mid-2026, two extension bills—SB 710 and AB 2389—were pending in the legislature but had not been signed into law. Installing before December 31, 2026 locks in the exclusion for your system. If you wait until 2027 and neither bill has passed, the added value of your array could be folded into your assessed value at the next reassessment.

Check the DSIRE database (dsireusa.org) and your county assessor’s office for the current status of both bills before deciding whether to accelerate your installation timeline. This deadline is worth tracking closely.

SGIP battery rebates: effectively closed for most homeowners

The Self-Generation Incentive Program (SGIP) was California’s main residential battery rebate—at its peak, it meaningfully reduced the cost of adding storage. For 2026, a typical homeowner should not count on SGIP.

The standard residential storage budget closed at the end of 2025. In 2026, only narrow program steps remain—primarily a limited Small Residential Storage tranche in select utility territories—and more substantial funding is reserved for equity, low-income, and high-fire-risk customers. Most of those tracks are on extended waitlists.

If you are a low-income household, receive medical baseline support, or live in a high fire-threat district, call your utility’s SGIP representative to check eligibility and waitlist position. Otherwise, budget for your battery at full retail cost and treat any future SGIP award as upside rather than a line item in your decision.

The effect on the numbers is significant. A 10–13 kWh battery that cost $8,000–$10,000 net after a robust rebate in prior years now runs closer to $12,000–$16,000 all-in for most buyers. That shifts the economics of battery-plus-solar toward homeowners who genuinely need backup power, energy resilience, or aggressive time-of-use arbitrage—not those whose decision depended on a rebate to make the math work. See is solar worth it in California? for a fuller look at how battery payback intersects with your specific utility and usage pattern.

NEM 3.0: what your export credits actually pay

Every kilowatt-hour your panels send to the grid under the Net Billing Tariff (NBT)—what the industry calls NEM 3.0—is credited at the avoided-cost rate for that specific 15-minute interval, not at retail. That rate is time-varying, based on what the utility would have paid on the wholesale market. Averaged across the year, it runs roughly $0.05–$0.08 per kWh. During summer midday hours—precisely when rooftop solar produces the most—it can drop close to zero, because the grid is already saturated with cheap solar generation.

Compare that to what you pay when you draw electricity from the grid. PG&E, SCE, and SDG&E customers pay approximately 31.6 cents per kWh on average in 2026. The export credit is roughly 25 cents on the dollar. That gap is why oversizing a system to maximize exports rarely makes financial sense anymore.

The strategic response to NEM 3.0 is self-consumption. Every kilowatt-hour used directly from your panels—running a dishwasher at noon, charging an EV during the day, or storing energy in a battery for evening use—is worth the full retail rate you avoid. A battery lets you bank midday production and discharge it during evening peak hours, when time-of-use rates on most plans hit $0.40–$0.55 per kWh. That arbitrage, not grid export, is where the value lives under NEM 3.0.

Worked example: 8 kW system with battery storage, no SGIP

Numbers for a Sacramento-area home with a south-facing roof and moderate shading—no SGIP rebate assumed, no federal credit available.

System configuration: 8 kW solar array + 13.5 kWh battery
Estimated installed cost: $38,000–$44,000 all-in
Federal tax credit (§25D): $0 (expired)
SGIP rebate assumed: $0
Property-tax exclusion: applies for installations before January 1, 2027

Annual production estimate:
Sacramento averages roughly 5.5 peak sun hours per day. Starting from the gross calculation:

• Gross: 8 kW × 5.5 hrs × 365 days = 16,060 kWh/year
• Apply 0.80 system performance ratio to account for inverter losses, wiring resistance, module temperature, soiling, and minor shading: ~12,850 kWh/year net

That 20% haircut from gross to net is real and consistent across most residential installations. Never plan to a raw peak-hours number.

Savings breakdown (estimates):
With a battery enabling strong self-consumption, assume roughly 70–75% of production is used directly or dispatched from storage at full retail value, and 25–30% is exported at the average NBT rate.

• 9,600 kWh self-consumed × $0.316/kWh = **$3,034/year** in avoided retail cost
• 3,250 kWh exported × $0.06/kWh = **$195/year** in export credits
• Total estimated annual savings: ~$3,200–$3,400/year

At a midpoint installed cost of $41,000 with no credits, simple payback lands around 12–13 years (estimate). That is longer than the NEM 2.0 + 30% ITC era, but the panels carry 25-year production warranties and the property-tax exclusion reduces the effective annual carry cost. After payback, the system generates free electricity during what will likely be a period of continued utility rate increases.

Use the solar savings calculator to model your specific address, utility, and rate plan. These estimates shift materially based on your time-of-use plan, how much load you can shift to daytime or battery discharge, and your actual roof production.

California solar incentives at a glance

Incentive	2026 status	Benefit
Federal tax credit (IRC §25D)	Expired 12/31/2025	$0 for new purchases
California state income-tax credit	Never existed	—
Property-tax exclusion	Active; sunsets 1/1/2027	~$250–$500/yr saved (estimate)
SGIP standard residential storage	Budget closed end of 2025	Not available for most homeowners
SGIP equity / low-income / high-fire-risk	Limited; mostly waitlisted	Check with utility
NEM 3.0 export credit	Active for new interconnections	~$0.05–$0.08/kWh
Lease/PPA commercial §48E benefit	Depends on provider terms	Ask your provider

Steps to take before you sign

Verify every incentive independently. Installer websites and sales sheets lag behind program changes. Check DSIRE (dsireusa.org) and call your utility’s customer interconnection line to confirm what is actually open and funded today. A rebate that closed six months ago can still appear in a sales deck.

Get a bill analysis, not just a production estimate. Ask your utility which time-of-use rate plan applies under NEM 3.0 and request a bill impact analysis modeled on your actual usage data—ideally 12 months of interval data. A 12-month average consumption number misses the time-of-day dimension that drives NEM 3.0 savings.

Decide on your property-tax exclusion timing. If SB 710 or AB 2389 passes before year-end 2026, the deadline pressure eases. If neither bill moves, installing before December 31, 2026 locks in the exclusion. Track the legislation and make a deliberate call.

Model the battery on its own merits. Without an SGIP rebate, a battery needs to earn its keep through time-of-use arbitrage, backup power value, or both. Run the battery case without assuming any rebate, then revisit if your utility confirms eligibility for a limited SGIP step.

California’s solar fundamentals remain strong—among the highest retail electricity rates in the country, excellent sun resources, and a long-term track record of rate increases. The incentive stack is thinner in 2026 than it was 18 months ago, but the right system, sized for self-consumption rather than export, still makes sense for many homeowners. The numbers just require more precision now.